They've got it all wrong!
I'm not the first person to shout at the picture box of freshly pressed suits indiscriminately dropping talking points that have polled well with voters all over the stage; I surely won't be the last. At this point in my life, I feel an intense need to bounce some of my thoughts off of you and continue pushing the bounds of that is possible in healthcare in out country.
The evil Insurance Company
Many folks talk about the cost of insurance being too high, which I agree with. We talk about the need for lower deductibles, co-pays and premiums - less out of pocket for the average American worker. A lesser known fact is that, under the ACA, private health insurance profits are capped.
It's true. For individual and small group insurance 80 percent of premiums we pay must be spent on medical claims (payments straight to the doctors, hospitals and pharma companies). No more than 20 percent of the premium can go towards administrative costs (which includes salaries and profits. For large group insurance, the ratios are even tighter at 85/15. Insurance companies that spend more than allowed on non-medical claims, must send rebates back to consumers. In the first seven years of the ACA, insurers gave back nearly $4 billion to consumers in these rebates.
Below is a nice graphic demonstrating where premium dollars go. Provided by AHIP (American Health Insurance Coalition), a totally partisan insurance collective, the point remains, dollars are dollars and facts are facts.
We can certainly continue to squeeze and vilify insurance companies. I am not here to defend them and am not a fan from many angles. However, I am convinced the only way to significantly lower the cost of healthcare is to reduce the amount that is charged by our doctors, clinics, hospitals and pharmaceutical companies.
Why do very few propose solutions to the underlying issue; exorbitant charges for services by our Doctors, Clinics and Hospitals?
Lobbying dollars: Follow the money
Through July 24th, 2019, the wider insurance industry has reported almost $79 million dollars in lobby spending. Keep in mind that is the entire insurance industry, not just health insurance related entities. When you remove dollars from property, casualty, life, auto, and other insurers clearly not related to health insurance, you get down to somewhere around $37 million dollars spent lobbying on insurance.
Compare that to the nearly $296 million dollars spend during the same period by the healthcare lobby (pharmaceuticals, hospitals, health professionals, and health services) and it is easy to start getting ideas about why the political dialog is the way it is.
Healthcare spending is important to the economy
We have higher mortality rates, higher disease burden, hospital admissions for preventable diseases are higher, mortality rates after a stroke are worse, higher rates for medical, medication, and lab errors, and more. But the biggest talking point is a real shocker that contradicts much of the talking heads banter: most comparable countries have quicker access to a doctor or nurse when then need care.
All of that said, my real thought here is around the cost of healthcare in relation to our economy.
If we were to magically cut 25% out of the healthcare sector in order to get in line with number two, Switzerland, or, better yet, cut our spending in half to be in line with our hockey playing brothers and sisters to the north in Canada, what would happen to our overall economy? Would a recession ensue? If you were a politician and policy maker would you want to be responsible for causing the next Great Depression? Maybe that is why nobody really wants to talk openly about how to fix the problem.
Desperate times call for desperate measures
At least one of the Democratic candidates for President, that I am aware of, has called for price controls and caps on pharmaceuticals. This idea is similar to how the Japanese system works, where each and every service has a set maximum price that a provider is allowed to charge. Full replacement Medicare-for-all would essentially, do just that. Doctors, clinics, hospitals and pharmaceutical companies don't seem to be able to control themselves and put in place reasonable pricing. Is government intervention and regulation the answer?
Maybe we wait until our healthcare system crashes and subsequently restructures, as I suggested early last year in the article "Too Big to Fail, Healthcare Style".
Whatever we think the solutions may be, I encourage you to have a listen to two very enlightening discussions I had on the topic recently. One on the role employer sponsored healthcare can play in solving this problem and the other, a discussion on the ins and outs of Medicare-for-all and what is missing from the current political dialog
Both are great debate primer for anyone you know following the issue. Please share with your friends and family on LinkedIn, Facebook, Email or Text.
It is with excitement and more than a little trepidation that I share the launch of my new project, the Illuminate HR Podcast. What started as an idea to capture, and share, the great Employee Experience and Human Resources conversations we are all a part of everyday has resulted in learning a new skill and title of “Podcast Host”.
Over the years, I have had the opportunity to have, and listen into, some amazing conversations with incredibly smart people in and around HR. From veterans, to fresh faces, founders, consultants and thought leaders, I have found there is much to be learned by listening to passionate people.
The concept is simple; short (usually no more than 20 minute) conversations with interesting people in the Human Resources space. I hope you will join me on this adventure.
Listen now or tune in and subscribe using your favorite playeriTunes | Google Podcasts | Stitcher | Spotify | RSS
Last but not least, a huge thank you to Lumity, Inc. for sponsoring this first season and making this initiative a reality.
Nearly ten years ago, I was fortunate to be working with an incredible group of people creating innovations in employee benefits and healthcare at Washington Mutual. By the time 2008 ended, JP Morgan Chase had purchased WaMu in a fire sale after the FDIC seized the bank (Chase paid $1.9B for $52B in assets, not including the value of the branch network). Many were hopeful, and excited, that our work might continue, only now with a much larger platform.
Shortly after, as I was sharing some of our successes in bending the cost curve and improving health outcomes, a leader in Chase benefits told me that they weren’t ‘in the business of managing healthcare costs’. Instead, they ‘just buy benefits for our employees.’ At that moment, I knew my skillsets and the efforts and passion of my fellow WaMulians weren’t important to or needed by our new employer. To no one’s surprise or chagrin, the entire employee benefits team were let go.
With news this week of the Amazon, Berkshire Hathaway and JP Morgan Chase partnership aimed at fixing healthcare in America, I can't help but view my experience in a new light. Ever since that conversation at the WaMu headquarters in Seattle a decade ago, I’ve wondered how many other benefits professionals contribute to the problem of rising healthcare costs by ‘just buying benefits’ for their employees without searching for more elegant solutions.
Of course, the employee benefits profession has changed a lot since 2008. Most notably, the cost of healthcare it is now squarely on the radar of every CFO and CEO in the country. U.S. health care spending in 2016 reached $3.3 trillion and accounted for 17.9 percent of the nation's GDP.
I truly hope and want to believe these three titans of industry, Jeff Bezos, Warren Buffett and Jamie Dimon, will be guided by an altruistic desire to lower the extreme cost of healthcare. Their balance sheets alone make it possible for a complete restructuring of the system. If something isn't done soon, the next great recession could be triggered by a 'too big to fail'style healthcare implosion and subsequent taxpayer bailout. Come to think of it, maybe that's the reason Mr. Dimon is involved.
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