Businesses Urged to Use Purchasing Power to Help Control Medical Costs

U.S. Health and Human Services Secretary Michael Leavitt warned Thursday (October 12) that employers must use their purchasing power to create a health care marketplace that is more sensitive to price and quality—or face rising health care costs that will imperil the primacy of American business.

“There is no place on the economic leader board for a country that puts 25 to 30 percent of its gross domestic product into health care,” Leavitt told employers at the Midwest Business Group on Health in Chicago. Currently, the Health and Human Services Department calculates that 16 percent of American GDP is spent on health care.

“Unless we change something we will be eliminated from the competition,” Leavitt says. “It is very serious and requires change.”

Leavitt urged employers to join with the federal government’s commitment, made in August via an executive order signed by President Bush, that new contracts with medical providers and insurance carriers promote the use of standardized health information technology and foster greater transparency over the price and quality of health care.

He asked employers to get involved with six pilot projects that have been launched in six regions of the country. The projects—based in Boston, Indianapolis, Minneapolis, Phoenix, San Francisco and Madison, Wisconsin—are using claims data to develop standards that could eventually be used to create a benchmark of care for various ailments and then rate the performance of doctors and hospitals against that scale. Eventually, medical providers would be paid according to the quality of their services, as is the case for most goods and services in a functioning marketplace.

Federal health programs account for four out of every 10 people with health insurance. Leavitt says he is reaching out to the country’s 150 largest employers with 50,000 employees or more to get those companies involved in using the president’s executive order as a template in negotiating new contracts.

“When 40 percent of the market moves, it changes the market,” Leavitt says. “We want you to do that by creating an executive order of your own.”

Health and Human Services will conduct training sessions in Washington, D.C., on November 17 to help employers develop requests for proposals that specify how potential providers and carriers can comply with the goals of the executive order.

—Jeremy Smerd