Cooperation urged to cut healthcare costs

By Frank Cho
Advertiser Staff Writer

Double-digit increases in health insurance premiums are pushing affordable healthcare out of reach for many people, but one of the top health insurance executives in the nation said the impact could be reduced if the industry worked with providers and government officials to manage costs.

Scott Serota, president and chief executive officer of the Blue Cross and Blue Shield Association, said the healthcare industry's problem has not been lack of competition, as some critics have argued. It has more to do with fundamental issues such as low government reimbursements and the dramatically rising cost of medical technology, he said.

Serota pointed out that health insurers cover more than $150 billion of insurance risk. "We are taking that risk for a 2 percent (profit) margin. The bulk of the dollars are going to providers, as it should be."

His comments at a breakfast meeting for business leaders yesterday highlight the growing contentiousness among healthcare sectors as they grapple with rising costs. For years, hospitals, doctors and insurers were aligned in blaming prescription drugs for the increase. More recently, the groups, each armed with cost reports, have begun pointing fingers at each other.

Serota became the association's top executive in June 2000 after serving four years as a senior officer of Chicago-based Blue Cross/ Blue Shield. The association covers about 85 million people and has contracts with 90 percent of physicians and 80 percent of hospitals nationwide.

Bob Hiam, president and chief executive officer of the Hawaii Medical Service Association, said Hawai'i's healthcare system is unique, but not immune from rising costs.

"Hospital, medical and drug costs continue to increase, and we are all using more services than ever before. As a result, Hawai'i employers and consumers are faced with paying more and more for quality care," Hiam said.

HMSA, which covers more than 650,000 people in Hawai'i, is a member of the Blue Cross/Blue Shield Association and sponsored yesterday's breakfast meeting.

Among the more pressing challenges are falling reimbursement rates.

Serota said government insurance programs represent about 51 percent of healthcare costs, but make up only 46 percent of reimbursements, putting a financial strain on healthcare providers to make up the difference.

"It's going to take the healthcare finance expertise of the insurance industry, the healthcare delivery expertise of physicians, hospitals and other providers ... to make a difference in keeping healthcare affordable," Serota said.

Reach Frank Cho at 525-8088 or fcho@honoluluadvertiser.com.