The Challenge of Regulating Managed Care

8. General Motors as Purchaser

  General Motors as Purchaser Bruce E. Bradley, James C. Cubbin, James F. Ball, and Deborah Salerno The health industry has been under intense pressure to provide high-quality care at low cost.1 As is evident from other chapters, opinions vary as to how to best accomplish this goal. Changes may be facilitated through regulatory control , competition in the marketplace, and other factors. Thus, different approaches to managed care have been proposed in the public and private sector . In the process, terms such as effectiveness, evidence-based medicine, and quality have become familiar. In this chapter, we present a large employer’s perspective on the problems of, and some of the popular marketplace strategies for, overseeing managed care, with particular emphasis on common features and differences between regulatory and market forces. Both the public sector (i.e., government) and the private sector (e.g., the auto industry) play important, often overlapping, roles. Contrary to common perception, the public sector does not equate exclusively with regulation and the private sector does not equate exclusively with market forces. The government , as the largest purchaser in the health industry, plays both regulatory and purchasing roles (see chapters 9 and 12). Similarly, while the private sector behaves primarily as a purchaser, it also acts as a regulator under certain circumstances . In this chapter we explain why we believe market forces are preferable to regulation for managing care. We also explore the expansion of publicprivate sector partnerships to achieve mutually desired goals, focusing on issues of speed and ef‹ciency, evidence-based decisions, and effectiveness. Health Care at General Motors General Motors is the largest private-sector health-care purchaser in the United States, providing coverage to over 1.5 million employees, retirees, and dependents in all ‹fty states and the District of Columbia. Health-care costs at GM far exceed the amount spent on steel for its vehicles. In 1998, GM’s cash expenditures for health care in the United States totaled $3.7 billion. Total booked 120 expenditures were $4.5 billion, including the accounting for post-retiree bene‹ts other than pension (i.e., the SFAS-106 accrual for future retiree costs). Such purchasing power and responsibility for providing coverage to large numbers of individuals afford signi‹cant leverage in the health-care industry. Benefit Options Approximately 60 percent of GM enrollees choose conventional fee-for-service or indemnity plans, while the remaining 40 percent choose network plans, including PPOs and HMOs. In addition, individuals eligible for coverage may elect no coverage at all. The scope of bene‹ts in GM’s U.S. operations is substantial , with an annual total of 31 million health-care transactions. Enrollees receive services that are arranged or provided by 126 HMOs, 80 non-HMO carriers, 6,000 hospitals, 35,000 pharmacies, and 500,000 physicians.2 In this competitive environment, a range of providers is available to cover the full spectrum of health-care services, from wellness to incipient illness to chronic illness to terminal care. GM’s strategy is to create an environment that rewards consumers, providers, and payers for improved quality and outcomes of care, higher productivity , and lower costs. For most employers, premiums to ‹nance this care are paid by the employees through payroll deductions, while the remaining 80 percent or more is paid ostensibly by the employer.3 At GM, the employer pays most of the premium for salaried employees and the entire cost for unionized hourly employees. Temporary and contractual employees do not receive health bene‹ts. Strategies in Managed Care As a purchaser, GM seeks to provide uniform, high-quality health care while procuring the best value for each dollar spent—a strategy based on value purchasing , partnering, and broad-based coalitions. Similar to existing processes in the automotive industry, managed care at GM rests on the theory that patient-focused care requires the application of best practices and continuous process improvement. “Driving the good” is the goal. This means purchasing the most appropriate care to help patients manage disease, while remaining cognizant of the dynamic nature of medical science. As GM discovered in manufacturing , high costs are often a symptom of poor quality, while improving quality often lowers costs. In the same way, the company contends that higher quality health care should also lead to lower overall costs. High-Value Paradigm in Health Care Given the extent of coverage and the diversity in bene‹ts, GM is driven to assure that managed-care providers meet quality and ef...