Mercer Shares Views With Senators on Controlling Healthcare Costs

Mercer Shares Views With Senators on Controlling Healthcare Costs

As US healthcare costs sharply rise, Mercer is suggesting steps to ease the problem in a March 1 letter to Sen. Lamar Alexander, R-TN, chairman of the Health, Education, Labor and Pensions (HELP) Committee. Mercer’s recommendations respond to Alexander’s Dec. 11, 2018, letter asking healthcare experts how to curb costs for taxpayers, employers and families. Mercer’s response focuses on cost-control strategies and other reforms to help employers continue providing health benefits to more than 181 million Americans.

Drug-Pricing Reforms

Prescription drug costs are rising faster than overall medical costs, and specialty drug costs are outpacing other prescription drug costs. To set the stage for longer-term structural changes, Mercer recommends that initial drug-pricing reforms move away from the current rebate system. Rebate reform should be coupled with increased transparency for private payers and flexibility for public payers. These changes would pave the way for a drug-purchasing system more aligned with a pay-for-value approach. Any reforms must occur across both the public and private sectors to avoid cost shifting, Mercer notes in the letter.

Greater Flexibility for HSAs

Consumer-directed health plans, which combine health savings accounts (HSAs) with high-deductible health plans (HDHPs), can cut total healthcare spending about 5% in each of the three years after a plan is introduced, research shows. Mercer suggests Congress build on this success by modernizing HSA standards — for example, to allow predeductible care delivery through cost-effective options like worksite clinics and telemedicine and to create HSA-qualifying HDHP safe-harbor plan designs that allow predeductible coverage of drugs and services for people with chronic conditions.

Improved Price, Quality Transparency

Mercer notes that much of today’s healthcare data doesn’t help consumers make cost-effective decisions for quality care. Healthcare consumers expect the same types of price and quality data available for retail goods. To improve healthcare price and quality transparency, Mercer recommends Congress require hospitals and health insurers to give cost information to patients and beneficiaries before they receive care.

Clear, Uniform Rules for Wellness Programs

Many employers provide well-being and care-management programs for employees, and those programs are associated with reduced turnover, lower healthcare costs and higher profitability. But employers offering financial incentives for health screenings — such as employee or spousal health risk assessments or biometric screenings — face legal uncertainty after a court nullified Equal Employment Opportunity Commission (EEOC) rules on how much of a financial reward — if any — is allowed (AARP v. EEOC, No. 16-2113 (D.D.C., Dec. 20, 2017)).

Since then, continued delays filling EEOC leadership posts have kept the agency from issuing new guidance. Mercer urges lawmakers and regulators to address current compliance uncertainties and ensure a consistent and supportive federal policy for wellness programs.

Repeal the ‘Cadillac’ Tax

Though delayed until 2022, the impending 40% tax on high-cost employer-sponsored health coverage that exceeds certain Affordable Care Act (ACA) values has already led to benefit cuts and higher out-of-pocket expenses for employees. As Mercer notes, this tax will also have inconsistent and inequitable impacts: Contrary to its nickname, the tax will hit not only generous health plans but also ordinary plans that are expensive simply because they cover people with above-average health costs — such as women, older or disabled workers, families with catastrophic health events, and people living in costlier areas. Mercer urges Congress to repeal the tax and reject new proposals to tax employer-provided health benefits.

Dorian Z. Smith
by Dorian Z. Smith

Partner, Mercer’s Law & Policy Group

Geoff Manville
by Geoff Manville

Principal, Mercer’s Law & Policy Group

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