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Sinking Health Care Ship Could Bring Down the Economy

Sinking Health Care Ship Could Bring Down the Economy

Our nation's health care system
is facing an economic
meltdown of unprecedented
proportions. Over
the past 20 years, medical
inflation has averaged double the general
inflation rate. In the 5 years between 1999
and 2004, premiums—where costs converge
from throughout the continuum—
rose 5.5 times the general inflation rate, 4.0 times workers'earnings, and 2.3 times
the growth of business income.

The private sector is increasingly unwilling
to pay for rising health care costs.
A recent Kaiser Family Foundation report
on employer health benefits showed
that between 2001 and 2006, the percentage
of employers offering coverage
plummeted from 68% to 61%, a 10.3%
drop over 5 years or a 2.1% annual erosion
rate. During the same period, the
percentage of employees with coverage
dropped from 65% to 59%. And those
companies that continue to provide
health insurance have steadily reduced
benefits and required employees to contribute
more to their costs.

The public sector is also responding to
increased health care cost, with reduced
federal reimbursements for Medicare and
cutbacks by state legislatures.

At some point in the near future, as
fewer dollars are available for more care,
the system could fail: Public hospitals
could be forced to close, staffs dismissed,
and suppliers not paid. Keep in mind that,
at one-seventh of the dollars and oneeleventh
of the jobs, health care is the
largest sector in the US economy. If health
care goes down, the turmoil would likely
cascade to all sectors of the economy.

FRAGMENTATION
One of health care's core problems is
the extraordinary disconnectedness of its
players. Literally millions of health care
professionals and thousands of organizations
are routinely rewarded for acting in
their own interest, independent of how their decisions and actions impact health
care as a whole.

Health care's systemic fragmentation
and generous reimbursements have created
very wealthy sectors. That, in turn,
has led to a broad distribution of power
among special interests who have strong
influence over health care policy. As a
result, proposals for substantive change
typically threaten the interests of groups
that have the power to kill them.

AN OPAQUE SYSTEM
This economic gridlock has been significantly
exacerbated by a distinctly different
but related problem: Over time,
we have failed to create a transparent
management infrastructure that allows
us to identify problems so we can attack
them. Health care's lack of transparency
(its opacity) has cultivated an opportunistic
business environment that pervades
the industry. In other words, each group
is free—and has the incentive— to pursue
its own interests at the expense of the
system as a whole.

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