The Business Roundtable Makes the Case for….Well, er….Umm….I Guess It’s Hard to Say
Whenever I get anything from the Business Roundtable (BRT), the organization representing America’s largest companies, I always pounce on it with relish. Some of these companies produce more in a year than the GDP of most of the world’s countries. So, if anyone can get to the root of our nation’s health care crisis, surely these are the folks who ought to know how to do it.
I always go first to the index and look under “M” for “mea culpa.” After all, if our third-party payer system is dysfunctional, you have to figure that the companies paying the lion’s share of the bills bear the most responsibility for it. But, no luck in the latest report.
Then I look under “H,” as in “How Large Companies are Making Our Problems Worse.” I strike out again.
Then I turn to “W,” as in “What Large Companies Can Do to Correct the Problem.” No luck here either.
So I decide to actually read the report.
It was disappointing. In fact, you have to wonder why these companies are so successful. The latest report says that spending on health care per employee will rise from $10,763 to $28,530 over the next decade, unless we change course. Beginning with this (probably accurate calculation), everything goes downhill. The report says:
- Health care costs add to the cost of production and make US firms less competitive internationally, despite overwhelming economic evidence that health costs trade off dollar-for-dollar against cash wages.
- Public provisions of health care in other countries lower the cost of production of our competitors, despite (again) overwhelming economic evidence to the contrary.
- Electronic medical records, value-based purchasing, managed care, coordinated care, etc., etc., etc., etc., are the key to controlling costs, despite the dismal failure of all the Health and Human Services (HHS) pilot programs and the Congressional Budget Office’s (CBO’s) conclusion that these ideas do not lower costs.
- We need government to take the lead in changing things, despite the fact most of these companies are large enough to implement any kind of health care system they choose for their own employees.
On this last point, I have written before that large companies can have just about any health care system they like. There is no need for government. If the auto companies and the United Auto Workers decide the Canadian system is the best system, nothing is keeping them from having it. They can form an auto workers’ HMO, give it a global budget equal to 75% of last year’s spending and tell it to ration care the way the Canadians ration care.
On the other hand, if they think Accountable Health Organizations (ACOs), medical homes and electronic medical records is the way to go, then they can form a health plan that does all of that.
Along the way, let’s hope they don’t try to impose these ideas on the rest of us.
And here is a surprising discovery I will leave with you. Sen. Jay Rockefeller (D-WV) understands labor markets better than the CEOs of our largest companies. The cost of fringe benefits come out of the workers’ wages, he writes, not out of the pockets of consumers.
Off of this topic; in a March 2009 address at Hillsdale College, you mentioned Dallas companies that were forward thinking in their approach to providing medical care without working with insurance. Can you share the names of those businesses?
John, frankly if employers could just form ‘their own health system’ is a very simplistic approach. Frankly for a national employer to engage the wide range of providers across the country that it takes to service a population of people…the discounted arrangements that insurers provide is a key ingredient in the current system. A large employer, except the federal government with its use of its legal powers, cannot negotiate contracts with enough providers to cover its people.
Employers getting together to do similar things is much more difficult than you might imagine. Consider all of the conflicting interests based on the geography, the demographics of the workers, the business they are in and the complexities rise geomerically. http://www.healthexpertease.org
Larry, wherever an employer or group of employers is employing thousands of people in a geographical area (think auto workers in Detroit) it can effectively set up any health system it wants. It can even hire its own doctors and build its own hospitals, if it comes to that.
Nothing is standing between the auto workers and Canadian-type medicine except an unwillingness to put their convictions into practice.
I believe Forbes and Whole Foods are two companies who implemented appropriate systems.
It is not difficult at all for a large employer to negotiate discounts for its employees for most basic services.
If the goverment would get out of the way, it would be even easier.
The hardest part of the system is getting people to eat right, exercise and avoid self destructive behavior.
I am with John on this one, which probably will trouble him.
Employers have been the spoiler in American health care. Their whining over competitiveness will not convince any economist.
Most policy wonks wish employers had never interjected themselves ibnto a system they do not understand and do not know how to manage.
Uwe Reinhardt
Better yet, why don’t the employers ask the doctors to form a medical care system for them? Isn’t that the service they want?
Excellent post.
George said it all.
Why not ask the doctors how to fix the system?
Does anyone really believe that a third party can fix the system, when the third parties are the one that ruined it?
I do not believe that just because you made the mess, that you have to clean it up.
The problem is not the hospitals, doctors, or other medical providers. The problem is the system that the govt and third parties put in place.
To fix the system:
1) Allow individual tax deductions for healthcare expenses
2) Open up competition across state lines
3) Allow a govt high risk pool for pre-existing conditions as long as they have private insurance for their non-pre-existing conditions.
4) Open up HSA’s and individual responsibility
5) Stop with all this population or community based nonsense. People are individuals and we need to treat them as such.
6) End mandates
7) Fix the tort system to decrease defensive medicine
8) If we require insurance for all, it would have to be for catastrophic care only and fully tax deductible.
Given that other countries are having their health expenditures grow at roughly the same rate as in US, why will American business become uncompetitive?
After all, you either finance health care with after tax cash, before tax cash, or tax revenues. In countries with government health care, taxes tend to be a lot higher. This makes business even more uncompetitive than having to pay for health care as a business expense.
In 1992 Patricia Danzon estimated that Canada’s tax funded system had hidden overhead in excess of 45 percent of premiums mostly due to the deadweight cost of collecting taxes and poor control of moral hazard. US private insurance had overhead of 7.6 percent net of return on capital, investment income, and premium taxes.
Doc SH has a great post. We need to remember that you and I are responsible for our HEALTH. Medical providers are responsible, if we compensate them, for our SICKNESS.
In Montana it does seem that medical providers educate medical providers and regulate medical providers and are the largest lobbyist groups in the state–probably significantly so nationally also.
Pete and Doc SH are right on!
I wonder what would happen to medical costs if insurance was not available commercially?
What would happen if people voluntarily decided to band together in a type of mutual sharing, or simply dealt with the situation on an individual basis?
Don Levit
How about looking under “G” for “Government Suck-ups”?
I like Dr. SH’s ideas. Personal responsibility, tax deductions, and I would like to add, reasonably priced health insurance that actually PAYS your health claims instead of institutional investors, CEO’s, perks, etc. Personal responsibility, AND corporate responsibility to turn out decent products and protect health consumers.
Great comments from Dr SH, Pete, and the absolutely correct economic analysis of Uwe Rheinhardt. Most medical colleagues have little understanding of the economics and don’t understand that the Canadian and UK systems are giant cartels controlling the market by franchising and price fixing. If fellow docs understood that these “single payers” were nothing more than giant managed care organizations, they would not “prefer” them as noted in recent polls.
DoctorSH said:
I agree with most of the rest of the suggestions, but think the first two need some refinements:
1) A tax deduction is regressive, as is the current tax exclusion for employee coverage. It might provide excessive incentive for health care spending for higher earners, but zero incentive for working poor. The nearest replacement for a tax deduction without these problems might be a non-refundable tax credit worth a modest percentage–say 25 percent– of health insurance costs.
Also, limiting this credit to insurance that meets the same rules as employer-provided coverage would avoid the adverse selection problems that would soon undercut employer-sponsored plans.
2) The concern about across-state-line purchasing is that it would limit the states’ ability to set their own policies, and act as “laboratories of democracy.” One could argue that if the voters of New York want to abolish the mandate for pure community rating in that state, then they should be the ones to do so.
Larry, there is no reason why even a moderately large employer couldn’t set up a Canadian-style system by setting extra low fees and rationing care, even if it does not exercise monopsony power as Canadian provincial governments do. Providers would put that company’s employees at the back of the queue, behind payers which pay higher fees, and only treat them when they had spare capacity. This would result in Canadian-style waiting times.
Great post, Doctor SH.
Agreed.
Most of the suggestions from all parties concerned with health care are simpily tweaks of the system. Some tweaks are more efective than others but none deal with the real problem of health care.
The real problem is that we are declining in our ability to create wealth. With 1960’s thru 1980’s style wealth production our country could afford heath care regardless of how it is administered and whether or not government is involved.
But with real wealth production cut in half since that time so is our ability to pay for basic neccessities. Next is housing…or was that first? Then the next crisis will be in food production. That will complete the cycle of degredation of our capacity to produce our own wealth. By then we will become a lesser nation.