Managing Health Care Costs: Private Sector Innovations

By Sean Sullivan; Polly M. Ehrenhaft | Go to book overview

Introduction and Overview

Private sector initiatives to contain health care costs have become a striking feature of the changing health care marketplace in the past few years. Not long ago most private employers did little more than grumble as they paid ever-escalating premiums for their employees' health insurance. Serious efforts at cost containment by business, labor, and insurers were the scattered exceptions to a general rule of inertia. Now, in many areas of the country, action is fast replacing talk. The short case studies in this volume are good evidence of the shift that has been taking place.

The American Enterprise Institute's Center for Health Policy Research has been studying this shift for more than two years. Since our first survey of private sector initiatives, we have watched them develop to the point where they are playing a large part in changing the structure and operation of the health care system. With all the attention given the problems of the Medicare program by the press, it is easily forgotten that employers still pay the largest share of the nation's health care bill. Their actions are at least as important as reforms being made in Medicare and Medicaid toward effecting the single most important change needed in the system -- giving providers and users incentives to be more conscious of costs in their provision and use of services.

The actions of companies and coalitions like those presented here are having such an effect. Utilization review based on good data is changing providers' practice patterns when payers insist on it. And health maintenance organizations (HMOs) and other alternative delivery and financing systems, such as the new preferred provider organizations (PPOs), are making the entire system more competitive.

The individual companies studied are Deere and Company and Caterpillar Tractor Company, two large, traditional mid-American manufacturing concerns that have been ahead of most private employers in curbing runaway health care costs. Although their approaches have differed, as the case studies show, Deere and Caterpillar have both done what other companies are discovering they must do to gain any control over costs-treat health care as a managerial

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