McKinsey weighs in on healthcare reform

Charlie Baker is the president and CEO of Harvard Pilgrim Health Care, Inc., a nonprofit health plan that covers more than 1 million New Englanders. Baker blogs regularly at Let’s Talk Health Care.

Charlie_headshotBack in December, 2008, the folks at McKinsey – one of the world’s most well known consulting firms –  wrote an interesting article on health care reform in the U.S.  What’s striking about it now as we all watch the debate unfold in Washington, DC is how different McKinsey’s approach is to the one being taken in our nation’s capital.  McKinsey focused on three things – personal behavior, cost and quality transparency, and administrative simplification.  The Washington debate is focused mostly on whether or not to create a government run health insurance plan, individual and small group health insurance market reforms, Medicaid and/or Medicare expansions, how much deficit spending is too much, and administrative simplification.

People in DC would argue that doing anything about personal behavior is virtually impossible, so why bother, but McKinsey’s case on this one is pretty compelling.  In fact, McKinsey argues that the whole “40% of individual health care expenses occur in the last year of life” is no longer true – primarily due to the rise in costs associated with managing chronic conditions.  Quote – “…our findings suggest that the management of chronic disease outside of acute-care environments accounts for at least 20 percent of total U.S. health care spending, perhaps more.  That level of expenditure, compounded over decades in many cases, dwarfs the cost of end-of-life care…”  They indicate that end-of-life health care spending – on average – for people who pass away between the ages of 65 and 95 represents less than 10% of the total amount of money they spend on health care during their lifetimes.

McKinsey references obesity as a specific example.  The incidence of clinically defined obesity has doubled in the U.S. since 1980 – to roughly 34% of the adult population.  Clinically obese patients spend almost twice as much as someone with a normal body mass index on health care – every single year.  Put another way, if we were as obese today as we were in 1980, we’d spend $60 billion less on health care.  McKinsey says ignoring the impact personal behavior – and here, I’m mostly referencing diet and exercise – has on the rising cost of health care is a huge missed opportunity, and their data points make a compelling case.

Second, McKinsey points out that the same service provided by two different providers in the same geographic area with the same patient and the same outcome can vary in cost by as much as 40%, and no one knows it.  “In no other industry are service attributes and prices so opaque.”  No kidding.  Some of us having been banging this drum for years, and we are still in the crawl stage in terms of making this sort of information publicly available.  And while I’ve always thought of that as a way to rationalize provider prices, McKinsey thinks it could also rationalize insurance plan design and re-frame the health care conversation generally.  They note that without publicly available information on price and performance, the move from delivery and insurance models that are based on acute episodes of injury or illness to ones that are based on promoting healthy behaviors and managing chronic conditions will take forever to occur.

Third, McKinsey discusses the price of administrative complexity – and while Washington does seem interested in taking this one on, some of McKinsey’s observations about what drives complexity require a more nuanced approach than  the ones currently under discussion.  For example, McKinsey notes that regulation drives complexity, that providers and payors each own a piece of the complexity around claims processing and payment, and that the government as payor has contributed significantly to this conundrum as well.  Are there opportunities here?  Yup, but it’s not as obvious as it seems.  Remember, when someone talks about standardizing processes and rules, they usually standardizing everyone else to the way they do business.

I wonder if the whole diet/exercise question – or the transparency issue – will find their way into the health care reform discussion.  My guess is the answer will be “no.”  They are too beside the point for a discussion that’s primarily about financing and paying for services rendered.  That’s too bad.  McKinsey’s piece makes it pretty clear that reducing the rate of growth in health care spending and improving care quality is about a lot more than whether or not we have a government run plan for the non-Medicare/Medicaid population.

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  1. An fascinating dialogue is value comment. I feel that you must write extra on this topic, it may not be a taboo subject however typically people are not sufficient to speak on such topics. To the next. Cheers

  2. Hi,
    Assuming that obesity is a personal choice does not come close to explaining the epidemic. If it was really a personal choice then the problem would have been with us at the same percentages all along. I do not think the obesity problem can be solved by changing eating habits, such as lowering calorie intake when the American food supply is so poor; that is like pouring gasoline on a fire. The nutrition they need is not in the food they are eating due to poor farming methods, irradiation, pasteurization, over refining, GMF’s and poor food choices and handling at home. The obese are eating empty calories so they crave more trying to fill a nutritional hole that cannot be filled by the food they eat. They tend to have less energy, more diseases and be on more medications. Expecting them to exercise more and eat less of a poor product is ludicrous. This problem has to be solved at its root food supply and education. Almost any disease you can name today is at an epidemic stage; take any disease you can think of do a search with the word epidemic added to it and you will find that most are at the 1 in 4 number. The basic foundation of the body is the food we eat. What surprises me is that the medical establishment with all of its money and power is doing nothing, zero. They should be shaking this country to its foundations over this health emergency. They say they are investigating genetics as a possible cause, that blames the person again and not the cause. Since when does the genetics of the people of an entire country change within a matter of years so that we get these numbers, that is as ridiculous as saying it is a personal choice. Paul

  3. It most surely is in the best interest of the insurance company. Anything that increases premiums increases profits. It is a poor financial decision on part of the consumer to purchase such a plan though. Why pay 120% for routine exams? Cut them out of insurance and have people pay for them dorectly. Before the far left of this blog, about 99%, start screaming about the poor poor americans who can’t afford the exam, stuff it, the vast majority of Americans with private insurance make more then enough to afford an annual check up. If I was writing policies I would have a deductible penalty for anyone that doesn’t have an annual exam. Charge them an extra $200 if they don’t.
    On the larger point we need to seperate insurance and care so one doesn’t need to specify of which he speaks. What is good for your healthcare should not be determined by the company from which you purchase insurance.

  4. Nate, I think that you’re misinterpreting a key aspect of health benefits (and I use that term deliberately rather than health “insurance”).
    Many such plans today cover preventative and routine maintenance care for chronic disease at little or no out of pocket cost. These expenses would not fall under your definition of “insurable”, given that they are predictable. So why do health benefit plans cover them?
    I’ll borrow some concepts from the property and casualty insurance industry to help explain this phenomenon. When one experiences a covered occurence in insurance, one of your obligations is to take timely and prudent action to try to limit the amount of damage. One’s insurance contract covers such expenses as part of the claim.
    Health status is a bit more complicated to track that having a car accident or fire at your business. You may not know that a treatable medical condition has occured until routine examination including lab work detects it. The value of detecting medical conditions at the earliest stage in which they can be effectively treated improves the outcome and often delays or mitigates the need for more costly medical care. Thus, it is in the health plan’s best interest to provide coverage to facilitate this process of routine screening and subsequent ongoing maintenance care.
    I personally agree that the cost of health benefits (reflected in the cost of premiums) has gotten out of hand partly due to having to include this routine preventive and maintenance care.
    I’d like to see this part of the US health care system viewed as basic infrastructure supported by tax dollars.
    Improving access to this type of care is a more more efficient use of tax dollars than subsidizing emergency care for those who are unable to access primary care due to lack of insurance.

  5. “Nate, you think insurance is the perfect vehicle to solve healthcare, but isn’t insurance like a tax in that it costs more for bad habits/actions/inactions so as to change/modify behavior, or at least have the bad apples pay more?”
    Um…what? And no not at all. Not even sure what solve healthcare means. I think insurance is an ideal tool to protect oneself from unknown events/needs. I think it is a terrible way to finance known medical expenses.
    True insurance is nothing like a tax. In the few places it is praticed insurance is just math and probability. Depending on ones comfort with risk and financial being you can purchase varing amounts of insurance.
    A tax on the other hand is a financing tool, often inefficient. Taxes work for the payment of known expenses. You are going to spend X dollars on something so you collect X in taxes. With our politicians more like collect X x 2. Taxes don’t work when you allow the payer to pick when and if they are going to pay, i.e. Democrats only paying taxes when appointed to high office.
    Insurance on the other hand allows you to make those choices. Not sure where you see any simularity except maybe in the way politicians have destroyed insurance so it doesn’t even meet the definition any more.
    rbar, i’m heart broken maggie popped up and I missed it. I can’t find what article you are referring to, I would love to see what she has to say. Hadn’t seen her around assumed she was sitting in her ivory tower reading other peoples work so she could write another book. I haven’t been around much either, been traveling a lot meeting with employers, helping them control their healthcare cost so they can continue to offer insurance. If I’m not out there actually doing then Matt and Maggie won’t have anything to “study” and butcher.

  6. Margalit,
    Is that not how we got stuck with our President? Maybe you are on to something afterall. Now ACORN has billions from the stimulus bill just for Obama 2012. Watch out for the advertising. You might just buy it again.

  7. rbar, I’m not sure that financial penalties are quite the same as incentives. For example, providing incentives to employers to set up gyms on premise is a good thing. Educating children on good nutrition and exercise is also something worth spending money on.
    I have a problem with allowing insurers to decide which lifestyle they condone and which one is to be penalized. For example obesity can have various sources and various reasons. I really don’t think that we will resolve this particular issue by making healthcare more expensive, or unaffordable for fat people.
    I agree with Peter about the insane farm subsidies, some of which are not going to farmers at all, and most of which are going to big corporations. I for one am incensed at the fact that tax dollars are spent on subsidizing brutality and cruelty to farm animals.
    I don’t understand why big business gets to collect tax dollars to help produce unhealthy food, gets to advertise all over the place and create demand for all that junk, and nobody is holding them responsible for anything.
    On the other hand we dump all the responsibility on individuals who are subjected to this mega marketing barrage and frankly, most people are not capable of defending themselves, considering that the exposure to this garbage starts in infancy.

  8. “I am against taxing alcohol and unhealthy food, since these things are OK in moderation.”
    rbar, then you will only be taxed in moderation. We are getting the diet (and habits) our tax dollars subsidize. Subsidized corn is the chief food stuff found in almost every processed food. It is nothing more than calories through starch and sugar. Changing tax policy may not change habits but it will pay for the poor health it creates. The tax dollars can be used to fund healthcare and subsidize good food and exercise – even for the poor. For all those “personal responsibility” advocates isn’t that what a tax on bad habits pays for? Why would you not think that the other guy exhibiting poor decisions, that cost us all money, should pay for those decisions?
    Nate, you think insurance is the perfect vehicle to solve healthcare, but isn’t insurance like a tax in that it costs more for bad habits/actions/inactions so as to change/modify behavior, or at least have the bad apples pay more?

  9. The link between health status and socio-economic status has been extensively documented globally. Interestingly, some of the pioneering work was done in England, where everyone has health insurance (access) but class distinctions are fairly clear. (Not that WE have that problem, right?)
    An article I wrote on Mike Huckabee’s health care reform proposal for the blog of the policy journal Health Affairs criticized the simplistic notions of personal and financial accountability put forth by the GOP. (To be clear, I’ve also been vilified by the Left for criticizing the simplistic notion that single payer would solve all financial difficulties arising from health problems.) To read that article, go to: http://healthaffairs.org/blog/2008/01/31/huckabee-style-health-reform-morally-and-physically-fit/
    About three quarters of the way down, I quote Dr. Steven Woolf on socio-economic status and health, from a commentary he wrote in JAMA. He notes, “The connections between poverty and disease have been well documented, but even modest reductions in income among more affluent persons can also influence health.” If you click on that link, you will see that his article is full of footnotes on the topic.

  10. Margalit,
    I don’t think that’s a valid argument. There is always a lot of gray in life, and not much pure black and white. Almost all legislative or administrative intervention has to draw the line somewhere, and compromises need to be made (for instance, most states have a legal alcohol limit even though DUI is such a terrible thing – why is that?).
    Different insurance (tax) premiums should not be considered punitive, but taken as an incentive, an incentive converting long term benefits that are rather in the future (improved health) into actual financial advantage right in the present.
    I am against taxing alcohol and unhealthy food, since these things are OK in moderation (as opposed to cigarettes or, say, uncontrolled/untreated diabetes). If someone argues that some of my favorite sports like scuba diving and downhill skiing are a burden to insurance and therefore, my premiums should be adjusted upwards (in fact, they already are for life insurance), well, if the numbers show it I would have to accept that. I would claim that this model is a good hybrid combining social engineering (attracts progressives) and individual responsibility/mercantilism (the conservative-libertarian approach).

  11. {Didn’t have time to read all posts but Nate and Margalit seem to be ‘spot on!’}
    Here is my response to ‘Mike’
    Is that ‘25 percent asthma rate on Chicago’s West Side’ a credible statistic? So how was, Mike, it you come to know that “profiteering by businesses (slumlords, corporations dumping environmental hazards) end up causing chronic disease in large swaths of the population?”
    To me…that’s sorta funny because asthma, obesity and all those other Chronic Ailments impact EVERYONE! Regardless of where they live.
    Mike quotes/says: “There are a host of studies linking obesity, etc. to socio-economic status?!”
    So what’s the excuse for someone who has asthma, who has three of four kids with asthma, who has two out of six family members who are overweight? Can we just blame you? Or are Independents and Conservatives just convenient targets for you?
    Could it be that ‘slumlords, corporations dumping environmental hazards and certain other people’ actually have NOTHING to do with OUR health status? Or is it just ‘easier’ to blame someone else?
    Of course not!…But how convenient! Eh?
    That’s rich…C’mon Mikey!
    I really, really do wanna believe you… My Chicagoan Brother! But before I bite – like so many who might just read your spit and bite – I need some basic facts. Just back up your Spouts and I might could be a believer Mike.
    Steve S. – Chicago Native – now living in Arizona – via Brentwood, Tennessee.

  12. So maybe insurance premiums should be assessed by pound of body weight, or by BMI for accuracy. We could also use treadmill tests to gauge fitness and have higher premiums for those who choose an inactive lifestyle.
    We can also charge higher premiums for those with HIV or other STD, since that’s a lifestyle choice. There should be something about alcohol consumption in there too.
    If you have back problems from old football injuries, the premiums should go up as well, after all football is really a lifestyle choice.
    If you fall off a horse and end up in a wheelchair, then most definitely you should pay more. Horse riding is absolutely a lifestyle choice.
    How about teen pregnancy? That should cost more and so should late age pregnancies. Both are risky lifestyle choices.
    And what do we do with people that knowingly decide to have a Down Syndrome baby? Should we charge higher premiums for that reckless decision?
    I guess you can choose your lifestyle if you are wealthy, but not so much if you are not.
    The problem with legislating “lifestyle” is that you usually know where you start, but very rarely do you know where you are going to end up.

  13. Overeating is not about diets and willpower. It’s about people getting their rewards from something other than food. We are wired to go for the most salient stimuli. Why do you think Chili’s, TGI Fridays, etc. create the carnival atmosphere that they do?
    I believe in personal responsibility as much as anyone, but we have become hijacked by the food industry. Unfortunately, Dr. Kessler and the FDA had it easier when they took on big tobacco. It’s not a necessity like food. However, we still need to make it socially unacceptable to market, sell, and consume foods laced with huge amounts of fat, sugar and salt. Regulation, legislation, and taxation are nice, but until we counteract the effects of the dopamine increase in our brains caused by the ubiquitous food cues in our environment, we will be a fat population.

  14. So looking into a weekly Pathmark circular on three arbitrary items is proof to debunk that the link between subsidies and food costs? Junk science indeed.
    As for largely relying upon on education to improve lifestyle, that path is hopeless. Gov’t agencies like the Dept. of Agriculture and others already have huge deficiencies in dollars and personnel devoted to the issue but they also don’t have the savvy, understanding, and ability to reach the American public either as effective as food conglomerates and their Madison Ave. counterparties.

  15. We spent vast sums on the “war on drugs”, almost certainly with the opposite results of what’s intended.
    What I imagine could help people to live a healthier life style is a concerted effort, with a fraction of the efforts/money dedicated to the WOD, namely the war on obesity:
    -elementary to high school education focussing on a healthy liefestyle (and, as a bonus, also focus on how to interact with the medical system, because many US residents have great deficiencies using health care appropriately …. important topics include anxiety, somatization and medical symptoms of urgent concern)
    -advertising/image campaign
    -reduction/abolition of corn syrup subsidies
    -charge people with unhealthy lifestyles higher insurance premiums (i.e. one pays more if one is obese and/or smokes etc.). If we ever get universal coverage with progressive financing, this could be done on a percentage basis, but still in a progressive manner.
    The problem is that obesity is not generally acknowledged as being a widespread serious health problem, so there is no critical mass for starting this kind of concerted effort. Pres. Obama gives a good personal example, but he could start talking about lifestyle choices, too.
    Nate, “At some point when the obituary for the European Healthcare systems is written will the left finally acknowledge you can’t rely on the government? Name one country who’s HC system(s) is/are sustainable. Outside the third world there are none.” You wrote pretty much the same a few weeks ago, and Maggie Mahar gave you a fact based answer – namely that some Scandinavian countries are stable, and that the HC problems of most other Europeans countries (incl. cost explosion) are minuscule compared to the situation in the US. I can’t believe that you write about “orbituaries” of other nations HC systems when the US is so clearly in major trouble … you seem to write from a completely alternate reality, like John Cleese (in “Holy Grail”) challenging his opponent to an even fiercer sword battle after all his limbs have been chopped off.

  16. I, too, have to question the premise that the reason for the economic disparity in obesity is partly that “healthy food costs more.” It doesn’t. Take today’s circular for my Pathmark store:
    1 bag Doritos $3
    1 lb apples $1.29
    1 lb grapes $1.59
    How to address the problem of getting people to take responsibility for their own health and make healthy decisions is one of the more difficult aspects of health reform. It is also an essential part of addressing the crisis in chronic illness that is costing us all a great deal of money.
    I don’t have any answers. Is raising the price of sugar really going to make much difference? What is it that has finally gotten more people to stop smoking? Is it the cost of cigarettes? Investing in education?
    These are important questions as we decide where to put healthcare dollars. Is there a role for Health IT in the solution?

  17. Diet and exercise will come into play if the govt decides to increase rates for those who do not fit certain height and weight requirements. The private insurers all do it, so why not the feds?
    Sometimes people need to be motivated to take better care of themselves and there is nothing like financial incentives to do so.

  18. Nate – I agree with you on a few points about personal responsibility and lifestyle choices but it is more nuanced than that.
    As for downplaying the link between farm subsidies and lifestyle choices, your ridiculous. Why do you think that McDonalds (or other fast-food restaurants) are able to offer a double cheeseburger for $.99 other than the massive subsidies that flow to corn and soy.
    Basically, everyone in healthcare always talks about the passage of Medicaid/Medicare along with Hill-Burton Act as the key to the explosion in HC spending but you generally don’t hear Earl Butz’s name brought up. More than any other person in this country during the past half-century, Earl Butz’s policies and ideas while Sec. of Agriculuture under Nixon/Ford changed the American food supply and how Americans ate through his fundamental beliefs in viewing agriculture as “Big Business.”
    You can’t really talk about healthcare growth without understanding the importance of Earl Butz and the impact he has had on the American food supply and lifestyle.

  19. The Independence at Home Act will soon be introduced to both Houses with bipartisan support and will revolutionize the delivery of care to the frail elderly and disabled…
    As long as your a politician and completly ignore the fact nothing is that simple.
    What prevents the providers visiting patients homes from abusing the program? Every other segment of Medicare has been abused at one time or another how will that be prevented this time? Do we know they actually go to the home as often as they say? Do we know these people are really unable to go to the doctor and just prefer to be treated at home?
    “The IAH organization may keep 80 percent of savings beyond the required 5 percent savings as an incentive to maximize the financial benefits of being an IAH member.”
    Sounds like HMO type incentives there, paid to not treat, didn’t we try that once already? How do we know the IAH won’t simply deny care they shouldn’t be getting, something we can accomplish without paying 80% of the savings.
    Home health is already one of the most abused segments of Medicare, this sounds like we just put in on steroids.

  20. The issue of obesity policies runs into the same problem of current costs vs. future savings. How about a policy which directs care to the top 10% most costly Medicare patients, who now consume 67% of the entire Medicare budget? These patients have two or more dysfunctional activities of daily living (can’t eat, walk,bath, dress or use the bathroom), multiple diseases preventing any case management tools from working, and are shunned by managed care payors.
    I know about these patients, and it is their desire that we bring the care to them in the home, which now is proven to reduce costs by 30-50% immediately…and the behavior is driven by the patient!
    The Independence at Home Act will soon be introduced to both Houses with bipartisan support and will revolutionize the delivery of care to the frail elderly and disabled…everyone wins except the CEOs of the healthcare institutions who have failed to recognize the key trend: physician are now making housecalls.
    C. Gresham Bayne MD

  21. At some point when the obituary for the European Healthcare systems is written will the left finally acknowledge you can’t rely on the government? Name one country who’s HC system(s) is/are sustainable. Outside the third world there are none.
    The US Healthcare Systems have not been struggling for 60 years. Our multiple systems worked great until the burden of failed public plans started dragging them down. America does not have a healthcare crisis, American Public plans do.
    “If all Americans have to pay a “direct health tax”…. why don’t we call it premium and do it the way we have been for years. Why would you inefficiently collect premium by making it a tax, running it through Washington, and lose a big chunck to other spending desires. When does the free ride end? Our poor live better then the middle class of the majority of the world. What incentive do the poor have to take care of themselves if you feed, house, insure, and cover their retirement? There is a reason Medicaid is the biggest failure of public plans. Giving more people free insurance with no responsibility isn’t going to improve that.
    “How else does society accommodate health conditions that arise from being in the wrong place and the wrong time or having the wrong genes?”
    INSURANCE, it is very simple, has been around for hundreds of years, and works until you let politicians basterdize it into a social funding mechanism.
    “These are very real costs which are often not affordable to low and moderate income heads of household without some type of support.”
    BS, smoking is the exact opposite, an unhealthy expense that decreases health yet something like 40% + of poor find the money and time to do it. I’ll challenge you with this, for the cost of a smoking habit a poor person could buy their own insurance and in the time they spend smoking take a walk. Just solved both problems and didn’t spend a penny doing it.
    “If Charlie can get the Republicans to honestly discuss how environmental factors often due to profiteering by businesses (slumlords, corporations dumping environmental hazards) end up causing chronic disease in large swaths of the population, then he can challenge the Democrats to talk about diet/exercise to, say, the dwindling number of well-insured autoworkers.”
    Michael, Republicans could talk till they are blue in the face about enviromental issues but never in a million years are they going to change what the corrupt Democrats in Chicago are doing. I have businesses outside Cleveland, Cleveland is a wasteland because the Democrats that have ran Cleveland for 40+ years allowed it to be. If you don’t like the air and water quality in Chicago, Detroit, and Cleveland you need to get the corrupt Democrats in office to stop taking kick backs for a term or two and do something about it. At least in Cleveland we have a couple more Democrats on the way to jail for corruption so you have an opportunity, instead of doing nothing and blaming reublicans for it force the democrats you elect to take some responsibility and fix the problem.
    “Until we link the farm subsidies into health reform, we’ll all be drinking and eating sugar subsidized by the very tax dollars that will be used to treat us for diabetes and health failure.”
    Hogwash! I use to drink a gallon plus of soda a day, not becuase it was cheap or subsidized becuase it tasted good and kept me awake. One day I decided the calories and caffine were not worth it and quit. Now I drink water which is even cheaper. To even begin to make this a money issue is making excuses for being weak. Water cost less then soda and is more readily availble disproving your entire argument.

  22. To follow up on Michael’s comment, above. Mr. Baker’s first and third paragraphs seem to equate poor personal behavior (poor diet/ little exercise) with obesity, ignoring the significant economic and political etiologies of our obesity epidemic. In particular, I would like to see health reformers take on our Farm Bill, so that the federal government will stop subsidizing the sugars and fats that flood our grocery store shelves (for a 2006 fact sheet on the Farm Bill and obesity, see: http://www.iatp.org/iatp/factsheets.cfm?accountID=258&refID=89968).

  23. While most of the packages under consideration address transparency, wellness, and prevention, none have a metric that’s easy.
    Here’s two:
    1. Carbon is to global warming what calories are to health reform. Until we link the farm subsidies into health reform, we’ll all be drinking and eating sugar subsidized by the very tax dollars that will be used to treat us for diabetes and health failure.
    2. I’ll know things are transparent when I walk into the hospital or physician office and am handed a chart that portrays the facility/physician’s average private plan payment as a percentage of Medicare.

  24. THANK YOU, M Millenson & Bill S. Individuals and communities exist within physical and cultural environments. We have a legacy of scary air, water and soil in our physical environment; a flood of unhealthful products in the food supply and other systemic problems (funding for phys ed?) that create barriers to health.Calls for accountability ABSOLUTELY must include both personal AND corporate/regulatory.

  25. The McKinsey Report cited was based on an assumption of Americans preserving employer based financing of healthcare. This colors their analysis and recommendations. In other McKinsey studies of healthcare they do a comprehensive assessment of other industrialized countries mechanisms for financing healthcare and find that Americans get less value for this employer financed structure.
    At some point when the obituary for the American auto industry is written will the cause of death be healthcare? My guess is yes. The perverse incentives within the business model(s) of healthcare reinforce and buttress our fragmented delivery/payment/outcome structure where someone’s income is another person’s excess or unnecessary costs.
    Perhaps there are certain human endeavors that are not appropriate for markets to resolve and that after 60+ years of struggling to provide Americans with healthcare we are at a point at acknowledging this. How else does society accommodate health conditions that arise from being in the wrong place and the wrong time or having the wrong genes?
    If all Americans have to pay a “direct health tax” as a percentage of income we will understand the direct relationship between our actions or inactions and healthcare costs and outcomes.

  26. You are absolutely right to focus on the costs of chronic disease, both the suffering they cause and the costs to the health care system. A coalition of diverse groups has in fact been sounding the alarm about the lifestyle issues that lead to chronic disease, which eats up 75 cents of every health care dollar. Go to http://www.fightchronicdisease.org for more info.
    Ken Johnson
    Senior Vice President
    PhRMA

  27. The point about the rising cost of individual lifestyle choices (diet and exercise) is a very valid one. As is usually the case in many aspects of health care, however, the incentives are not aligned.
    The additional cost (and there definitely is one) of following a healthy diet and getting enough physical activity falls solely on the individual, and is in current (not future) dollars. Healthy food costs more than junk food, and time spent engaging in exercise is time taken away from work or family. These are very real costs which are often not affordable to low and moderate income heads of household without some type of support.
    The current model of health care provides limited support to individuals who follow this healthy lifestyle.
    There is no support whatsoever from any source (health plan, employer, government) for purchasing healthier foods, nor any penalites or taxes for making unhealthy purchases.
    As for physical activity/exercise, here at least there are incentives from some enlightned health plans and/or employers towards the cost of health club memberships and allowing time for daily walks during the business day. This support is not available to the majority of individuals, however.
    When the cumulative effects of poor dietary and physical activity habits result in medical conditions which require chronic disease interventions, the individuals only bear a small portion of this cost. Employers incur the lower productivity rates and higher absenteeism costs, while health plans pick up the bulk (no pun intended) of the additional medical costs.
    Much more can and should be done to help support good lifestyle choices by individuals. The government, employer groups and health plans all need to collectively step up here.

  28. Charlie wonders whether the whole “diet/exercise question” will find its way into the health care debate. I agree with him that, for now, the answer is no, and I agree with him on the reasons.
    But since Charlie has long been rumored to have political aspirations as the Republican candidate for governor, I have a deal to suggest to him. This morning’s news in Chicago talks about how residents of the poor, black Lawndale neighborhood on the city’s West Side have a 25 percent asthma rate. If Charlie can get the Republicans to honestly discuss how environmental factors often due to profiteering by businesses (slumlords, corporations dumping environmental hazards) end up causing chronic disease in large swaths of the population, then he can challenge the Democrats to talk about diet/exercise to, say, the dwindling number of well-insured autoworkers.
    There are a host of studies linking obesity, etc. to socio-economic status. But these days, politicians would rather talk about race than class. And that definitely includes politicians like former Arkansas Gov. Mike (“I lost weight, why can’t you”) Huckabee, already considering another presidential run.
    Personal accountability and responsibility? Absolutely. Accountability by government and business for the impact of forces outside our personal control? Yes to that, as well.

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