Brian Klepper
Published 6/09/14 in Employee Benefit News
One of America’s most enduring mysteries is why the organizations that pay for most health care don’t work together to force better value from the health care industry.
We pay double for health care what our competitors in other developed nations do, but studies show that more than half of our annual health care spend – equal to 9% of GDP or our 2012 budget deficit – provides zero value. Every health care sector has devised mechanisms that allow it to extract much more money than it is legitimately entitled to. Health plans contract for and pass through the costs of products and services at high multiples of what any volume-based purchaser can buy them for in the market. Medical societies campaign for excessive medical service values that Medicare and commercial payers base their payments on. Hospitals routinely over-treat and have egregious unit pricing. There are scores of examples.
Decades of these behaviors have made health care cost growth the most serious threat to America’s national economic security. Medicare and Medicaid cost growth remains the primary driver of federal budget deficits. Over the past decade, 79% of the growth in household income has been absorbed by health care. Health care’s relentless demand for an ever-increasing percentage of total resources compromises other critical economic needs, like education and infrastructure replenishment.
Health care costs have been particularly corrosive to business competitiveness. Three-fourths of CFOs now report that health care cost is their most serious business concern. Commercial health plan premiums have grown almost five times overall inflation over the past 14 years. Businesses in international markets must overcome a 9+ percent health care cost disadvantage, just to be on a level playing field with their competitors in Australia, Korea or Germany.
The health care industry’s efforts to maximize revenues have been strengthened by its lobby, which spins health policy to favor its interests. In 2009, as the Affordable Care Act was formulated, health care organizations fielded eight lobbyists for every Congressional representative, providing an unprecedented $1.2 billion in campaign contributions to Congress in exchange for influence over the shape of the law. These activities go on continuously behind the scenes and ensure that nearly every health care law and rule is structured to the industry’s advantage and at the expense of the common interest.
Health care is now America’s largest and most influential industry, consuming almost one dollar in five. Only one group is more powerful, and that’s everyone else. Only if America’s non-health care business community mobilizes on this problem, becoming a counterweight to the health care industry’s influence over markets and policy, can we bring health care back to rights.
In every community, employers represent loose groupings of lives covered by health benefits, each with different approaches and results on health outcomes and cost. There are few standards and divergent opinions – mostly based on ideology rather than evidence – on plan structure, service offerings, cost sharing, incentives and many other variables.
Business health coalitions represent the opportunity for health care purchasers to collaborate and become more consistent. They can move collectively toward best practice and market-based leverage, with better health outcomes at lower cost. Coalitions like those in Savannah, Ga. and Madison, Wisc., have shown impressive, measurable impacts. Many others could benefit from shared access to advanced risk management capabilities that can change how benefits and health care work.
Another critical missing component has been the direct involvement of business leaders. Many senior executives may not fully appreciate health care’s often blatant inappropriateness, and possibly haven’t thought through the scale of financial impact on their own businesses and the larger economy.
It will take businesses collaborating, harnessing their immense purchasing power, to disrupt health care’s institutionalized mechanisms of excess. By leveraging their collective strength, purchasers can convey that health care profiteering will no longer be tolerated, and that America’s economic success is dependent on the right care at much fairer pricing.
These goals are worth pursuing for our employees and their families, our businesses and the country. And we call on America’s employers to join us.
Brian Klepper, PhD, is chief executive officer, National Business Coalition on Health, a non-profit membership organization of purchaser-led business and health coalitions, representing over 7,000 employers and 35 million employees and their dependents across the United States.
Care And Cost 
You are correct.
Business needs to get involved in healthcare, but not the way you think.
Costs have increased exponentially due to third party payments in the system. When large payers negotiate, they are negotiating with a large budget for individuals but the individuals pay very little at time of service.
This disconnect drives up utilization, why not as someone else is paying for it. If the individual was responsible directly and knew all the costs involved they would either delay care on their own, mostly with few ill effects or negotiate down the price as occurs in a true free market.
We know there is no free market presently, at least not one where the individual is aware at any time of he true costs involved.
Businesses would do better to propose HSA’s with high deductibles, fund parts of the deductible and then let All healthcare entities compete for business based on quality, costs and transparency.
Hospitals and other big ticket items can use the benefit of health insurers to knock down the costs of care, but leave the outpatient world to the individuals.
Free market implies the buyer knows what they want or need to buy. With luck 10% of people might be capable of informed health care purchasing; but the combination of poor medical knowledge and poor understanding of risk puts 90% in the position of a blind man in a market — that’s called random choice. By the way, if you had an appendicitis what type of incision would you choose? You would choose a 5 star hospital and hope the surgeon on call knows a good answer. Not a free market and it never will be. The point is people need to choose health care in terms of a product that supplies all the care they need for a year — they can’t be down in the weeds with every medical decision. Co-pays are very reasonable ways to steer people away from costly care (the ER) or unnecessary care (screening CT scans). The health plan needs to shoulder 99% of the risk, not the patient.
Sorry but incorrect assumption.
Most of healthcare occurs outside of hospitals where patients are informed well. With the advent of the Internet they sometimes are even more informed.
Your example of asking a patient to pick what type of appendix incision is ridiculous and has nothing to do with this debate.
Prepackaged goods and services are a means to help industry, not the consumer. It is individuals who consume, not populations. Get individuals to be true consumers and costs go down and industry would need to adapt.
But alas today’s insurance industry is in collusion with the present administration for their own good and profits, at the expense of everyone’s pocketbook, other than those who get subsidies.
Nice one. Well stated–you make it sound like a no brainer! Just on a personal note, the health care experience here in NY, for regular folks with a little money seems to me to be more fucked up than ever! How are you? You and Elaine have been on my mind a lot. We were in Jacksonville for a quick overnight last weekend to do Mom and Dad’s unveiling. Being there evokes so much, but also is a measure of how things change. As I told you, life has resumed a much more even, and joyful keel. (Is there such a thing? Sounds like a sailing term…)
Pls. check in and let me know how it’s going. Gosh I’d love to see youj. D Diane Dreher Writer/Producer, Medicine & Health http://www.linkedin.com/in/dianerdreher 245 West 107th Street, suite 14F New York, NY 10025 917.363.1726-phone 212.678.6752-fax
I am skeptical. How and why does a business have an interest in healthcare (outside of offering a benefit to attract employees)? How does a plumbing company understand healthcare? I see your logic — nobody else is stepping in to improve our nearly absent healthcare system. I do not believe substituting business for government is wise. However, it’s a great idea for business to force government to fill its proper role in managing health care for all citizens. Case in point: why on earth are waiting times for primary care longer in the US than in the UK? — bad system management. Management is something business understands.