Is the Medical Industrial Complex (MIC) in Wisconsin headed for price controls?
Ford Koles, a leading health care economist and guru for the Advisory Board, told Wisconsin self-insured companies last week in Madison that he thinks it could happen. And I agree with his assessment.
That’s because free-market models obviously are not working to get runaway cost/prices under any semblance of control. Koles sees the health care industry as “chronically inflationary.”
None of the members of The Alliance, a Madison cooperative that buys health care for several hundred companies, disagreed with him at that their annual meeting and symposium last week.
Kaiser Foundation puts the 2023 inflation at 7%. The price tag for a family of four now runs at almost $24,000. Multiple sources project another 7% rise in 2024.
Depending on company size, the employee share per year can run between $5900 and $8300. That’s a lot of Cheerios and hamburger.
Drew Altman, Kaiser CEO, sounds a lot like Koles. He wrote recently: “Rising employer health care premiums have resumed their nasty ways, a reminder that while the nation has made great progress expanding coverage, people continue to struggle with medical bills, and, overall, the nation has no strategy on health costs.”
In absence of clear strategy, dynamic changes still take hold. But not always in good ways. The MIC has defaulted away from six-sigma lean management (it’s demanding, rigorous work) and from innovation on cost management. Lean disciplines have transformed manufacturing, but haven’t significantly dented the enormous health care industry.
On innovation, for example, a Milwaukee startup led by seasoned entrepreneurs introduced AI into primary care six years ago and has failed to win a single major system, even though it enables major efficiencies and improved diagnostic accuracies. (It is succeeding in the independent urgent care space.)
Instead, the industry game plan has been to consolidate providers toward monopolies, duopolies and triopolies. Horizontal mergers are rampant in Wisconsin. The departing executives negotiate obscene golden parachutes. The remaining executives jack prices amidst less competition.
For some reason, regulators like Wisconsin Attorney General Josh Kaul and Insurance Commissioner Nathan Houdek have looked the other way. Consumers be damned.
The Biden Administration has put its toe in the water for trust-busting in the industry, but its Federal Trade Commission has tackled only a few cases of anti-competitive mergers. So the lucrative mergers – three in Wisconsin in the last year – are likely to stand.
In that vacuum, self-insured companies are desperately looking for some relief. The Alliance is doubling down on to improve transparency on prices. Smart companies are already using navigators to ferret out best prices and quality and have been helped by new rules requiring transparency at the federal level.
They want to help consumers find the best deals for “shoppable” procedures. The reality is that consumers/employees will always need navigators to assist them on their medical journeys.
There is also a movement by self-insured companies to contract directly for primary care. Many have installed their own on-site or near-site clinics, and others have contracted with direct primary care centers. They help keep employee families out of expensive hospitals.
Some contract directly for higher-level procedures and fixed prices. Joint replacements at top centers of excellence can cost less than half what the big providers are charging.
All that bottom-up reform, however, has failed to mitigate the chronic inflation in health costs.
They are simply becoming unbearable for many companies and most families.
Given that reality, Koles’ prediction for treating the MIC like utilities makes a lot of sense.
The Wisconsin Public Service Commission has to approve all price increases by the state’s utilities. The precedent is there for a similar commission to oversee price increases by hospitals and clinics.
Eight states have already moved to establish such commissions or powers within existing agencies.
Wisconsin is a prime candidate for price regulation. Three recent national studies, one by the Rand Corporation, have put Wisconsin near the very top of the states for health care prices. Some candidate for governor in 2026 will surely run on that platform.
