We begin with the cost of health care. High—and still rising. The cost of medical and drug benefits is expected to rise 5% in 2019. The 6th year in a row with a 5% increase. Premiums and out-of-pocket costs for employees and dependents will average $14,800. Congress has struggled for years to fight the escalating costs— with little success. But what if the answer lies in a place they haven’t bothered to look? What if it’s right there out in the open in Big Sky country? Today’s cover story takes us to Montana where their solution came from a senior citizen with a knack for numbers. Those who took her on quickly learned they’d grabbed a tiger by the tail.
Our story begins a few years back about two thousand miles from Washington DC in Helena, Montana - Where Marilyn Bartlett was assigned to tackle the seemingly impossible.
Sharyl: People have told you it couldn't be done?
Bartlett: Absolutely. People told me it could not be done.
It was 2015, and Bartlett had just been hired as Montana's new healthcare and benefits, or insurance administrator. Montana's 30,000 state employees and their families were in deep trouble: their health insurance plan was going broke. Fixing it would be like moving a mountain. But Montana passed a law saying it had to be done. So Bartlett had about a year to do what nobody else had ever done and what Congress hasn't been able to do on a national scale: drastically slash healthcare costs.
Bartlett: We had no choice, but I'll tell you, there were sleepless nights for me. I did not know how we're going to pull this off.
It was a tall order. But Bartlett came equipped with a very particular set of skills acquired over a very long career.
She'd managed finances at a Blue Cross Blue Shield plan, and been chief financial officer for a benefits firm. She believed the key to success had nothing to do with "insurance for everyone" after all, every state employee was already insured.
Sharyl: When we talk about what's the issue with healthcare today, a lot of people say the issue is getting everybody insured. This was not really the approach that you took.
Bartlett: You're right. I don't agree with that. I think the solution is getting the cost affordable and I did not take the approach of "insurance for everyone." I found a lot of waste just with the insurance part.
She began by comparing charges from two different hospitals for similar knee replacements.
Bartlett: And one came in around $30,000 in the other at $105,000. Huge difference. I just kept asking why, why? Well, the implant was much more expensive. Well, can I see the invoice? Can I see what you paid? No, that's private. You can't see that. So I couldn't get to the information. It was frustrating and I couldn't get to the answers. And one hospital said, well, we don't really know our costs.
Bartlett wanted to take the mystery out of hospital billing. Find out what things really cost, add on reasonable profit, and standardize prices. Her plan required an insurance company that would roll with the punches and fess up what it paid hospitals and why. Bartlett says Montana's insurer at the time, Cigna, would not play ball. So she fired them and took bids from other companies, settling on Allegiance Benefit Plan Management.
That's when she got her first taste of resistance from the insurance industry, including so-called third-party administrators or TPAs.
Bartlett: The other unsuccessful TPAs or insurance companies made fun of us and laughed, went to the Governor's office and said, 'what she's proposing is stupid. It's never going to go.'
With a new insurance company on board, the big questions were: how to set reasonable prices for medical care. And how to get Montana's hospitals to agree to them.
Montana's insurance plan had been paying some hospitals a whopping 600% of what federal insurance for the elderly, Medicare, pays for the same treatment.
After crunching the numbers, Bartlett suggested hospitals would get paid somewhere around 220 to 250 percent above Medicare. Way less - but still a healthy profit.
Bartlett: The hospital industry was adamant against it. They then started lobbying with the governor. They lobbied heavily, but they couldn't tell me anything that would fit with our goal of lowering healthcare costs. And so we had the hospitals very, very upset with us. We had some legislators upset with us. You know, it's interesting, legislators that were hammering on me during the 2015 legislature to get costs down I didn't realize that many of them sit on the boards of directors of these hospitals. And so they're kind of playing both roles too and that caused problems. And we had the insurance companies against us.
The unions were also unhappy most of Montana's state employees are in unions. And Bartlett heard from them at meetings.
Bartlett: And they were very hostile. They were very, very tough meetings. Employees were mad. They were yelling at us. And one meeting, a woman flipped me off and left the meeting.
One month away from the new pricing structure taking effect, six major hospitals were holding out. If they didn't agree to join in, the new plan could fall apart. Employees could face hour-plus drives to get treatment from participating hospitals. A turning point came when Bartlett helped convince the unions to channel their anger into sending postcards and making phone calls to pressure the hospitals. At the very late minute, it worked. On July 1, 2016, Bartlett's radical pricing reforms took effect.
Sharyl: The results defied expectations. Inside of two years they went from projecting a $9 million-dollar deficit to a more than $100 million surplus.
Today, Montana continues its unorthodox path. On the day we visited, Bartlett and state senator Dr. Albert Olszewski, an orthopedic surgeon, met to discuss new ideas.
Sharyl: Do you think some of this would work if Congress were to talk about attacking health care costs in this way?
Olszewski: Indeed. I look at Montana and we are very large state geographically, but we're very small population and we're an ideal test tube or a bed of experimentation for the rest of the country. If we can make it work here in Montana, it can work for the rest of the country.
A new, proposed Montana law would regulate the little known pharmaceutical middlemen who take a cut of the consumer's money when it comes to drugs.
Back in Washington DC, Congress might learn a lot from Montana's experience. But in this town, the insurance and pharmaceutical industry hold even more sway.
Sharyl: Why is this so hard?
Olszewski: Well, because many people profit from it. The fact is that if the system would stay where it's at - broken - too many people profit and the profit, not in thousands of dollars, but in millions upon millions of dollars. That's why it's so hard to fix.
Barlett's plan worked, she says, because she was prepared to take some arrows and she knew her numbers.
Bartlett: We had to stand up to the barriers and I knew that data didn't lie. And I knew we had the numbers. There weren't any arguments that could hold up against that. It really was pretty simple.
North Carolina is following Montana’s lead and other states are considering it. Bartlett thinks large, self insured corporations could also follow her pricing model to save patients millions.