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Making Health Care Work for U.S. Businesses |
 Image courtesy of iStockphoto
This is the second entry in a new series from Duke Strategy Professor Will Mitchell. PART 2 – SOLUTIONS Yesterday, we discussed competitive disadvantages that established US businesses face compared to younger firms and foreign competitors as a result of the US approach to employment-based health insurance. Today, let’s consider solutions to the competitive disadvantages. Let’s start with a couple of solutions that will not work. Non-starter 1: Convince other countries to change? One approach is to ask the US government to try to force other countries to reduce their health insurance coverage, which would at least address the disadvantages relative to foreign competitors in developed markets. I know this sounds silly (at least I hope it does), but I recall serious suggestions to this effect about Japan during the 1980s, when the Japanese economy was booming and US firms were struggling to compete. It is not hard to imagine how badly it would be received if one of Hillary Clinton’s first actions as Secretary of State was to try to convince Canada, Japan, Germany, France, and the UK to roll back their national health insurance systems. Non-starter 2: Ratchet down expectations? A second approach would be to try to convince US employees that extensive health care coverage is a luxury that they cannot afford, rather than a necessity and right. Again, I hope this sounds silly. But I recall a conversation with a senior executive from an established business that faced serious competitive disadvantages because of health care costs, in which this came up as a serious (I think it was serious – it was late, and maybe it was just fatigue and frustration that produced the point) suggestion. I think it is unlikely that Tom Daschle would make such a proposal the cornerstone of his policies as Secretary of Health and Human Services. Now that we’ve disposed of the silliness, let me suggest a starting point for a solution that would work.
Broad based access to health insurance, independent of employment. Quite simply, the country would be more competitive and businesses would be able to survive longer if the US provided a broad base of national health insurance, in some form. Let’s be clear that I am talking about national health insurance, not national health care provision. There are many ways of providing a broad base of insurance that preserves choice and flexibility in medical care, while ensuring that people have access to dignified care when they are ill or injured, independent of whom they work for or whether they have recently lost their jobs. Paying for insurance: A broad based insurance system would need to be paid for. But many countries have found viable means of paying for a broad base of insurance through combinations of income taxes, corporate taxes, general revenues, and cost containment. Certainly, the US has the ingenuity to figure a means that makes sense in this country. Moreover, the presence of a broad based insurance system might actually help us create the ability to say “no” to marginally beneficial therapies and services that contribute to the high level of costs in this country. Currently, neither Medicare nor private insurers have the power to reject many services that other countries select more carefully. If we want to control health care costs then we need someone to undertake thoughtful cost-benefit analysis and implement the implications – a more coordinated health insurance system would be in a better position than the current fragmented system to take on this challenge (again, as an honest bow to my medical colleagues, medical professionals will need a strong voice in any cost-benefit analysis). Flexible supplements: At the same time, companies and their employees could decide to supplement the basic base insurance by providing additional benefits. But they would have much greater flexibility in competing effectively, by focusing on targeted needs of their employment base and/or by being able to adjust benefits if competitive conditions changed, without leaving their employees high and dry. National is not nationalized: A broad based national health insurance system does not have to mean “nationalized” health insurance. The presence of multiple established health insurance companies in the US provides a base that some form of public system can complement. We manage to require car insurance for all drivers, for instance, without nationalizing the motor vehicle insurance business. Depending on the degree of “self pay” involved in the base plan, this would likely involve tax changes that provide benefits to people who purchase health insurance on their own or with other organizations, similar to the current tax breaks for corporate-funded benefit plans. Insurance is only part of the solution: The US health care system needs more of an overhaul than just changing the insurance system, even if that helped control costs within the current provider options. Many of the criticisms of the poor cost-quality performance of the system are spot on – we need substantial changes to the organization of the health provision system in order to bring cost-quality combinations to world standards, while also working to retain the many outstanding features of medical care in this country. But decoupling access to effective coverage from employment would provide an important competitive boost that would help generate resources needed to transform the system. CEOs should promote national health insurance: The final implication here is that large corporate employers should be the biggest proponents of a broad based national system of health insurance in the US. By taking the costs of employment-based health insurance out of the competitive equation, established firms would be in much better position to compete against younger firms and against less cost-ridden foreign competitors. This is one of those powerful cases where the needs of corporate strategy line up directly with the interests of social welfare. |
Thanks for tackling a very emotional topic and for making the very important distinction between national and nationalized insurance. In theory, moving away from the employer funded base in the U.S. could have, as you point out, many advantages including rationalization of what is covered from state to state, better compilation and sharing of data, and economies of scale in administration.
However, in my opinion, even “national” health care implies extreme politization of the process. Politicians will not make the choices to come up with standards for a national “base” plan that limit coverage to the necessities (like eliminating coverage for Viagra, e.g.). Similarly, politicians will balk at any structure that permits, as you advocate, employers/employees to purchase insurance beyond the base plan, claiming that such structure is elitist. Finally, politicians will certainly not have the courage to address really sensitive issues that contribute greatly to the high costs of health care such as the huge expedentiures for persons in the last 6 months of their lives and organ transplants, to name two very touchy subjects.
I think that we will eventually wind up with national health care, however, since it will become an area where social liberals and pro-business conservatives can find common ground.
Jack, thanks for the thoughtful comment. I think the key point here is that health care is political, pretty much by definition — any issue that is central to the health and well-being of the country and involves such an extensive array of resources will be political. So the challenge for us is to have a positive political discussion of what we want the health care system to accomplish for the country and the people in the country, rather than fall into the battles that the last two major rounds of attempted health care reform have engendered (the Ted Kennedy initiative in the late 1970s, and the Rodham Clinton attempt in the early 1990s).
This is going to take sensitive management on the part of leaders in both the political and corporate sectors. One thing that encourages me is that many corporate leaders will privately discuss the need for deep health care reform. So the challenge now is to generate a real public forum that helps us move forward.
I also agree it was helpful to point out the distinction between national health care and nation health insurance. However, I think the discussion would be more productive if it focused on the issue of 3rd party intermediaries and their role in the health care system. Historically, they are a relatively recent phenomenon and were established under the premise they would aggregate healthcare spending and use purchasing efficiencies and knowledge of healthcare delivery to force costs out of the system to such an extent they justified their own existence and drove costs out of the system. This has not occured. Healthcare pricing is now so distorted that a cash paying patient, the most profitable to deal with because they come with no 3rd party administration of claims and its overhead, pay the highest prices in the system. This makes no sense.
We are at a critical juncture for the country. Last I read, 40% of healthcare is being paid for by the government through Medicare and Medicaid. The crux of any argument around the future of healthcare in the US should be whether we maintain private purchase of healthcare or simply socialize the whole system. We are standing on that line now ready to step in one direction or the other, and if we are going to make an intelligent decision, we need to deeply engage on whether consumers should play an active role in the consumption of their own healthcare or whether society (through government) should direct it for them.
I have a personal point of view having consumed healthcare in other countries, and it is we should fiercely defend our right to purchase healthcare directly and eliminate 3rd party intermediaries wherever possible. I believe other systems will continue to show the gross inefficiencies we have today, or sacrifice our personal liberties on healthcare choice to the government, which will inevitably not act to my personal benefit, but to society at large (and even that is debatable).
The entire US needs to revamp in the current health care system.