Based on a presentation to the Greater Miami Chamber of Commerce I was in the elevator of Humana’s corporate headquarters recently, riding with just one other person, a woman I’d never met. Out of the blue, she turned to me and said, “You know, I know who you are and I’m mad at you.” I said, “Well, I’m sorry. What did I do?” She said, “Last year, you took away my HMO plan and you pushed me into one of those high-deductible consumer things and I had to go online to enroll in all of that and I had to try to figure it out. I was coming off that other plan and I really didn’t know whether I was doing the right thing. I went through all the tools. I did all that work and, man, I was really frightened that I had gotten into the wrong place and gotten the wrong thing. It just was very frustrating. I loved my HMO.” I said, “Well, how did everything in the new plan work?” “Well, it was generally okay. I guess I can’t complain too much,” she said. But by now she was starting to get a little bit worked up. “You know what I did this year?” she continued. “I got out there online ahead of time. I studied all of my historical claims. I looked at everything that had been going on. I looked at the doctor visits that I had and that my kids had and at everything that had happened. I went through the whole budgeting thing you have out there. I had to spend two hours on it. I put money in one of the savings account things. I’m not even sure how that’s going to work out, but I have money in there.” She added: “I was really frustrated when I got finished.” I asked, “Why?” She replied, “I’m not completely certain that I’m in the right place.” I said, “Well, do you feel confident that you got close to what you needed to do?” She was still in a huff, practically poking me in the chest, and said, “Yeah.” I said, “You studied everything?” BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 2 “Yeah.” “You looked at your history?” “Yeah.” “You thought of the future?” “Yeah.” “You set up pre-tax funding in one of the accounts?” “Yeah, I did all of that.” “Congratulations,” I said. “You are a fully informed, engaged consumer of health insurance who is using the best equipment possible—the best tools out there to inform yourself and to get to the best possible place that you can for you and your family. Not only that, but you took advantage of favorable tax treatment, which is new in the process. You are a really well-engaged consumer.” “Well, that may be true,” she said, “but I don’t like it.”
The Problem with Healthcare

I share that story as the context for everything else because the big debate in healthcare is around consumerism, and I am the industry’s single most dedicated zealot around the idea that if healthcare is going to avoid some sort of a huge cataclysmic event, we are going to have to find a different path and a different way. I know that business groups are frustrated about their ability to provide health benefits to employees and that companies have a fair amount of fear over whether they’re going to be able to continue to do so going forward. Firms that compete globally are in an even worse spot. That’s the business environment we’re all in. That’s the state of health insurance today. I am one of the few people in our industry who will get up and openly say that the “system” is broken. We don’t have any choice but to rethink how we finance healthcare. It has to start acting like the rest of the economy. And businesses are “the rest of the economy.” Employers know how business works -- and most of what they think and do and most of what affects them does not happen in healthcare. There will have to be new roles in the industry. There is an opportunity for insurers to do things differently, and we have to begin now. There is a lot of talk, and everybody has an idea. I spend a fair amount of time in Washington, and I wear one cuff link with an elephant and one with a donkey because both sides of the aisle have opinions. But I haven’t found a side that has a really clear view of what it actually is going to do. But something has to be done, and it has to be done relatively quickly. BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 3 Why now? We are very close, as a nation, to spending one dollar in every five on healthcare. The cost increases are absolutely unsustainable. There are many drivers, but I would argue that one of the biggest is the epidemic of elective healthcare. We as Americans are absolutely insatiable in our desire to use healthcare. Yet study after study tells us that somewhere between 20% and 50% of healthcare delivered in the United States does not add any value. In a $2 trillion business, think about the opportunities you could create if you could begin to rationalize that spending. The question is how to do it. The Business Roundtable, an employer coalition, conducts a survey each quarter asking CEOs to identify their major problems. Healthcare is the biggest cost problem every single time. Even in the worst times for oil prices, healthcare pops up at the top of the list. That would be okay if we were getting value for all that money. We spend 50% to 100% more per capita on healthcare than other countries, but we consistently rank 16th out of 22 industrialized countries in actual health outcomes. There is a lot of money being thrown at really marginal results. I love a comment by Mark McClellan, the former head of the federal Centers for Medicare and Medicaid Services, who said that our healthcare “system” leads the world, but in many ways costs too much and produces too little. But I would argue with him that, really, there is no “system.” Healthcare in the United States is a cottage industry of multiple components and players. But it is not a system because it has none of the attributes of a system. Systems use technology. They use data. They have processes. And they constantly improve. Quality goes up and prices go down. All the things that systems tend to look like and produce do not occur in healthcare. We have to start by acknowledging that. We have no system. And what we do have is broken. What can we do about it? We can make it everyone’s problem – but there is no silver bullet here. Healthcare is a
very complex industry – and changing it is a very complex problem, with people, companies and governments
differing in how they feel about it. At the end of the day, though, real productivity gains, real savings gains and
real advances are only going to come about when healthcare begins to look like and act like the rest of the
Joining Rest of the Economy

Michael Porter’s recent book on healthcare transformation is quite revealing. In it, he talks about how competition in healthcare does not produce the same results it does elsewhere. Rather, in healthcare it is a zero sum game. If I’m winning, someone else is losing. Elsewhere in the economy, where there is real competition, it produces better products and lower costs. In healthcare, cost and quality never improve at the same time. You can get better quality in spots, but it always costs more and, remarkably, it never seems to displace something else. Creating value out of a big business like healthcare is challenging and, in my opinion, the current “system” – or lack of it -- will never cut it. We won’t have an effective system until every participant—employers, consumers, providers, government and health benefit companies—rethinks where it stands. BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 4 What should employers be doing? The first thing is to stop treating healthcare as a commodity. Health insurance should not be an annual purchase. This is heavy lifting, and companies need to hook up with good insurance payers and then stick with those companies over a number of years to come up with joint strategies for educating employees in changing the way they think about health insurance. It can no longer be considered an annual spreadsheet commodity business. If businesses keep doing that, they’ll get the same results they’ve been getting for the last 30 years. Encourage engagement, not dependency. Many employees believe they’re entitled to healthcare that, to them, costs five dollars each time they seek services. That’s an entitlement and dependency attitude that has to be broken down. I stood up in front of my own employees many years ago and told them they were on their own for health insurance. I said I’d “set the table” and use my buying power for thousands of people. I told them I’d give them choices, but that they were responsible for taking care of themselves. I said I’d continue to be the facilitator, but that the company would no longer make day-to-day healthcare consumption choices for them. That was the beginning. Now, all companies need to encourage their employees to take advantage of tax-advantaged programs. In 10 years, we’ll see that the biggest thing that happened as a result of the Medicare Modernization Act of 2003 was not seniors getting drugs under Medicare, but the implementation of health savings accounts. They incredibly gear up the concept of engagement, budgeting, funding and planning. Their integration into the healthcare economy places high importance around financial services and health insurance. What can consumers do to change healthcare now? As soon as they start demanding simplicity, transparency and guidance, the marketplace will respond. As consumers, you demand and get exactly those things in other areas of your economic life. Before you go to buy a used car, you know everything about it. You have compared it to other cars. You know its safety. You know its price. You know the cost of financing it. And you know everything it does from the standpoint of performance. You know everything. You are all-powerful in buying that vehicle. But you have none of that in healthcare today. Indeed, we are only seeing the beginning of that kind of Consumers also need to be engaged in the pursuit of healthy lifestyles. It is often suggested that up to 50% of all healthcare costs are directly related to behavior. And we are bringing the high costs of healthcare upon ourselves. Consumers need to budget their plans, compare plan choices and find out about alternatives. In other words, they need to pay attention, be thoughtful and spend a little time on healthcare decisions -- because they are important. Providers have a role to play in changing healthcare now as well. In fact, one provider-related statistic is almost embarrassing. A full 45% of doctors do not practice evidence-based medicine. A study from several years ago said that 55% of people receive the right care – and that means 45% get too much, too little or the wrong thing. I know that delivery of healthcare is in some ways an art, but it is also very much a science. There are best known ways to treat certain conditions and illnesses. We have to be able to move effective ideas and practices more quickly through the healthcare space. We’ve already seen at least 10 years of efforts to do BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 5 that. Think about that going on anywhere else in the economy. You’d never see that slow pace of change. But in healthcare, it is very common. Doctors need to be more cost-aware. We don’t want them to be cost-driven. That’s frightening for patients. But they certainly should be cost-aware. There is a big role for government, too. Half of every dollar spent on healthcare in this country is spent by some form of government. At the end of the day, the solution to America’s healthcare crisis will involve a partnership between the private sector and the government. Because of its huge influence, the government can help create an electronically connected system and standardize related electronic applications. Pay-for-performance presents another opportunity for the government to take the lead. Lawmakers lead best when they create an environment of real, rich and quality information around price. We constantly encourage the federal government to release the Medicare database, the best database on healthcare in the country. With that information, the private sector would have an incredible opportunity to show consumers the best, most efficient, most effective and highest-quality places to receive care. Only through that database is that possible. But only the government has the power to make it happen. The government also can help generate better competition in the health insurance industry. There will never be real, robust health insurance competition among companies like ours until there are two different options for licensure, a state option and a federal option --very similar to the banking industry. Benefit companies need to put consumers first, to get together and start taking some of the nonsense and noise out of healthcare. To do so, we need to compete on value creation. There are incredible things we can do because of the data we manage and because of where we sit in the industry relative to what happens in healthcare. We are in the best position to know what happens to consumers as they move around in healthcare because all financial transactions pass through us, and with those financial transactions comes clinical information. To continue to find capabilities to inform and to guide, the major insurers have made huge investments in information technology. And we have an obligation to continue to invest in IT because we’re going to be key in pulling the various parts of the healthcare industry together into a real “system.” At Humana, we started seven years ago. We concentrate our efforts in four categories to help consumerism work: product and network design, clinical programs and forecasting, financial analysis and forecasting and consumer education. Product and network design is what most people are accustomed to seeing Humana work on. They represent the core of our work. Clinical programs and forecasting include our disease management and transplant management programs, HumanaBeginnings, HumanaFirst, Personal Nurse, Maximize Your Benefit and our various predictive modeling efforts. The real value of clinical programs and forecasting lies not just in having them -- but in their integration into the other services we offer. In financial analysis and forecasting, Humana is developing new prediction techniques. I could pick six plans, offer them to a room full of business leaders and predict how many would pick each one -- with 94% accuracy. Such capabilities are out there -- and they’re getting better. BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 6 Consumer education is the main area in which employers have to step up. Businesses spend between 75% and 90% of all the money in healthcare, and thus have an opportunity to help employees better understand it. But I am constantly amazed at how inattentive employers can be to the ideas that the money is theirs and that their people are spending it. Why don’t employers step up, get engaged and help employees understand healthcare better? Health plans like Humana can help them do that. Our perspective is consumers will be good at such guidance. Every piece of data that we have proves that consumers can and will be good at it if they have the information they need at the right time. However, employers see three lines on the balance sheet: member cost, a solution and coverage. Companies are shifting costs to employees because it is the only way to keep premiums down, and they’ve been doing so for at least 10 years – more so in some years than in others, depending on how business goes. What that means is coverage drops and individual employees’ costs increase. But there is an end to that game. There will be a point when employers will be unable to continue to share costs and the basic premise of health insurance will fall apart. That situation can be avoided by educating consumers, but to do so, three big questions have to be answered. How do people choose their benefits? How do they finance their piece of the cost? And how do
they use healthcare services? There are capabilities being built to answer those questions—information
systems, data warehouses and new tools and techniques.
Humana’s New Role and Approach

Today, 50% of Humana’s 23,000 employees sprinkled around the nation have high-deductible health plans with health savings accounts and use debit cards from those accounts to pay for their portion of their medical expenses. The other 50% are in other forms of high-deductible plans. The result? Cost trends have been less than 4% for six consecutive years. Our people are very engaged and provide a lot of feedback about their ability or lack thereof to obtain certain information. As a result, we know that our approach works. The main premise of Humana’s health plans for its employees is Humana insures them against financial disaster should they become seriously ill, but covering visits to the doctor is not Humana’s responsibility. That’s where the high-deductible plans become important. The question becomes one of how the employer helps employees prepare, plan and budget for and finance their piece of the cost. The HSAs, the pretax dollars and the payroll environment are very powerful in helping employees reach the point at which they are comfortable with their responsibility for their component of healthcare expenses. Here’s how Humana’s integrated approach to consumer engagement works. Meet Diane. At Humana, we believe people should budget, so we offer them the tools to help them do so. Diane uses our family health budget tools and reviews her expenses and can thus forecast what her expenses will likely be. That forecast is never going to be exactly accurate, of course, but Diane has thought about her finances beforehand and has a premise from which she can make her healthcare decisions. After reviewing her expenses, she enrolls online using a wizard that helps match one of many plan options with the expenditures she is estimating. She selects an HSHP with an HSA plan. BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 7 We process the enrollment and send Diane a guide that encourages her to register online at She follows our advice and takes a health risk assessment because she is asked to -- and encouraged to. Because that health risk assessment provides us with unique data that we never had before, we find out that Diane has a health problem. We reach out to her through a nurse who contacts her, explains what we found out through the health risk assessment and asks how we can be of assistance. Diane talks about her problem with the nurse, who sends her to see a doctor. When was the last time a health insurance company sent somebody to a doctor? The answer is never. So we’ve changed an important past dynamic in healthcare. We are reaching out and helping people get to the right place because we now have the tools to know things we didn’t and couldn’t know before. Diane listens to the nurse’s advice, but doesn’t have a doctor. She finds one using one of our tools, which tells her who and where the doctor is, what his or her hours of operation are and what languages the office staff speaks. Transparency tools talk about the services and the quality of the particular provider’s practice. Those tools are already alive and out there, by the way, and are not just a bunch of theoretical examples. Finally, Diane picks a doctor based on effectiveness and cost. Next, she goes to the doctor, who writes her a prescription. That happens almost every time, because that’s how you close the deal on a visit—you get a prescription. How many times have you left the doctor’s office without a prescription? None. So Diane buys the prescription medication and pays her co-payment at the time using her debit card. We find out about the purchase right away because we see the claim almost instantaneously. We report to her that she could have saved money if she had purchased the prescription through the mail instead of going to a pharmacy. At the end of the quarter, Diane receives a document from Humana that most companies haven’t seen yet. It’s called “Smart Summary Rx,” and it’s an absolute breakthrough concept. Well, it’s an absolute breakthrough concept only in healthcare. Anyone in the financial services industry would recognize the document very quickly. It is a monthly wrap-up of Diane’s relationship with the healthcare providers she’s patronized in a form that she’s accustomed to seeing -- because the rest of her life is recorded on periodic aggregations of what happened. Visa and American Express account statements are examples. Smart Summary Rx tells Diane where she started the period, what happened and where she ended the period. That kind of document never existed in healthcare before we started using it. Instead, there were other forms, basically a bunch of paper flying around. Does anybody get those things called “Explanation of Benefits” at home after visiting the doctor? They are totally incomprehensible, and everybody just throws them in the trash. I don’t know why we send them other than regulations require that we do. In fact, while the rest of our industry is trying to figure out how to make EOBs better, I’m trying to get rid of them. And Smart Summary Rx would do just that. It embodies consumerism in healthcare. It is not a component of a consumer-directed health plan, it is consumerism in healthcare coming to life. Smart Summary Rx is a real document that goes out to about 3.5 million seniors every single month and helps them understand their prescription drug plans. BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 8 Begin Transformation Now

How many newspaper reports have you read that talk about the lack of pricing transparency in healthcare and that say that the government should negotiate prices because only the government can figure all of it out? Well, Smart Summary Rx is pricing transparency in a real-world sense right now. Every Medicare beneficiary and around the country gets such a document from Humana. It lists all the medications the individual is taking and tells the person the average retail price for each medication and the prescription cost with the plan, reflecting all the discounts. It also shows the individual what he or she paid and at which pharmacy, what Medicare has a subsidy for -- if the individual receives a subsidy -- and what the plan paid. The document shows everything. Nothing is hidden. It is very straightforward. Each Smart Summary Rx also has healthcare news customized to its recipient. In fact, all 3.5 million such documents are individually customized because we know what is wrong with our consumers—because we see the drugs they’re taking. If a person is diabetic, having cardiac information on that individual’s Smart Summary Rx wouldn’t do much good, but diabetic information would. So that’s what the consumer receives. The document also explains the clinical conditions for a specific individual’s situation and lists suggestions and advice for him or her to follow. How do you think the pharmaceutical companies feel about Smart Summary Rx? They’ve never, ever confronted a real consumer because employers and insurers have convinced everybody drugs cost $5 or $10. If Lipitor really is $125, consumers don’t know it. But Smart Summary Rx pulls the cover back on that and says upfront that Lipitor is $125. It tells the consumer what the discounts are, what his or her piece of the cost is and what the payer’s piece is. It is beginning to introduce transparency, clarity and understanding of what things cost and how things work. And so it is very powerful. We have experience with such an approach, and an increasing number of companies are going down the transparency path because cost trends can be brought down. In fact, it’s time for all businesses to stop whining about healthcare. Healthcare is actually fixable. But companies have to step up and really rethink how they approach it. Humana has brought down the annualized healthcare cost increase to 4% for a very large swath of a large company, and it is a perennial occurrence, not a one-time event. There are a lot of proposals and a lot of talk about how to fix healthcare. And little of it has any chance of going anywhere. The idea of a centralized national system frankly doesn’t have as much traction as political candidates might have us believe. Support for it is very, very shallow and if Americans really understand the implications of a national system, support drops off even more. And, because of the real-world implications of trying to centrally manage 300 million people’s healthcare, it would be very difficult to do. We are not Canada, with 35 or 40 million people, or the UK, with some number of a similar size. This is a big, complex nation. Rather, the key principles for fixing healthcare should be generating value for money, regardless of who is paying, and creating value for consumers in terms of who is in control. Changing healthcare is really about putting consumers in control for the first time and creating value for everyone through better products and lower cost. BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 9 There is a three-pronged approach to change: Humana and Blue Cross of Florida started a joint venture there a number of years ago called “Availity” that has become a model for the entire nation. The premise of the venture is the need to standardize our approach in interacting with providers. The goal was to take the complexity out of the interaction, to take out the variations and put real-time transactional pipeline capabilities into doctors’ offices and hospitals throughout Florida. Working together—they’re large and we’re large—we had critical mass to make it worthwhile for providers to make changes, and it has been an incredible success. Availity will run about 400 million transactions in 2007. The good news for the rest of the nation is we now have a new partner—the Blue Cross plans of Illinois, Texas and New Mexico. We are moving out from Florida, and the standardization approach is beginning to go nationwide. If you are in the banking business, you already know how important standardization is. An ATM card will work in Rome and Miami because banks were able to standardize around how to make that work. That’s what’s happening in healthcare in Florida and, soon, around the nation. The future around what can happen with this real-time pipeline laid into the system holds spectacular opportunities. Some 90% of the doctors in Florida and virtually all of the hospitals there are involved. The Availity venture has turned out to be a real example of what can happen when an industry gets together and puts competition aside and finds common ground to help healthcare overall. Consumers This prong is about consumers stepping up, being adults and taking accountability for their healthcare. I am a big believer that consumers are smart enough to do so, even though there are some who think they are not. Some doubters say consumers are too stupid, that healthcare is too tough, that they’ll never get it done. But we have no evidence of that. Any time we actually put information in front of consumers, they do a better job of managing their own care. But caveat emptor always applies. I always remind consumers to remember that 45% percent of people receive the wrong care. So be a little cynical as you move around healthcare. Ask some questions. Be skeptical and question everyone. Use a budgeting tool, plan ahead, find information online. Health information online has one of the highest transactional volumes on the Internet—right behind pornography. But people still wait until they are ill or someone in the family is ill, then they try figure it out. They stumble around the Internet, and they get lost. I would encourage consumers to go to some web sites before the need arises to get comfortable with how to find things on them and to get used to how they look and how they work so they know how to navigate the web and know how to search it when the need does arise. And consumers who have the opportunity to do health risk assessments at work should do so. Those assessments supply a critical new component of data that will drive insurers’ ability to enroll people into case management, disease management and related programs. Employers need to integrate those assessments into their processes of providing health insurance. BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 10 Companies need to reward consumer engagement. There are a lot of ways to do so. One is insisting on transparency and accountability. All companies are exposed to those concepts in other areas of their businesses, so I can’t understand know why they tolerate the hiding in healthcare. But they do. But that’s changing. Most of the really smart provider systems, hospitals and doctor groups understand that they are going to have to be a part of a new approach. If they excel at what they do, it will be a big win for them, not a problem. But it is not just the DNA of the delivery system that has to think that way. Employers can help push the approach, too. Business partnerships and alliances can be very effective and have worked well. Humana has one in southeast Wisconsin that boasts a huge membership. A lot of companies there assembled to drive the idea of transparency and quality. They went out to all the provider systems and explained that they, the employers, were going to insist on transparency and accountability. Humana facilitated that through some technology investments and made the approach work – and now the partnership is the best example of true price and quality transparency in the United States because the businesses were involved in it. What makes it different is it uses the idea of individual customization. If you’re a Milwaukee Humana member and you need an MRI of the knee, we will give you true price and quality transparency for what happens with the providers in the community, and tie the specifics of your benefits, your cost position and Humana’s deals together to tell you exactly -- or very close to exactly -- what your cost is going to be as you choose your point of service and as you choose your provider. That is what the rest of the world should look like. That’s how today looks. Going forward, changing healthcare is really about doing things that we can do. I’ve spent a lot of time working in policy groups and the talk will make your head explode – even though there are real-world events already happening out there. The next time I hear about a health information network being built from the ground up with consultant assistance in some state, I am going to jump out of my chair. Availity already works! Why are we going to build another one? Such overlap and unnecessary expenditure of resources prove that people need to stay in touch. One of the things Humana will do is help all our customers and the people we talk to do just that. We’ve launched a web site – – that’s publishing stories of real-world progress so people can see examples of what’s happening around the country, where improvements are occurring and where real actions are being taken. Also, Humana will host a business summit this fall and initiate a different level of dialogue about what can really be done right now, as opposed to a vague national “reform” concept that no one can really put any details around. We are very excited as a company about what a new approach means to us -- and to the nation. Healthcare must change. It must change around the very elements that are known to work in other parts of the economy, so we don’t have to guess whether they will work in healthcare, too. We just need to figure out how BOARD OF GOVERNORS AND TRUSTEES LUNCHEON 11 to get those elements into healthcare. The business community disappeared from healthcare for about 10 years when things got better. Now it’s going to have to come back, get re-engaged and help us make needed changes. We are beginning to see early indications that the change we’re calling for is exactly what is going to happen. I am very optimistic. I have spent more than 30 years in this industry and in this business. I think it can be done. There are a lot of smart people involved, and we now are beginning to see good productivity and a lot of new technology. Things really are moving, because the power that we have seen working everywhere else in the economy does work in healthcare. Technology does matter, and consumers are at the center.



Deciphering the Drug Rules As we look forward to the 2011 competition season in Ontario, one that will have beautiful weather with no torrential rain or excessive humidity, it is a good time to have another look at the Equine Canada medication rules for our horses. This is not an article that provides everything you need to know in order to avoid a positive test but it does address some freque

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