Toxic Healthcare: Choking Us on Its Well-Intentioned Success
The high cost of health insurance should no longer be considered an important financial and operational concern for America’s senior business executives; it should be considered a critical existential concern. Healthcare has morphed into a slow-moving environmental catastrophe that now threatens every business’ future viability. Corporate America has been slow to react.
The natural inclination has been to find ways to keep costs in check. High Deductible Health Plans, Heath Savings Accounts, High Performance Networks, Wellness Plans, Disease Management, are all just stop gaps that delay the inevitable. These actions will no more prevent health care costs from enveloping their profits and viability than building taller and taller stilts for your beach house as the water begins to creep in.
This will not end well.
We all pay for healthcare. We pay for it directly as customers and we pay for it as employers. CMS estimates that private employer sponsored health insurance cost the nation approximately $1.2T in 2017. Estimates are that approximately 75% of that burden was directly shouldered by the businesses with 25% being paid as payroll deductions from employees.
In addition, the employer portion of the Medicare Part A tax totaled approximately $130B in 2017 (an additional $130B is paid by the employee). This means that in total employers paid approximately $1.03T in health care insurance costs directly, with their employees shouldering another $430B. The total tab is close to $1.5T on an annual basis and growing faster than the economy as a whole.
There are not enough sandbags that can be placed around a business; there are no sump pumps powerful enough to keep a business dry forever in the face of the rising waters of healthcare unaffordability. So, what can be done?
First, we must stop thinking about healthcare as an endogenous business problem.
Second, we must start thinking about healthcare as a ubiquitous exogenous problem akin to total environmental degradation.
Third, we must keep acting to keep the water at bay, while also beginning to cooperate and mobilize across all businesses and people to address the real underlying causes of Toxic Healthcare.
First. Business can’t “wellness” or “cost share” its way out of the healthcare morass. Can smart and efficient programs help to marginally contain costs? Can they reduce the likelihood of catastrophic illness? Sure. Can they prevent all cancer? Can they ensure that no employee will have (or spouse of an employee will have) a high-risk pregnancy? Can they prevent an employee or family member from getting into a horrible car accident? Can they miraculously get all of your employees to stick to a diet and exercise program?
No, no, no, and no. Every employer should be smart about deploying programs to keep employees happy, productive and healthy, but these programs can only slow the tide not stop it.
Second. The factors that make healthcare unaffordable are not backyard issues, they are macroscopic trends that are national and sometimes international in scale. No single business can solve or negotiate their way out on their own. The solutions to Toxic Healthcare are not likely to be complete in a two, five or maybe even ten-year time horizon. Some of the solutions are likely to be generational in nature. Employers need to start thinking about healthcare the way that we now do about the environment. Businesses must act locally and simultaneously think more expansively.
What makes healthcare in the United States expensive with inconsistent quality? That’s a totally separate article. Simply put, almost everyone in the health care “industry” behaves rationally and within the rules, but the incentives and the rules in the industry are such that the cumulative effect is irrational and bankrupting us.
Are there some bad actors out there? Sure, but while they compound the effect, there is no mustache twirling villain or bald man with a cat causing the system to go haywire. The system is out of whack, and it’s going to take more than a few well-placed kicks to get it moving smoothly.
Third. CEO’s shouldn’t stop what they are doing to mitigate the immediate costs of healthcare anymore than they should remove the recycle bins from the break rooms. If there is to be any hope of a longer-term solution, business leaders (yes, everyone has a role, but business leaders’ role is outsized) must start taking the long view and begin engaging with healthcare the way that many have with the environment.
Normally business leaders ask, “what’s the return on my investment,” when they think about where to put time and resources. It’s the right question to ask, but there are times when businesses have recognized that some “returns” are hard to quantify. Some investments have to be made in good faith with the belief that they help preserve the future.
This is why companies build LEED certified buildings, it is why they invest in mentoring programs for local youth, and it is why senior business leaders must begin to start engaging on healthcare as an ambient existential threat that must be addressed. This works when businesses get together for common cause, it falls apart when businesses wait for the others to act first.
I have spoken to dozens of CEO’s about health care. Everyone agrees that it’s a mess. Everyone has many different ideas about the source of the problem. Everyone complains about the cost, the overall level of satisfaction with the medical profession, and their own general impotence in addressing the Medical-Industrial complex on their own. Thus far, I have yet to see the business community rally around the idea of addressing it on a cooperative level.
This is a problem that affects us all and there is no single person who can solve it. It’s time to come together and work together to start addressing the problems. In the classic prisoner’s dilemma game, misaligned incentives and an inability to coordinate result in bad consequences.
In healthcare we have an opportunity to both align incentives and cooperate to get a desirable result. Cooperative action can stave off both direct disaster and the avoidable adverse scenario of reactionary government intervention.
This isn’t about advocating for a specific global solution. There are hundreds of proposals in the ether: Universal Health Care, de-regulation, tort reform, technology investment, more regulation, price control, medical education reform, immigration reform, Medicare for all, Universal Medicare Choice, hyper-transparency, Intellectual Property reform, Pharma regulation, etc. Some are helpful, some red herrings, none are perfect, and no single one is sufficient.
The first step is to recognize that this is the type of problem that will require moon-shot like focus and perseverance. I have put forth a proposal that I think can help but it’s just one idea among many that should be considered. This can’t be a free-for-all; this need coordinated complementary action, and business must lead. Why? Business has the most to lose.
What should a business leader do?
- Get Informed. Business leaders don’t have to become health policy analysts, but they should understand the problem in all its complexity. This means doing more than listening to healthcare industry insiders whose primary goal is to sell a good or service.
- De-Personalize. Until business leaders learn to think beyond the sound bite and the ideology, there will be no progress. A reasonable solution to healthcare challenge is unlikely to fall along ideological lines — liberal or conservative. Approach healthcare with an open mind and a flexible toolkit with which to act.
- Invest. This doesn’t mean throwing dumb money at the problem, but it does mean spending time, resources and money to engage with the challenge. This includes collaboration with like-minded businesses.
Leave a response below. React. Look me up. Drop me a line. I would love to make this a dialog instead of a monologue. Refine the idea. Correct my misperceptions. Help mobilize industry.
It’s time to act before the tide rolls in.
