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.