Mike Hamerlik offers his vision for fixing the cost of health care

DE PERE, Wis.—Jan. 17, 2018—Imagine a time in the United States when everyone would have to carry health insurance and they’d choose their own plan. Government subsidies would be provided on a sliding scale. Providers would have to charge everyone the same amount, and they’d have to publish their prices. Furthermore, drug prices would be regulated by the government, and everyone would pay the same.

If you ask WPS President and CEO Mike Hamerlik, that would be his ideal system.

He offered this scenario as part of his presentation at the CEO Breakfast Series at St. Norbert College in De Pere, Wisconsin, on Jan. 17. The theme of his talk was “Trying to Make Sense and Find Solutions for This Health Care Mess.”

He said his remarks were intended to provoke thought, and didn’t necessarily represent the official position of WPS.

He said three elements are important to the discussion: 1) having access to health care services; 2) how, when and where those services are delivered; and 3) how those services are paid for.

“We must understand that the real problem is the cost of health care, and the cost of health insurance only reflects the underlying medical costs,” Hamerlik said.

He described five challenging realities:

  1. The United States spends more than any other country on health care.
  2. Health care services are not purchased or delivered in a marketplace where basic rules of capitalism, or of supply and demand, or of economics apply. Because traditional market theories do not apply to health care delivery or financing, typical market-based solutions often don’t work, or don’t work the way we expect them to.
  3. Most people are insulated from both the knowledge and the consequences of the cost of health care because they are almost always mostly paid by someone else, usually an insurance company or a government entity. We as consumers of health care think of our deductible or copayment as the “cost” of health care, not the total cost paid by both us and another payer.
  4. Health care decisions are often emotional, not rational, decisions. It’s one thing to talk about health care policy. It’s quite another to be sitting with a loved one in a hospital when the options are not good, but it’s not yet time to give up.
  5. Except in a few rare cases, the demand for health care services is insatiable. Whatever it takes. Only in the most extreme cases at the end of life – and after all alternatives have been pursued – do we accept the ultimate conclusion.


When the Affordable Care Act was passed, the purpose was to provide access to health care through guaranteed issuance of health insurance policies. The ACA developed an “essential benefit” plan that eliminated cost limits and caps on many services.

“Guaranteed issue, or no pre-existing conditions, is a two-sided coin with the individual mandate. If we are going to cover everyone, we must cover everyone. What happened with the ACA is the penalty for not enrolling was so weak that it wasn’t effective to balance the number of healthy versus the number of unhealthy in the insurance rating pool,” Hamerlik said.

“This isn’t a policy issue; it’s a math issue. More people who needed care signed up than those who didn’t need care. There was a clear economic advantage to enrolling, and there was only a tiny economic disadvantage to NOT signing up. The math is simple: premiums will go up, often substantially. And, when the premiums continue to go up, those who are healthier, make their own economic decision about whether health insurance is a viable economic choice for them. That’s what is called an actuarial death spiral, when most risks remaining in an insurance pool are heavy users of health care resources, and skyrocketing health care costs further push healthier risks out of the insurance pool based on their own economic choice.”

Hamerlik said the solution starts with an iron-clad mandate, not the repeal of the mandate that was just passed by Congress and signed by President Trump.

“And, we need to ensure there are subsidies if you can’t afford it. But there can be no way to avoid having insurance.”

Another area where there is hope for reform, he said, is in prescription drugs. Thirty years ago, prescription drug costs were less than 5% of the medical spend. Now, pharmacy claims account for about 25% of total medical spend.

“It is my view, but not necessarily my wish, that drug price controls must be on the short list of solutions that can have an immediate impact on the cost of health care. We are past the tipping point on affordability of pharmaceuticals, and this is one of the immediate solutions that could be effective,” he said.

Another idea that can change health care costs is to abandon fee-for-service reimbursement models. “The problem is that the incentives are entirely backwards, and the rewards go to those who do more, not those who do best,” he said.

“I’d like to recommend proceeding with fixing our health care system following the maxim that ‘something is better than nothing.’ Some improvement is better than no improvement. Even with all the flaws of the Affordable Care Act, at least it was bold change. We knew from the outset that the reforms wouldn’t work as intended. But the rails came off because it was a political solution, and the politics overtook the policy improvements,” Hamerlik said.

“Change can be incremental, it can be bipartisan, maybe even non-partisan, and it can be effective.”