An apple a day keeps the doctor away….and if you don't want to eat apples, we'll force feed you – That's been the driving philosophy behind the "demand" side management by employers for decades. The focus on the demand side comes from the belief that third party administrators are managing the supply side and that "if only patients could comply with their doctor's recommendations, everything would be ok." Of course we all know that's a bunch of hooey, but it's easier to believe that than to face into the consequences of the truth. A few months ago, Penn State made headlines when it announced that employees would be compelled to fill out health risk appraisals and engage in a number of wellness programs. The penalty for non-compliance was steep and included higher premium contributions. The uproar from the faculty was deafening and resulted in the creation of a Task Force that would investigate Penn State's current health care benefits policies and compare them with other universities as well as market innovations. The result is a really good and thoughtful report that examines the management of both the supply side and the demand side and makes a series of observations and recommendations.
What this means to you – The most striking observations relate to supply side management and illustrate how little employers have kept their TPA's feet to the fire. Penn State's TPA engages in almost no value-based contracting, which means that healthcare services are paid fee-for-service, encouraging an over-production of services. In addition, the relationship between Penn State and the Hershey Health System offers little, if any, value and the Task Force recommends a thorough review of that relationship and its impact on employee health care costs. As a result of these "laissez-faire" supply side policies, Penn State's health care expenses have steadily and dramatically risen. The focused response on the demand side, while sensible in its design, was clearly ill conceived because it shifted a lot of burden on employees while leaving the providers free to do whatever they want. That makes absolutely no sense. Both sides have to be tackled simultaneously and yes, that's really hard. But the easy solutions and grandma sayings don't work, which forces all of us to face into the tasks at hand. For starters, as CPR and others have recommended, employers must set a far higher bar in selecting TPAs, and the driving criteria must be the percentage of payments that are made using contracts other than fee-for-service. That's because even if all employees ate apples every day, many will still get sick and need care. And ignoring supply side management will simply negate all the efforts of individual employees, whether voluntary or not.