Contagion, Cure & Result
Contagion: the spreading of an attitude or emotion from person to person.
Notions pertaining to healthcare are contagious. And like a contagion, the notions deal more with emotion than fact. The following are a few principals surrounding healthcare for all to consider when advancing the contagion.
Most economic factors are related and dependent on the economy. Healthcare is not. The demand for and cost of healthcare grows irrespective of the economy. People age, become ill, have accidents, and need healthcare regardless of the growth or contraction of America’s GDP.
GDP is the value of goods and services produced. It’s essentially the horsepower of America’s collective economic engine. It’s common to compare expenditures to the GDP in order to gain a sense of scale.
Speaking of GDP, healthcare in America now represents 18% of GDP and is growing at 1.5 times the rate of growth of the GDP. That’s not a good thing. A few years ago healthcare represented less than 5% of GDP. The cost of healthcare is priced into all goods and services produced in America. Healthcare is not free for anyone, except maybe illegal aliens. Now, we don’t want to reduce healthcare in America to that of China, but just as a comparison, the cost of healthcare in China is 3% of their GDP. That difference puts America at an economic disadvantage before considering the cost of labor.
The cost of healthcare long ago eclipsed the cost of steel in a typical car.
The cost of defense, our military, represents 4.5% of GDP and is shrinking. It’s interesting to note that within defense spending, healthcare is the largest expense item. The cost of healthcare pops its head up everywhere.
In my opinion there are three major drivers of healthcare costs—the migration of a culture of insurance as insurance to insurance as a healthcare plan, which gradually led to consumer price complacency, and then our notorious tortuous legal system.
Healthcare insurance was originally purchased to cover accidents and catastrophe. Remember those policies we used to come home from school with? During the late 40s and early 50s healthcare insurance began to migrate to what is known today as a healthcare plan. Patients once asked the Doctor what a test or procedure cost.
Big companies began to offer health insurance plans as part of their benefit packages; small companies followed suit. Eventually, consumers lost interest in the cost of healthcare and only asked what is the deductible or co-pay. “Is the covered by my insurance,” became the most frequently asked medical question.
We now have a culture that knows not the actual cost of healthcare and worse, have lost the art of price negotiation. And to make matters worse, while this dumbing down occurred, doctors began practicing defensive medicine, which added exponentially to the costs.
Cure: to affect a recovery from.
Everyone needs to learn what to ask when contemplating healthcare needs. Larger deductibles will cause consumers (patients) to hone their shopping skills. Large employers have already begun to negotiate on behalf of their employees. Wal-Mart is a good example of this. Wal-Mart employees have a short list of hospitals at which they can get spine or heart surgeries at no cost (travel included). Yes, Wal-Mart employees can go elsewhere, but out of network will cost them more out of pocket.
Healthcare providers will need to become more efficient by increasing the quality of their product. This will be forced by competition due to informed customers asking more questions, and then shopping for best value, which won’t always be the lowest price. The value proposition, recovery times, and quality of care will be largely reported by on-line reviews.
Tort reform by state is crucial but since defensive medicine is so embedded into the practice of medicine, it will take time to affect real savings. Once implemented, competition and case law proving the legality of reformed law will slowly result in lower cost.
Cultural shifts take time.
The result will be a reduction in the cost of but not the quality of healthcare. Doing so is critical to the viability of America as a participant in the global market. Discussions need to be centered on reducing costs while maintaining quality and choice.
The system we now have is broken. But like all systems, the result we’re getting are precisely that which the system is designed to produce. No system produces anything other than that for which it’s designed. Change the system–change the results. Simply legislating ways to cover the costs of the current system will never achieve the desperately needed results and keep America competitive.