IRRA panel examines spiraling costs for health care

By DON McINTOSH, Staff Reporter

At a Nov. 14 conference in Portland, four speakers took a swing at how to rein in out-of-control health care costs - the number one headache in bargaining union contracts. The panel was a highlight of a day-long conference organized by the Portland chapter of the Industrial Relations Research Association, attended by 190 unionists, human resources managers, government officials, attorneys, and academics in labor studies.

Bill Kramer, chief financial officer (CEO) of Kaiser Permanente, Northwest Region, said the best prescription for limiting cost increases is for patients to make "cost-conscious choices" - in other words, for patients to pay part of the cost of treatments they receive. To make this work, though, patients need to be involved in treatment decisions and educated about the benefits and costs. To completely shield patients from the costs of their procedures contributes to runaway cost increases, Kramer said. But when given information and choices, patients often choose less expensive methods than surgeons.

Also needed, Kramer said, is adequate funding of public health programs. Hospitals are obligated to provide care to the many uninsured, whether or not they pay for it. And Medicare and Medicaid don't always pay the full cost of procedures, he argued, thus shifting costs to other payers.

Union-side health care expert Tom Moore took exception to Kramer's points. Instead of having government and patients pay more, Moore argued, the health care industry needs to start charging less. Co-pays, which Kramer seemed to be advocating, are already causing delayed treatments for lower-paid workers, with deadly results. In California, where Moore works as a health and welfare consultant for the International Longshore and Warehouse Union and Service Employees International Union, costs are so high that employers are ready to get out of health care altogether. And why, he asked, should government pay inflated charges for procedures that shoulder part of the cost of "enormous and excessive expense on capital equipment?"

Moore likened the U.S. health care sector to a petri dish full of amoebas - it contains multiple layers of self-dealing organizations, with little incentive to cut costs. Hiding behind ailing non-profit organizations are a host of for-profit entities - such as labs, pharmaceutical companies, and medical equipment manufacturers - that are insulated from price competition and are doing quite well. He cited the example of a nursing home chain in California, whose chief executive officer pled poverty every time he bargained with his poorly-paid workers. A little research revealed that the nursing home paid rent to a company owned by the CEO and awarded a management contract to another company owned by the CEO.

"I'm convinced non-profits are siphoning off large amounts of money to for-profit entities," Moore said. As further evidence of the deforming effects of profit on health care, he pointed to "outrageous variations" in utilization of basic medical procedures at the local level. "If there's a woman in Redding, California, who still has her uterus, she must be a tourist," Moore said, quoting a health care CEO alarmed by high rates of hysterectomies in Shasta County.

Moore sees no short-term fix to the crisis, but suggested that unions should demand more cost-accountability from providers before pinching workers further.

Following Moore was Cathy O'Brien, deputy human resource director for Multnomah County. O'Brien outlined the county's Employee Benefits Board as a new approach to cost control. Composed of nine union representatives and one representative from management, the board is charged with reducing costs to the county's self-funded health plan. The books of the health plan are open to all board members for inspection. Among their strategies:

* Buy certain frequently-used drugs in quantity, bidding nationwide to get good prices.

* Focus prevention and self-care efforts on the highest-cost diseases. For example, each diabetes case costs the plan $200,000. Prevention education pays, and so does training in how to manage the disease.

Fourth up was Portland health care entrepreneur Larry Craven, whose approach is to form a holding company that contracts with physicians and hospitals to provide care for self-insured plans. It's cheaper to send patients with back pain to a back clinic, Craven said, than to go the traditional approach - "Eighty-five percent of surgery for back pain is not necessary and doesn't help," Craven said.

"What about having a single-payer system, like most of the rest of the industrialized world?" asked one audience member at the conclusion of the panel.

"A single-payer health care system makes so much sense," Moore replied, "that the likelihood of its being adopted is minimal."