Why Only Business Can Save America From Health Care

For a large and growing number of us with meager or no coverage, health care is the ultimate “gotcha.” Events conspire, we receive care and then are on the hook for a car- or house-sized bill. There are few alternatives except going without or going broke.

Steven Brill’s recent Time cover story clearly detailed the predatory health care pricing that has been ruinous for many rank-and-file Americans. In Brill’s report, a key mechanism, the hospital chargemaster, with pricing “devoid of any calculation related to cost,” facilitated US health care’s rise to become the nation’s largest and wealthiest industry. His recommendations, like Medicare for all with price controls, seem sensible and compelling.But efforts to implement Brill’s ideas, on their own, would likely fail, just as many others have, because he does not fully acknowledge the deeper roots of health care’s power.

He does not adequately follow the money, question how the industry came to operate a core social function in such a self-interested fashion or pursue why it has been so difficult to dislodge its abuses. For that, we need to turn our attention to a far more intractable and frightening problem: lobbying and the capture of regulation that dictates how American health care works.

It is hardly a coincidence that, in 2009, as Congress cobbled together the Affordable Care Act (ACA), more than 4,500 health industry lobbyists, eight for every member of Congress, delivered more than $1.2 billion in campaign contributions in exchange for influence over the shape of the law. Framed against an annual $2.8 trillion national health care expenditure, this paltry investment will deliver massive returns for decades.

The industry wanted two things in the reform law: to increase the number of Americans with publicly financed health coverage and to neutralize health care cost containment efforts. Its lobbyists, tasked with spinning every relevant legislative bill and regulation to advantage, achieved both to a breathtaking degree.

Over time, health care’s legislative influence has compromised the American dream and now threatens our national economic security. We spend double per person what other developed countries do on health care. About half of that provides no value, wasting about $1.5 trillion per year, 9 percent of GDP, or a sum slightly larger than our 2012 budget deficit.

This has become our most serious national economic concern. Even while average total employee compensation has risen, compensation net of health insurance has flatlined. A 2011 RAND calculation showed that four of every five dollars of household income growth is now absorbed by health care. Growing state health care expenditures are displacing funds for other critical needs, like education and infrastructure replacement. American businesses competing in international markets must overcome a 7+ percent disadvantage on health care costs just to be on a level playing field with firms in other industrialized nations.

It is easy to understand how the health care industry manipulated the rules of publicly financed programs like Medicare and Medicaid. A larger mystery is business’ passive acquiescence to explosive health plan premiums, which have become its largest and most unpredictable cost burden.

Why haven’t America’s business leaders united to be a counterweight to the health care industry’s massive influence? After all, only one group is larger and more influential than the health care industry, and that’s everyone else.

Part of the answer lies in the health care industry’s masterful divide-and-conquer tactics. Every community’s most prosperous and influential business leaders sit on local health company boards. No Chamber of Commerce will organize efforts that oppose the egregious practices of its largest members, the health plans and hospitals. Business health coalitions that welcome drug and device firm subsidies are loathe to mount efforts that might offend their benefactors.

So far, business has not displayed much appetite for galvanizing on this issue. But the fact remains that, unless the business community and its champions come together, health care will almost certainly continue to have its way with Congress and the national largess, planting the seeds of financial instability and undermining the nation’s future.

Health care is critically important, but America’s health system is dangerously out of balance. Fixing it will require that non-health care interests find ways to limit health care’s (and any group’s) tremendous power and influence over policy, and in the process re-establish the primacy of the common over the special interest. The question is whether business will rise to the challenge.

It would be wise here to heed the words of Florida Governor and former Hospital Corporation of America CEO Rick Scott. “How many businesses do you know that want to cut their revenues in half? That’s why the health care industry won’t fix the health care industry.”

Brian Klepper, PhD is an independent health care analyst and Chief Development Officer for WeCare TLC Onsite Clinics. His website, Replace the RUC, provides extensive background on the role that the AMA’s RVS Update Committee has had on America’s health care cost crisis. This essay originally was published in Medscape Connect Care and Cost Blog.

18 replies »

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  2. America never ceases to both amaze and amuse me. It’s the only advanced western democracy that still allows executions, and treats health care as a business. It spends more on keeping people incarcerated and more on health care per capita than any other nation on earth. Meanwhile, all the other advanced western democracies that have universal health care and no death penalty, have significantly lower crime rates and longer lifespans than the average American. In other words, if you want to live a long, healthy and happy life, America is definitely not the place to live. And for those Americans who still think the US is #1, all I can say is that you need to stop believing everything you see on Fox News and get out more and see the rest of the world. You’ll find that when compared to most other western countries, the US isn’t “all that” anymore and it’s overall credibility has dropped significantly on the world stage. I mean seriously, who in their right mind would want to be part of a nation that is so polarized on the issue of a government run health care system, (which is considered a basic human right in other western nations, where just the mere suggestion to privatize it, would end any politicians career), yet it can’t even manage it’s own finances and owes literally trillions of dollars to the Chinese, while at the same time, having the most dysfunctional system of government on the face of the earth! But you still think the rest of the world should look up to you and then you can’t understand why nobody takes you seriously anymore, (while at the same time youre secretly hoping to hell the Chinese don’t call in their loans).

  3. excellent point. I am baffled as to why these corporations accept the high cost of health care and seriously wonder if they bet big tax breaks or something i’m not aware of. they have powerful lobbyists too so I just dont understand why they don’t spend money fighting it. only explanation to me is they get paid off–tax breaks or some sort of incentive to let it slide. any one have thoughts?

  4. what amazes me and i see this is going to happen more and more–is that those with insurance will have major gaps in coverage. Meaning as technology advances, the insurance companies dictate what is medically necessary and anything newer can be denied. their term for it is experimental. even though many things even now that have been adequately studied, insurance has a new way to deny by saying that’s experimental.

  5. Thanks John, perhaps I should move my journal work to Facebook since it seems to be the social networking tool most use to contact me.
    I do this work simply to place consumer feedback into the market. Consumers are under-represented. Those that are represented e.g. Society for Participatory Medicine and Patients Like Me do not include the financially disadvantaged who are a large portion of the daily $ per year per person.

  6. Barry,

    Because I’m a Principal and Chief Development Officer for an onsite clinic/medical management firm, I’m in discussions every day with employers, physicians, health systems and health plans. I agree that, conceptually, health plans should be the ones to take on responsible management of comparative effectiveness and excess. But nearly all have aggressively abrogated that responsibility in favor of driving up cost (to make a percentage of the total) or generating additional revenues on ancillary services (e.g., Rx). If they were doing what you suggest, I wouldn’t have as job.

    We’re finding that many employers, provoked by the financial realities in the C-suite, are finally coming to grips to the fact that hands-off approaches, and following the leads of financially conflicted benefits advisors, haven’t worked.

    I’m not suggesting that we’ll see employers mobilize in the way they really need to. But I have observed that the odds are better than they have been in the past.

  7. Again thanks for your insights. Your father’s case underscores my suspicions. I have added your blog to my reader and may be getting in touch. (Blogging now plays second fiddle to Facebook and Twitter but I still have an attention span long enough to keep reading blogs. I just realized my name links to a blog that has now gone inactive so I’ll get that changed as soon as I finish here.)

  8. Thanks: My father (a retired aerospace engineer) paid $400,000 to enter one of these continuing care communities. This was originally considered an asset which could be passed on. Since his original contract the facility became insolvent and was purchased. All contracts renewed but the original buy-in is now a one time fee with no return. Beyond that, he spends $3000 per month for services including dining.
    When dad required brain surgery three years ago I had to have him transferred to a rehabilitation facility as he became an aspiration risk. The SNF side of his CCC could not provide the necessary clinical skills.
    I see an increase in consumer education requests as noted below and in many other posts. I have outlined a text for consumers and hope to find collaborators willing to speak their truth about the healthcare market sector they represent. Acute care, Long term care, Home care, Hospice etc.
    People would be best served with health-care consumer education which describes likely expense and social impact of health-status throughout ones lifetime.

  9. Brian –

    I think employers are reluctant to be the ones that have to sometimes say no to employees and their families about which hospitals, doctors, drugs and devices they can have access to. Insurers are in a better position to do that through tiered networks, narrow networks, and not paying for certain marginally effective but ultra expensive specialty drugs or at least not paying any more than for older therapies that are close to equally effective.

    Until recently, employers were lukewarm toward tiered networks because they were afraid employees wouldn’t like them but are now starting to embrace them. Some are moving to a defined contribution approach toward health insurance and I’ve seen it suggested that employees are increasingly willing to accept a tiered or narrow network of hospitals and specialists as long as they can continue to access a broad network of primary care docs and if the insurance premium is at least 10%-20% lower than for the broad network PPO.

    I also think it would be helpful if doctors started to view knowing and caring about costs as an important part of their job and we could also mitigate defensive medicine by passing safe harbor protection laws that protect doctors from failure to diagnose lawsuits when they follow evidence based guidelines and protocols where they exist.

    Finally, individuals and their families need to understand that the amount employers pay for health insurance is an important part of the employee’s compensation. If healthcare costs decline or grow more slowly than historically, there will be more money for wage increases. Most employees don’t have a clue how much employers are paying for their health insurance and they don’t realize that employees are effectively paying for it in the form of lower wages than they would otherwise be paid. Starting with 2012 W-2 forms, employees are starting to be made aware of that information which is a good, and long overdue, thing in my opinion.

  10. Thanks for this. Your insights and observations are invaluable. Let’s hope some of the right people will read and catch on.

    This interests me…
    “Is the family willing to transfer her and liquidate her assets?” His self-justification for asking the question was a simple knowledge that he owned an excellent group of rehabilitation hospitals.

    When I read that my first thought was the growth of CCRCs (continuing care retirement communities) which admit people with adequate assets to retirement settings that start with independent living, sometimes a single-family house and yard, and shepherd them through every stage of aging as long as they live, up to and including long-term and Alzheimer’s care if needed. In some cases there is a benevolence fund for those who outlive their assets.

    As the next decade or two unfolds (boomer generation) I predict that without regulatory oversight, packages such as these — up to now developed mostly by non-profits, typically religious — are ripe for the kind of exploitation you described so well in your experience. I have already seen real estate developments clearly aimed in that direction.

  11. This is a social issue: One requiring an amendment to our constitution which clarifies what was intended by the preamble’s reference to “Promoting the General Well Fare”.

    I have little hope. After 34 years as a healthcare executive, therapist, HIT visionary and above all: Advocate for fair and proper service- access to all US Citizens; I doubt I will have my needs met as a patient:

    I also doubt I will ever see harmony between payers, providers, patients and the media. It is far too easy to become distracted by the numerous disparities and factors giving rise to our overall US population cost and the rage between stakeholders. The distractions allow all who work in the industry to define a spot for themselves where they are comfortable: Comfortable with regard to salary, comfortable with regard to business processes, comfortable when they create a new service industry within the market under the argument of cost savings and quality improvement; comfortable, comfortable, comfortable. It is far too easy to reinvent ‘value added’ services and industrial segments. No ONE is in charge. No ONE is willing to step-up and claim they are the Great Oz.

    I began my career as a paramedic and then received credentials in respiratory therapy, cardio-vascular technology and pulmonary physiology. My work unfolded as I was promoted to department director and then division director in the first five years; as DRG’s were settling in and hospitals began finding new ways to make money in ancillary services. Healthcare –because of its capacity to rename, remarket, leverage known waist into ‘new savings’ and offer new technologies without utilization controls and proof of social value has been very good to me. My upper middle class salary increased every three years and when it became apparent that HMOS would begin purchasing business logic to approve and deny procedures, define lengths of stay and pummel physicians with outcome data I learned enough about each sector to add consulting value on both ends. Because of the dynamic legislation across both commercial and socialized sectors any entrepreneur could make an excellent living as long as he or she was personable and able to rationalize their behavior in terms of improving quality adjusted life-years for the 85 year-old golfing buddy who needs a second CABG.

    Then…in 1989 I began a ten year period where I retreated to offering disease management programs for folks with moderate to end-stage lung disease. We accomplished a great deal of good for many people in the last years (or months) of their lives.

    But in the end I found myself arguing for my ashen patients who had lost their oxygen prescriptions when they rolled off of Massachusetts Medicaid because of a $1.00 per hour bump in salary. I found new ways to ‘work the system for payment for their oxygen’. The oxygen they received through a small machine which cost $750.00 retail was billed to payers at $299.00 per month in 1989 dollars. In 1997 I flew to NYC and other areas of the North East to review individuals who were dependent on ventilators in acute care facilities. The call for help came from the hospitals as they accrued huge losses due to the prospective payment on these cases that were depending on their life support. One day as I was stepping off of the company Cessna the senior VP asked to review my list of cases from the day. Taking interest in an 80 year old woman on the list he asked “how long do you think this one will live Jeff?”; “Is the family willing to transfer her and liquidate her assets?” His self-justification for asking the question was a simple knowledge that he owned an excellent group of rehabilitation hospitals. He was not the type of fella to consider the pain associated with separating a grandmother from her grandchildren.

    I left this venture to work in the design of web-based continuous care plans for persons with Chronic Disease. However, even separating myself from the ugliness of clinical care that we all see in our lives I found similar behaviors wherever I went. For example: I had an IT start-up CEO fly us out to the 1999 Managed Care Conference. We had just released a very cool integrated transfer management system the previous month. The founder asked me to place a sign in our booth stating MEDICAL LOSS RATIOs 69%!!!! In essence, he asked me to repeat the MLR of the one brand new client that had purchased our new system the previous month. I felt ashamed and refused. (ref. MLR is amount spent on medical care / member fees)

    Eventually I found myself in NC as I declared I wanted to learn about policy. I was hired to work with what I envisioned to be a leader in Medicaid community care management and care coordination. The years I spent in the public sector with special programs under Medicaid only revealed the same type of rationalization for ‘stretching the truth’ or creating political and financial pressure for physicians. The eternal mind-set; we know this is the right thing so we need to keep the program alive.

    I found NC Medicaid to have a wonderful program. But, as in many situations in the past I felt boxed in to “the –insert corporate name- WAY”. I have found that questions as to data integrity or suggestions to reduce cost by deploying new technology that will remove a necessary contract with a friendly vendor to always be un-welcome. Many healthcare workers are content with status quo; some are not. So I became a consultant.
    My last few years were spent listening to boards of directors who shared numerous conflicts of interest shift charity funding between duplicative projects. I thought the ARRA, HITECH and perhaps parts of the PPACA might make work more enjoyable. Unfortunately, I found myself asking an FQHC who had received $1M in stimulus funding to delay their deployment of telemedicine since they had no plan. I said this just as the checks were being written to purchase high resolution flat panels for the clinics and a local vendor was installing a new VLAN. This was my first day on the contract. After fifteen months they never did succeed with getting their VLAN up and running. I was however able to launch their desired remote-psychiatry service for children with ADDH. How…well I conferred with some geek friends, researched the legal security standards; drove to Best-Buy and installed a three clinic encrypted Skype service. My submitted expense report for the work was $250.00. The cost of the ARRA never -implemented telemedicine service across a new VLAN? $144,000

    As a diabetic who is now retired after 44 year’s dancing with the disease and receiving SSDI at the age of 56 I feel as though I waited my entire career. My income is $2400 per month, I have some savings, little debt and many fond memories of the days with my patients. My insurance cost through my wife along with the ‘cost sharing’ pieces of my “cost of care”; roughly $1200 per month.

    What I see happening is ONE MORE TIME…new products and services. Last week I was told my physician was to charge me an additional $1500 per year through the local university’s Integrative Health Program. The money evidently is to pay for better access and (I am not kidding) an interest in my LIFE GOALS.

    The issue of the cost of health care in the USA has nothing to do with Physicians, Hospitals, HMOs, TPAs, Pharma, Therapists, Insurance Companies or any other entity. The problem is far greater than the sum of the parts.

    A society has gone askew with its values when it treats “Well Being” and “Well Fare” as a commodity in a free market system. The value of “Well Being” varies for every person, or culture and when intertwined with the largest factor in “Well Being” in early life (Employment) the calculus becomes complicated enough to manipulate and confuse the masses.

    Jeffrey Harris (BS, RCVT,RPFT,LRCP) All exams inflated salary beyond reasonable value for just one more Bozo on the Bus.

  12. Another great summary and a very sad picture it is. After a career in management my first hope for creating “universal health care” was the elimination or reduction of medical costs associated with workers compensation. But when I looked closer (and discovered Paduda’s place) I realized that was magical thinking on my part. Clearly this was less about costs and more aimed at creating a bigger market. Or, as someone said, what’s not to like about millions of new customers with federal vouchers in hand? ACA is the biggest cupcake insurance companies, Big Pharma and health care providers have ever been served.

    I read somewhere that Starbucks spends more on healthcare than coffee and the auto makers spend more on healthcare than steel. Those may be exaggerations, but they underscore the main point of this post, that it is in the interest of business to bear down on reducing health care costs. In the case of products being sold globally, American healthcare costs pose a competitive disadvantage competing with products from other countries in which health care is not only less costly, but in many cases paid by taxes.

    Unfortunately most companies simply regard health care costs as just another expense, along with utilities, legal services, accounting, marketing and the rest. Besides, attempts to reduce medical costs are too easily misconstrued as a reduction in employee benefits, and no enlightened company wants to go there. It’s Catch-22.

    And Klepper’s point about business and community leaders as board members of the largest health care providers in their respective communities is exactly right as well. This is especially important when the local hospital is officially “not for profit” since corporate and individual donations become more than just philanthropy. Good public relations and lower taxes go hand in hand when non-profits enter the picture And imagine how many non-medical jobs and business opportunities are at stake if the bubble begins to deflate.

    I’m an old-fashioned Liberal but I came across an interesting, well-thought out Conservative plan, hatched at the American Enterprise Institute during the Bush years, that suggest uncoupling employment from health care. Of course it’s never gonna happen, but if that became an idealistic objective (for a variety of reasons, including lower health care costs for both companies and individuals) tax policy, with a little tweaking, becomes a tool moving the needle in the opposite direction. Here is the link in case anyone is interested.



  13. Brian,
    Outstanding. You are absolutely right. As a health care provider and administrator I too have forever wondered why businesses put up with this. We have the most efficient marketplace on earth but 1/5th of our economy is hamstrung by no marketplace at all.
    It is no surprise that the top economies in the world have real markets for their health care. America should too.

  14. You’re a voice of reason, Bryan. Independent primary care groups are the only ones capable of aligning clinical and financial outcomes. Our data shows that primary care groups that directly contract with employers have an immediate reduction in utilization of expensive hospitals and specialists. Businesses that understand this have a competitive advantage but it requires fighting against the PR machine of the entrenched hospital interests. Keep up the good fight.

  15. I worked for 30 years in HMO’s and watched healthcare become a capitalistic model industry . Our hospital & healthcare system leaderships’ core values & motives have changed in incredible ways; competition, market share, profitability, medical leadership (Best in Cardiac etc) have all overwhelmed the mission of healthcare to the community. Of course, a classic ‘ cost pass through’ model with no financial risk or responsibility or apparent consciousness for who really bears the financial burden for these ‘acheivements’.

    It is past time when our local & regional businesses & elected leadership took this essential Community/human resource to task. This article is on target 100%.

  16. Two thoughts came to mind reading Brian’s post:

    – P.J. O’Rourke famously observed: “When buying and selling are controlled by legislation, the first things to be bought and sold are the legislators.”

    – There are disincentives to the Business Community coming together on this issue. I had a Food Store Chain as a customer many years ago. They told me that they buy apples at the same price as their competitors, but if they can spend less putting them on the shelves, they have a price advantage. So if they can manage their healthcare better, it creates a price advantage. If you are Volkswagen of America with a young workforce without heavy healthcare expenses, do you want to join GM to help reduce THEIR healthcare expenses and lose your price advantage?

  17. You state “Why haven’t America’s business leaders united to be a counterweight to the health care industry’s massive influence?”

    I have an idea why: they are not in business to be health care buyers. They are in business to produce goods and services, and to make a profit. Health care is a distraction from their core purpose for existing.

    Granted, the health of the workforce has an impact on their bottom line. So, who can fault them for wanting to invest as little as possible to minimize that impact? Furthermore, they have been duped several times into buying things that do not save money — for example HMOs, most wellness programs, and nearly all “preventive” care.

    It would be nice if business put its weight behind the consumers, but they have better things to do.