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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.

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Max
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Max

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… Read more »

drg
Guest
drg

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.

Linda K. Riddell, MS
Guest

I appreciate Mr. Carol’s optimism, and I hope to share in it soon!

Barry Carol
Guest

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… Read more »

Barry Carol
Guest
Barry Carol

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.… Read more »

Jeffrey Harris
Guest

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… Read more »

John Ballard
Guest

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… Read more »

Jeffrey Harris
Guest

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… Read more »

John Ballard
Guest

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.)

Jeffrey Harris
Guest

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.

John Ballard
Guest

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… Read more »

drg
Guest
drg

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?

Matt McCord (@mattMD)
Guest
Matt McCord (@mattMD)

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.

Eric Page
Guest

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.

Peter Fitzpatrick
Guest
Peter Fitzpatrick

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… Read more »

Robert T. Kellam Jr.
Guest

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.… Read more »

Linda K. Riddell, MS
Guest

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… Read more »