The Future of Health Care

This top expert says patients will be in the driver's seat.

By Kimberly Lankford, Contributing Editor

From Kiplinger's Personal Finance magazine, March 2007

California Gov. Arnold Schwarzenegger was the first governor to propose sweeping health-care reforms in his state this year. But he won't be the last, predicts Mark McClellan. McClellan is former head of the Food and Drug Administration and of the Centers for Medicare & Medicaid Services (CMS), where he successfully introduced Medicare's new prescription-drug program. Now a senior fellow with the Brookings Institution and the American Enterprise Institute, two top think tanks representing both ends of the political spectrum, the respected doctor and economist will be giving his prescriptions for fixing the U.S. health-care system. McClellan outlined his expectations for 2007 in a conversation with Kiplinger's Personal Finance.

Despite lots of talk on Capitol Hill, McClellan thinks much of the action will be in the states this year. "Most states have pretty good budget outlooks," he says, "so more of them are thinking about improving their health-care coverage."

But at least one part of the California proposal could be problematic. The plan would bar insurers from rejecting people for coverage for any reason, and it would allow health plans to set premiums based only on how old an individual is and where he or she lives. In states that have tried similar approaches -- notably New Jersey -- individual policies are so expensive that most people can't afford them. "You can't get an individual insurance plan for less than $600 or $700 per month in New Jersey, and the market is essentially gone," says McClellan.

Help for consumers. No matter what kind of insurance you have, expect to become more involved in your health-care decisions. Tiered pricing of prescription drugs is just one example, says McClellan. "A generic drug will be free, but you'll have to pay a large part of the cost difference for a brand-name version. Is the additional cost worth it to you?"

To help you make a decision like that, you'll be getting a lot more information. McClellan successfully introduced the MyMedicare.gov Web site, which provides Part D beneficiaries with personalized information about coverage options and drug prices.

Medicare has also begun reporting on the quality of care, and this year will start sharing measures of patient satisfaction. That will make it easier for consumers to select a doctor and a hospital, and it will also enable doctors to receive bonuses based on the care they provide. "For two years I've been talking about paying for better care rather than more services," says McClellan. "Doctors want to practice good medicine, but they need incentive."

You'll also get more help in using the new resources. "Historically, Medicare staff had to spend a lot of time talking to doctors instead of patients," says McClellan. But when Part D, with its wide array of choices, was introduced, "we redirected a lot of attention to helping consumers directly."

He predicts that you'll see "more consumer-focused resources" in other parts of the health-care system. And more people will hire advisers to help them navigate their health-care choices and finances, much like a financial planner handles other money issues. "These decisions are important and have as much financial impact as your investment decisions," says McClellan.

Employer innovations. Increases in the cost of employer-provided health insurance tend to get a lot of media attention. But McClellan is more interested in the innovative ways companies are controlling their costs.

For example, Pitney Bowes found it was possible to predict which employees were going to incur high health-care costs -- such as those who were pre-diabetic or neglected to take medications. "So the company invested in clinics and preventive services," says McClellan. "As a result, says the company, the increase in their health-care costs has been substantially reduced."

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