Board of Economists: Business, Heal Thyself

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SHEARER: Oregon set up a commission to study the effectiveness of different medications. Eventually this is going to lead to the state of Oregon selecting preferred drugs and negotiating for the prices. Our drug costs are increasing at 17% a year. If we could make some inroads into bringing those increases under control, we could save billions of dollars a year. This is one little glimmer of hope.

TIME: Are there specific strategies that individual businesses have tried in an effort to respond to their cost pressures and the needs of their employees?

WILENSKY: The postal workers are going to now be offering something that Medtronic has been offering for a while, in which the employer puts in a block of money, there's a block of money which the individual is responsible for--essentially a deductible--and then above that cap regular insurance kicks in.

DARLING: There are about 200,000 people in these so-called consumer-driven health plans in the whole country. By 2003 there will probably be another eight companies planning to roll them out as options. It's extremely complicated. The winners are relatively low users, and the losers are going to be those who are higher users. The suggestion is that this plan will change people's behavior, so that the overall cost will be lower, but unfortunately it all depends on exactly how it's designed. If you don't do something clever with the cap, very quickly you will have more and more people going into the insurance. All the big companies--Humana, PacifiCare, UnitedHealthCare, Cigna, Aetna--have their own models.

SHEARER: We are really concerned about the potential to shift costs to sicker people. It's one thing for someone who is healthy to get $1,000 and put it in an account that can grow year to year. Great. But that's diverting dollars away from our health-care system to go to healthy people. We thought the health-insurance system was about spreading risk broadly among the healthy and the sick. If these plans start taking off, we will gradually shift to a system with everybody facing much higher deductibles.

REINHARDT: This shifting to the sick is absolutely there. There will be some overall savings, but there will also be a major redistribution of the financial burden of health care from the healthy to the sick, because the sick will, every year, have to pay the whole thing. Then the money that stays in those healthy employees' accounts no longer goes into the health system. Think of the health system as a hungry wolf. It will eat, and if it doesn't get it in this bowl of vittles, it will eat somewhere else: in the catastrophic policy.

ALTMAN: Good for some people, bad for the system.

WILENSKY: I don't think we should trash this quite so fast. What we are talking about is, is it unreasonable to have to pay for routine procedures, even if they're nontrivial? In all areas of our life, we have routine expenditures that we are expected to pay for. It is a very interesting idea, and people in the business community are considering it.

TIME: Isn't there a disincentive for employers to offer any coverage at all?