An Industry Bankrupting Its Own Customers Cannot Thrive

Wonder why you haven't gotten a raise recently?  Does it seem your income goes less far than in years past?  Blame healthcare inflation.  Or, as one economist said recently, "...healthcare stole your raise."

 Brian Klepper, PhD, blogging at KevinMD.com predicts that healthcare is in for a new organizational structure.

At our first meeting years ago, Tom Emerick, Walmart’s then VP of Global Benefits, told me, “No industry can grow continuously at a multiple of general inflation. It will eventually become so expensive that purchasers will simply abandon it.”

He said it casually, as though it was obvious and indisputable.

Health care is playing out this way. From 1999 to 2011, health care premium inflation grew steadily at 4 times the general inflation rate. During that same period, the percentage of non-elderly Americans with employer-sponsored health coverage fell from 69.2 to 58.6 percent, a 15.3 percent erosion rate.

Health care’s boosters like to argue that it has buttressed the economy, and that it means more jobs and economic prosperity within a community. A February 2011 Altarum Institute report estimated that private sector health care jobs now account for nearly 11 percent of total employment. Since the recession began in December 2007, health care employment has risen by 6.3 percent while employment in other industry sectors fell by 6.8 percent.

[I love this next paragraph...]

But there’s a darker side. Health care’s ever-increasing revenue growth has come at the expense of individuals and firms that pay its bills, directly, through health plan premiums and through taxes, often instead of buying other goods and services. It transfers wealth to health care from everyone else. Like the finance services industry, health care has become a disproportionate “taker” industry, sapping economic vitality of America’s communities.

[Yep.  And it's time for state hospital associations everywhere to change the basis for their "economic benefit" calculations - calculations that still trumpet employment and purchasing data when it's clear the marginal benefit is negative.  Locally and nationally, we'd be better off spending more on education, infrastructure and innovation than on more health care.]

And it is also clear that a sizable part of health care cost is inappropriate and unjustified. It is related to procedures that are done unnecessarily, markups that are hidden, and a thousand ruses to make it cost more. The prestigious National Academy of Sciences Institute of Medicine recently estimated this waste at 30 percent of total health care expenditures, or about $765 billion/year. But any number of health care professionals I’ve spoken with agree that, based on their experience, the number must be significantly higher. Other estimates have suggested this. In 2008, the consulting firm PwC issued The Price of Excess, which calculated that about 54.5 percent of health care cost, or nearly $1.5 trillion annually, focused in every sector – supply chain, health information technology, care delivery and finance – provides no value.

Read the whole thing, here.