Gauging Healthcare’s Impact on Connecticut’s Economy
Every year, as lawmakers propose new legislation impacting healthcare, insurance carriers spend countless hours preparing for the consequences of those bills.
“We robustly scenario plan around, ‘What if this were to happen, what if that were to happen?’ ConnectiCare president Eric Galvin said at CBIA’s Jan. 13 Economic Summit + Outlook 2020.
“That goes into high gear when we get a preview of what types of bills are being considered, whether on the state or federal level.”
Galvin joined Usha Pillai, founder and president of Aria Management Consulting, and Paul Grady, principal with the C.M. Smith Agency, for a discussion on healthcare and the Connecticut economy moderated by Paul Pescatello, executive director of the Connecticut Bioscience Growth Council.
The impact of legislation on healthcare costs and delivery was among several topics the panel tackled.
“We work with legislators to try to avoid unintended consequences of a well-intended item,” Galvin said.
“You could have a bill that is being debated that will do something very good for a very small piece of the population and have massive unintended consequences for the rest.”
Connecticut spends around $40 billion a year on healthcare, with costs rising between 5% and 6% annually.
Those costs, which include commercial payments, Medicaid, and Medicare, are expected to continue increasing by 5% to 6% over the next 10 years—”unless we do something differently,” said Grady, who advises employers on health and welfare benefit strategies.
“There are some really life-saving, life-enhancing prescription drugs that are making a tremendous difference in people’s lives,” he said.
But, he added, they’re expensive, and while employers can do some things to manage their prescription costs, “we don’t have an answer for a $1 million drug.”
“And when you think of the impact a drug like that has on an employer, it really is a struggle,” he said.
Part of the reason, Pescatello noted, is the high cost of developing and testing a drug before bringing it to market.
“The cost to develop a new drug, from idea to FDA-approved product, is upwards of $2.6 billion and a minimum of 12 years of work,” he said.
“It takes 12 to 15 years because it’s complex and we want the drug to be safe and effective,” said Pillai, who has years of experience in the biopharma industry.
“Cost is driven by regulatory requirements.”
For the past few decades, the cost of drugs has been increasing as a proportion of overall healthcare costs, Galvin said.
“And in the last 10 years, it’s accelerated rapidly,” he said.
Much of the research and development for new pharmaceuticals is being done by smaller companies, Pillai noted.
“Two decades ago in Connecticut, there was big pharma and that was it,” she said.
“Today, we’re looking at somewhere in the order of 70 to 80 small startup companies.”
The welfare of the startups enables pharma to bring new drugs to market.
“There’s this complex tie-in between large pharma, startups, and universities, so together we can come forward and [develop] some of those new medicines,” Pillai said.
ConnectiCare’s strategy to combat rising healthcare costs is to stress wellness to its enrollees, Galvin said.
Last year, it introduced WellSpark Health, a company that helps individuals embrace healthier lifestyles by improving their health literacy.
“North of 60% of healthcare costs is really behavior or lifestyle oriented,” Galvin said.
“To the extent that we can peel that back, we’re going to help people live a better life and ultimately, from an economic perspective, keep our business out of the firing line.”
Despite perceived woes with healthcare delivery and cost, Connecticut has one of the best health systems in the world and some of the healthiest residents in the country, Pescatello said
“Medicines developed here in Connecticut have changed the world,” he said.
He added that research and development done in Connecticut on statins has helped reduce cardiovascular disease by more than 50% in the last 20 years.
Research done in Connecticut on HIV drugs also helped turn what was a death sentence into a manageable disease.
Focus on Value
Employers are focused on getting the best value from a cost and quality perspective, Grady said, but more employers need to demand more from the healthcare system.
“The most disappointing thing is that employers aren’t more focused on where they’re spending their money on healthcare and they aren’t holding the healthcare system more accountable for delivering better value,” he said.
“My ask would be for employers to be more mindful of where they’re spending their money and think about where they’re going to send their employees because the quality of care they’re getting is uneven, even here in Connecticut.”
The panelists also expressed doubt that a public option or Medicare-for-all can work.
Galvin predicted the delivery capability would fall apart.
“Doctors, hospitals, laboratories—all of the deliverers—are now going to get a massive haircut in terms of the amount of money they’re reimbursed,” he said.
“A public-private partnership is the only way to [address] affordability.”
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