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Employers As Purchasers

PROLOGUE

Employers As Purchasers

After being temporarily beaten into submission, problematic cost increases have reemerged. Employers’ freedom to crack down on costs, by either reducing benefits or increasing cost sharing, has been limited by a tight labor market. But in a weakening economy, with rising unemployment, this constraint has begun to ease. Policy-watchers are waiting anxiously to see how employers will react to another year of double-digit premium increases.

The following paper by Sally Trude and colleagues at the Center for Studying Health System Change (HSC) suggests that business leaders may not be in a hurry to push the envelope again. While many consultants and policy analysts envision a shift to defined-contribution strategies that would increase the predictability of employer costs, extensive interviews in twelve representative markets nationwide found more talk than action on defined contributions, along with a "preference for incremental changes and a wait-and-see attitude" among employers.

Complementing the broad view supplied by the HSC researchers, the next two papers in this section examine in depth the celebrated experiment in competitive purchasing that employers in Minnesota have been conducting over the past five years under the leadership of the Buyers Health Care Action Group. The experiment—rich in implications for Medicare and the private market—created a framework for direct contracting with providers that included many challenging elements that reformers have debated for the past decade, including standard benefit packages, risk adjustment, comparative performance reporting, and consumer choice. Two teams of investigators, led by Jon Christianson and Alan Lyles, respectively, report on their evaluation of the first years of the experiment, the changes it has undergone, and some of the lessons learned.

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