Why Healthcare Matters : How Business Leaders Can Drive Transformational Change 9781599964379, 9781599961538

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Why Healthcare Matters How Business Leaders Can Drive Transformational Change

Frank Hone

HRD Press, Inc. • Amherst • Massachusetts

Copyright © 2008, Frank Hone

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage and retrieval system, without written permission from the publisher.

Published by: HRD Press, Inc. 22 Amherst Road Amherst, MA 01002 413-253-3488 800-822-2801 (U.S. and Canada) 413-253-3490 (fax) www.hrdpress.com

ISBN 978-1-59996-153-8

Editorial services by Suzanne Bay Production services by Jean Miller Cover design by Eileen Klockars

Contents Dedication ............................................................................

vii

Acknowledgments................................................................

ix

Introduction .........................................................................

xi

Chapter One: Why Does Healthcare Matter? .................. An overview of the U.S. healthcare system and the important role employers play in its future

1

What do we mean by “healthcare”?................................ Healthcare as a Political Football ................................... Historical Thumbnail ...................................................... Five Major Themes......................................................... Personal Responsibility as the Foundation for Change ................................................................... Impact of the Healthcare Crisis on Employers ...............

2 3 3 4 9 10

Chapter Two: Today’s Healthcare Crisis: A Deeper Look at the Causes and Effects ......................... 11 A detailed look at the U.S. healthcare system and key factors, including medical advancements, chronic disease, life expectancy, and national economic factors Historical Perspective ..................................................... Life Expectancy .............................................................. Medical Advancements................................................... Treatment of Costly Diseases ......................................... Healthcare Spending as Part of GDP .............................. Cost and Quality: A Study of Contrasts.......................... How Other Nations Fare .................................................

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11 12 14 17 19 20 35

Why Healthcare Matters

Chapter Three: The U.S. Medical Marketing Model....... 39 How healthcare professionals, pharmaceutical manufacturers, insurance companies, and the FDA influence healthcare as the system’s primary stakeholders A Culture Dominated by Options and Choices............... America’s Appetite for the “Silver Bullet” Solution ...... How the Medical Marketing Model Meets Market Needs............................................................... Defining the Players........................................................ How the Four Components Rely on One Another.......... The Rising Voice of the Critics ...................................... Why Prevention and Wellness Get So Little Attention............................................................. Complementary and Alternative Medicines Left Out........................................................................ Wall Street: Rewarding and Reinforcing........................ Reform Inside the System............................................... The Role of Personal Responsibility............................... DTC and the Power of the Consumer ............................. Consumer Marketing: A Double-Edged Sword.............. The Emergence of Retail Health..................................... Chapter Four: Healthcare Consumerism and Personal Responsibility....................................................... The rise of “healthcare consumerism” and key elements in market transformation The Growth of Consumerism after WWII ...................... Consumer Power Comes to Healthcare .......................... How Healthcare Consumerism Is Stimulating Change ......................................................................... A Perspective on Healthcare Consumerism.................... The Emerging Challenges of Lifestyle-Related Diseases ....................................................................... Health Illiteracy .............................................................. Patient Compliance and Prescription Medicines ............ Building Relevant and Motivating Incentives to Drive Behavior Change ...............................................

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39 40 41 42 43 45 49 50 53 55 57 58 61 63 67

67 70 75 78 80 80 82 84

Contents

Rewarding Healthy Behavior.......................................... CDHP in Practice: A Case Example............................... Bush’s “Ownership Society” .......................................... The Trend toward Consumer-Driven Health Plans ........ Information Therapy ....................................................... Patients Are Taking Charge ............................................ On-line Access Opens New Worlds ...............................

85 86 88 89 90 91 92

Chapter Five: Business and the Employer: Catalysts for Change ........................................................... The role of business and the media in changing healthcare

95

Corporations as the Guiding Light of the Nation............ 96 Business Meets Dr. Deming ........................................... 98 Business and Health Insurance ....................................... 103 The Demand-Driven Economic Model for Healthcare .................................................................... 106 Corporations Supporting Healthcare............................... 107 Chapter Six: Collaborative Initiatives............................... 111 Eleven organizations that have brought key stakeholders together to address important national issues related to improving healthcare Chapter Seven: Early Adopters, Measurable Results...... 127 Fourteen corporations at the leading edge of healthcare consumerism Chapter Eight: A Plan of Action........................................ 165 A seven-stage plan of action to drive employee health as a central corporate strategy Employee Health as a Central Corporate Strategy ......... Healthcare Consumerism in the Workplace ................... Prioritizing Employee Health: Seven Stages .................. Gearing Up the Human Resources Function to Lead the Way........................................................... Charting a New Course...................................................

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165 166 167 172 173

Why Healthcare Matters

Chapter Nine: Bringing Healthcare Consumerism Inside: The Communications Campaign........................... 175 A 10-Step Plan for a Communications Program............. Employee Satisfaction and Retention: Increasingly Important Factors......................................................... Employers Rank Last...................................................... Employees Differ............................................................ Bringing Healthcare Inside with Company Clinics ........ ROI for Corporate Healthcare......................................... Setting a Clear Measurement Plan.................................. What, How, and When to Measure.................................

179 186 187 189 190 192 194 194

Chapter Ten: A Vision of Healthcare Consumerism as the Driver of Change ...................................................... 197 Roles and opportunities for business, markets, and consumers in improving the nation’s health A Real Voice for Change................................................ The Market Shift to Consumerism.................................. Personal Responsibility................................................... A Vision for the Future...................................................

197 204 204 205

Recommended Resources ................................................... 207 About the Author ................................................................ 213

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To my wife, Christina and my children, Marissa and Brendan

vii

Acknowledgments While this work has largely been a solitary endeavor, there are several people who did provide much-needed support and encouragement. The book was initially inspired by reading Eric Schlosser’s UK edition of Fast Food Nation, which I picked up on our honeymoon in Grenada in 2002. I knew I had a story to tell, and this book fed my desire. Not knowing the first thing about writing or publishing a book, I signed on to Jill Nagle’s “Book Proposal Boot Camp” in 2004, and learned a few of the ins and outs. After dozens of proposal revisions and refinements and way too many agent rejections, I was fortunate to meet Ken Lizotte of Emerson Consulting. Ken shepherded the book to several publishers and helped land a contract with HRD Press and Robert Carkhuff. I had the pleasure of working with a thoughtful and experienced editor in Suzanne Bay, who smoothed over many of the rough edges of a first manuscript. The actual writing was supported in large measure by my former boss, Steven Girgenti, who was chairman and CEO of Ogilvy Healthworld. He believed in me and provided me with a great amount of latitude in my work schedule during the summer of 2007 to make time to write. And of course, my wife Chris, who never wavered in her confidence in me or the end result. She fed me food and love, and for the most part, kept our cat Molly off my laptop.

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Introduction Why Healthcare Matters is a blueprint for transformative change. It is a call to action for our nation’s business leaders to give renewed focus to employee health and proactively deal with some of the many challenges of our growing healthcare crisis. This crisis has had and will continue to have broad and deep impact across the nation. It touches nearly all citizens in the population in one way or another. And yet it is so complex because of the multiple interrelated and interconnected components that comprise the U.S. healthcare system that it is impossible to completely define and dissect. Many of our political leaders, health policy experts, patient advocates, and others with a voice and a viewpoint see the challenges of mending the healthcare system from their own specific and often biased vantage points. For this and other reasons, it’s impractical to reach consensus about what specifically will solve the overall problem. The optimal answer for one may be viewed as wholly inadequate or unfeasible by others. This book does not attempt to bring all parties to a common field of understanding about the optimal solution. Rather, Why Healthcare Matters aims to provide enough context to enable readers to get a clear picture of the market forces, structural dynamics, and competing interests so they can fully appreciate the problem. This book proposes that the best solutions are those that tap the demand side of the equation so they can build off the premise of individual personal responsibility. By examining historical trends, the political landscape, and the inner workings of the healthcare system, we can hope to arrive at a place of shared understanding that it will take much to reverse some of the negative trends and correct harmful operational philosophies and practices. With time, a strong sense of purpose, and dedicated “changemeisters,” there is real hope for a healthier America.

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Why Healthcare Matters

Why Healthcare Matters explores our dysfunctional healthcare system in a critical manner. It examines our cultural approach to health and raises a red flag about our ability to continue to compete economically and politically in a rapidly evolving era of globalization. This may seem to suggest far-reaching implications about something as basic as caring for the sick, promoting wellness and good nutrition, and having hospitals staffed with qualified doctors and nurses and everything else that comes with a fully functioning and effective system. But it is not. The erosive effect on our economy is evident, and is fully discussed in Chapter Two. This book also aims to address the sources and depth of the problem, such as spending, malpractice, and the administrative costs of delivering healthcare. We’ll explain the structural dynamics that tend to support the status quo and resist change. A new administration in the White House and changes on Capital Hill will not remove the question of what to do about healthcare on a national level. It will be one of the public’s most pressing concerns for some time to come. While this book takes the view that the best solutions are market-based, it is clear that the government also has a key role to play. Later in the book, we’ll look at specific and detailed recommendations to illustrate how corporations can latch on to the promising trend of healthcare consumerism and implement powerful new concepts and strategies to lower overall costs and improve health outcomes at their companies. The book challenges business leaders to advocate healthcare transformation within their own companies, and provides a detailed and practical strategic guide for doing so. Employers are feeling the brunt of the recent and extraordinary increases in health insurance premiums, and they are best placed to implement real change. Real change comes with workers and all consumers taking greater personal responsibility for their health. This guide will help employers instill and reward positive behavior change. The heart of Why Healthcare Matters is the perspective of why and how business is the best catalyst for change. Following

xii

Introduction

a review of 14 leading-edge companies and their experience with healthcare consumerism, we’ll outline a strategic overview for driving change, share a communication plan framework, and provide recommendations on metrics. Corporate executives are an audience primed to do something about this problem, and they have the power to make a difference. Why Healthcare Matters is a manifesto for change and a focused guide for how corporate leaders can make this change happen.

Cost of Healthcare in the U.S. Everyone reading this book will be familiar with some aspect of what’s wrong with healthcare in the U.S. The broad-based data are well known and fairly well publicized in the media. Here are some quick highlights: • Healthcare in the U.S. accounts for nearly $2 trillion annually. • This represents 16% of our gross domestic product (GDP). • More than 47 million Americans have no health insurance. • Diabetes has become a national epidemic, and obesity is

on the rise. They both lead to other health complications. • Health insurance premium increases have far outpaced

the rate of inflation for the past several years. • Medical errors continue to plague the system. • Almost one-third of all healthcare expenditures are for

administrative services. • Paper-based systems with highly inefficient IT infrastruc-

tures are still broadly used. We know something is wrong either on a personal level as a patient or caregiver or on a professional level as a business leader, policy maker, or healthcare practitioner. There are individual frustrations: rejected insurance claims, physician misdiagnoses, incorrect prescriptions, and just getting the run-around as we try to manage our way through the maze of departments

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Why Healthcare Matters

and services in a hospital setting. And who can escape the articles in the daily newspapers, business press, and in other media outlets that routinely cover any one of these points? Macroeconomic problems rarely motivate people to act. It usually takes a catastrophic event for the market to sit up and take notice of a major problem. A stock market correction that knocks significant value from an individual’s net worth can do that. Persistent mechanical problems can take the Concorde out of service. The price of a barrel of oil has little significance until it’s time to pay at the pump. Ralph Nader experienced the frustration of failing to get people’s attention about the Corvair until he wrote Unsafe at Any Speed and testified in Congress. Behavior change can and will come when problems reach people at the point of pain. Why Healthcare Matters is a guide for influential business executives and policy makers who have a stake in the future of our nation’s health. It is geared for those who believe in the importance of individual choice and personal responsibility, rather than government intervention and entitlements. This book is for people who care about the problems related to healthcare in the United States and want to do something about it. This is one area of our nation’s economy where we really can make a difference—each one of us. Read on.

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Chapter One

Why Does Healthcare Matter? This chapter will provide some perspective regarding the state of healthcare in the U.S. It will describe its central and pivotal role in our overall economy and global competitiveness. We will outline some of the key themes in the book and touch on several of the topics that will be covered in much more detail in subsequent chapters. Healthcare matters to the way we all live and the way we all feel. When it is a microeconomic issue affecting you or your family as a crisis strikes or a chronic disease is diagnosed, healthcare becomes highly important, but the broad and amorphous world of “healthcare” is often overlooked when it doesn’t affect us directly. But then, doesn’t it always affect us directly? Think about the implications of a U.S. workforce that has lower productivity and higher costs because of an inadequate healthcare system. That hurts the profitability of the corporation, which can have an impact on wages, bonuses, and other benefits that could otherwise be provided. The health and vitality of the workforce is essential; but the cost of time lost to absenteeism and even “presenteeism” is extraordinarily high (though it is rarely calculated by most companies). For employees—also known as consumers—good health generally equates to a better quality of life, but the opposite holds true as well. How about for the nation as a whole? The United States is still the world’s undisputed economic powerhouse, but with China emerging and other economies expanding, how long before the U.S. is moved out of the top position? Frankly, the global competitive advantage of the U.S. is shrinking. We are losing ground in education, science, productivity, technology, and yes, healthcare. In fact, we are so far behind the rest of the developed world on many measures related to our actual health, the efficiency of our spending, and the functionality of the system that it is truly embarrassing.

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Why Healthcare Matters

Our national pride is at risk in this area. We have become known as a nation of fast food and fat people. Many will agree that the health of a nation’s people is the best measure of a nation’s wealth. For the country as a whole, healthcare could quite possibly be the defining factor that determines whether or not the United States remains a superpower. With effective and far-reaching changes to our healthcare system in the areas of access, quality, transparency of information, outcomes, and privacy, the U.S. might continue to reign supreme. But without concerted and collaborative commitment to an evolutionary and progressive approach to a new model, the nation and the economy could well become a victim of global competitive disadvantage.

What do we mean by “healthcare”? For a term that is as ubiquitous as healthcare, there are a number of ways to think about it. “Healthcare” refers to the way one is cared for by self, family, friends, and the system of providers and practitioners who deal with products, services, and available resources to help us sustain and improve our lives, treat and heal conditions and diseases, and help us take preventative steps to stay well. Healthcare is also an industry that deals with an astounding array of data, diagnoses, drugs, and other things most humans are not even aware of. It is about relationships, also, between patients, healthcare professionals, the providers, pharmacies, physicians, labs, and payers. But it should also be part of our daily lives. It’s about doing what is good for our bodies and ourselves, caring for our cardiovascular, respiratory, and other biological systems; staying mentally alert; and managing our emotions. We are all in the “business” of healthcare. It affects us positively and negatively, and we can affect it, positively and negatively.

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Why Does Healthcare Matter?

Healthcare as a Political Football The fact is, there are a lot of good ideas about how we can address the issues we face, but gaining consensus at the national level of government is not going to be easy. States and communities represent different kinds of opportunity for change. In cities and towns across the country, emerging regional health information exchanges are breaking new ground in the area of electronic medical records. Connecting hospitals, labs, doctors, pharmacies, and patients is a goal of the future, with a long path ahead. Most of these information exchanges are being funded as demonstration projects by a government entity at some level, but they will ultimately require internal funding if they are to be beneficial over the course of time. A good deal of what is being learned at the state and local level needs to be understood and applied (or avoided) at the federal level. Government does have a role to play in the transformation of healthcare, but only by supporting market forces, not replacing them.

Historical Thumbnail Believe it or not, there was once a time when people who were sick paid the doctor directly for their care in a “fee for service” arrangement. Of course, we’ve all heard of that era, and most of us born before the 1970s experienced it. But over the past 40 years or so, the payment for services, the prices for services, and the providers of those services have all undergone dramatic changes. Now, we have to choose our doctors from a list. We pay for services through a “third party administrator” who acts as a middleman to be sure only “authorized” procedures and visits are reimbursed. We don’t have any idea of the actual fees or costs. This layer of administration has become the standard in our system, but adds significantly to the overall cost of healthcare. How many of these administrators exist solely to push paper around in an effort to minimize payments out and maximize payments in? The health system infrastructure has become a maze of inefficient players with non-aligned performance incentives. The

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Why Healthcare Matters

desire to maintain the status quo while others try to bring about change creates a tremendous friction. These parties are like “cling-ons” that simply add cost and detract from care. Eliot Spitzer, former governor of New York, has called them the “Guardians of the Status Quo.” In the past two decades, the move toward managed care fueled many changes that restructured much of healthcare delivery, generally for the worse. More detail on this historical perspective will be covered later.

Five Major Themes Stakeholders involved in the healthcare debate agree that the status quo is unsustainable, but the kind of transformational change required to create a healthcare model that works demonstrably better (or even just better) is very hard to accomplish in today’s world. There is no single moment of crisis against which to coalesce stakeholders, so we need to look at the many contributing factors to the problem, and work to realign them. The five themes that follow are important in their ability to both help and harm the current situation. With the proper alignment, each can help shape the landscape of our nation’s healthcare toward a more productive, accessible, and userfriendly system. THEME #1. WALL STREET The United States is an economic powerhouse for many reasons, but key among them are the discipline and focus that Wall Street investors place on publicly traded corporations. The diligent analysis, careful review of financial statements, and assessment of growth prospects and profitability tend to dominate the way analysts and investors look at businesses. And while this allows the market to work efficiently, it can also lead to some rather counter-productive decision making. Since the responsibility of a company’s board of directors is to deliver “shareholder value” (e.g., profit) as the main mission of the enterprise, this priority quite often victimizes communities and employees through plant closings or layoffs, victimizes

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Why Does Healthcare Matter?

customers through cost cutting, and makes other compromises counter to what the company was originally established to achieve. The excessive emphasis on generating profits also has a detrimental effect on the healthcare business. The irony is that Wall Street celebrates the financial health of the big insurers, for instance, but pays no attention to the methods of this “success.” Patients, medical practices, and hospitals in the meantime spend inordinate amounts of time and energy to manage reimbursement from these big and successful insurers. If we consider the $2 trillion spent on healthcare as revenue for many public companies, you can imagine that the impetus for real change is small. How does the focus on short term profits and other financial outcomes at health-related public companies cause negative effects within the healthcare system? What is the opportunity for change if that focus is shifted to incorporate broader health outcomes? THEME #2. BIAS OF THE “MEDICAL MARKETING MODEL” A real drag on the move toward health reform is the desire of many stakeholders to leave things as they are. Primary among these stakeholders are four groups: healthcare professionals; insurance companies; pharmaceutical manufacturers; and the government, particularly the U.S. Food and Drug Administration. (Note: The term “Medical Marketing Model” will be used throughout the book, especially in Chapter 3. It is not a widely used or recognized identifier, but is the author’s proposed description of the primary interrelated forces noted in the paragraph above.) Each of these stakeholder groups is integral to the way in which our current healthcare system operates. They feed off each other and rely on each other for their existence and livelihood. They are also highly resistant to change. They want to hang on to their part of the economic power that they’ve gained from the evolution of the healthcare system over the past decade or more. There is an inherent and dangerous symbiosis of these

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major players that limits the opportunity for real market evolution. The special interests are firmly entrenched and mutually supportive. Healthcare professionals FDA

The “Medical Marketing Model” Pharmaceutical manufacturers

Insurance companies

We’ll look at this in more detail when we get into the bias of the Medical Marketing Model in Chapter Three. There, we will define the crisis both in broad terms and in minute detail while providing a deep look at these interdependent factions. This sets the stage about the importance of demand-driven solutions by providing supporting detail about the market challenges to real and substantive change, and the many conflicting and competing priorities on the supply side. How can the Medical Marketing Model be better structured so that improved health outcomes can be achieved? How can real and substantive change occur if there is such strong and inherent resistance to it? THEME #3. THE SHIFT FROM SUPPLY-SIDE TO DEMAND-SIDE Over the past decade and a half, most efforts at improving the healthcare system have focused on the supply-side, which is by and large represented by players within the Medical Marketing Model. Efforts to carve out population segments, limit reimbursement, encourage pay for performance, and promote generic substitutions along with other schemes have all impacted the supply side of the healthcare system equation.

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Why Does Healthcare Matter?

Over the years, a full range of supply-side ideas and initiatives designed to restrict the flow of medical goods and services as a way to contain costs or “manage care” were attempted on the national, state, and local levels. Depending on the perspective by which success is measured, these can either be lauded as successes for short-term savings or bemoaned as failures for further complicating the system and adding administrative bureaucracy. The fact is that most of these saved some money, but the net result of the cost savings often was inferior care for patients. That is an unacceptable tradeoff. A big focus of this book will be on the demand side of the equation. Herein lies the real power: More than any other country in the world, the economy of this nation has been driven by consumer power, yet in the healthcare equation, most consumers are really quite powerless. To achieve market-driven success, it is essential to move the emphasis from the supply side to the demand side and put more power into the hands of the people. Why Healthcare Matters provides the information, insight, and ideas to help make this happen. How is it possible for such a massive and growing economic force to be so supply-side oriented, with so little regard for the demand side? THEME #4. MANIPULATION OF THE MEDIA This nation is heavily influenced by the power of the mainstream media, most of which operate to satisfy the public demand for human-interest stories, entertainment, and sensationalized news. Members of the mainstream media often deliver the story lines that create a false impression of the way things really are. They can set unrealistic expectations of how life should be, and reinforce stereotypes. The public relations machines that represent many of the major companies within the Medical Marketing Model are expert at guiding public opinion about their clients’ agendas and their images, products, and services. All too often, those in the mainstream media are ready participants in the selling of the story. After all, a key reason is that these same client companies

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Why Healthcare Matters

are also advertisers in the magazines, newspapers, and television and radio outlets, so the media are willing to play along. They convey messages about health problems and drug therapies that are not fully accurate or balanced. And, in a broader sense, since the media are the shapers of our culture, they also shape our views on healthcare. Through programming, news reporting, and entertainment shows, the mainstream media creates the lens through which much of America views the world—and the way much of the world views America. The mainstream media are contributing to the healthcare problem, but also presents a big opportunity for change. How can the mainstream media do more to effect positive change in the healthcare system? THEME #5. EMERGENCE OF HEALTHCARE CONSUMERISM Healthcare consumerism has begun to emerge as a powerful force in the past few years. SHPS, a leading provider of integrated health solutions, defines healthcare consumerism as “empowering consumers with better health information and decision making tools and motivating them via financial incentives to spend wisely, so they will make better health decisions at lower costs.” Two factors in particular have contributed to its elevated importance: the passage of the Medicare Modernization Act in 2003 that put Health Savings Accounts (HSAs) into practice; and the rising cost of employee health insurance, which activated a number of earlyadopting corporations to offer their staffs consumer-driven health plans (CDHPs), beginning in 2004. We’ve also experienced “forced” consumerism required by the managed care markets of the 1990s that required physician selection based on new sets of rules. This led to massive consumer confusion but ultimately began a market movement toward consumer choice. The expansion of direct-to-consumer (DTC) advertising of prescription drugs in the late 1990s also led to more demand-driven decisions by consumers.

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Why Does Healthcare Matter?

Healthcare consumerism is evolving and growing. The main idea of this new era is people taking on greater personal responsibility for their own health. This is the overarching theme of Why Healthcare Matters. The core idea is that the essence of the solution lies in personal responsibility, that the main catalyst for change is healthcare consumerism, and that the main engine for popularizing this is the business community acting as employers. The book illustrates how healthcare consumerism can influence the markets toward greater economic efficiency, better quality of care, and improved outcomes overall. What factors need to align for healthcare consumerism to have a transformational effect on the U.S. healthcare system?

Personal Responsibility as the Foundation for Change Personal responsibility is the central idea that fuels healthcare consumerism. It has the opportunity to redefine the healthcare landscape based on demand-driven market power. Personal responsibility, however, cuts two ways. It is both a root cause of some of the problem and a cornerstone concept for some of the solution. Attitudes driven from our culture’s overriding views about freedom, liberty, and the pursuit of happiness can actually lead many people to take on unhealthy behaviors. The number of people who have diabetes, stress, high cholesterol, or weight problems is staggering. These conditions can lead to more-serious health problems if they are not treated or managed, but the root causes are often lifestyle-related behaviors that can be controlled by the individual. Americans have a misplaced sense of entitlement when it comes to healthcare. They feel they can behave however they want to today because there will be a pill to care for their ailments when they need one. But it is just not so. The U.S. is a nation of excess. There is even an undercurrent of national pride in this. We have more choice, more toppings, and bigger servings. And we go for it, more often than not.

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Why Healthcare Matters

Accepting personal responsibility is not easy. It is like dieting. There are ups and downs. But when taking control of one’s own health becomes imbedded in our culture and when examples are seen in the media, in Hollywood, in your office, and down the block, the trend will catch on and the wheels of change will really start moving.

Impact of the Healthcare Crisis on Employers Today, 99% of large corporations offer employer-sponsored health insurance and 60% of the U.S. population (over 170 million American adults) are covered by such plans. U.S. businesses are feeling the effects of paying significant cost increases for employee health each and every year. PricewaterhouseCoopers reported in 2005 that half of large U.S. companies said increased healthcare costs had contributed to slower profit growth over the previous 12 months. While the nation as a whole grapples with rising healthcare costs, declining quality of care, and an uncertain future, individual companies across the country are experiencing their own pain in managing the rising expense of health insurance benefits for their employees. Here’s where we can see both the opportunity and the responsibility. Randy McDonald, the head of human resources at IBM and the chairman of the Health Care Policy Roundtable, said it well. “As the nation’s biggest employers, we’re major stakeholders— and a potential force for positive change in an American healthcare system that is in critical condition today.” For too long, the employee health benefit has been farmed out to a third party, and little responsibility for employee health, other than financial, has been borne by the corporation. Companies now need to regain control of this increasingly important and costly investment in human capital. By taking back control, we can bring about real change, individually and collectively.

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Chapter Two

Today’s Healthcare Crisis: A Deeper Look at the Causes and Effects In order to paint a clear picture of this country’s healthcare crisis, it is necessary to examine the perspectives of each stakeholder group: providers and practitioners; manufacturers; consumers; and the government. In reality, there is no single picture of this mess. Rather, it is a kaleidoscope made up of thousands of facts and data points and millions of individual stories. In this chapter, we’ll provide some of the macroeconomic data and trends to set the framework. One of the key data sets is depicted in the graphic on the following page. The rise in health insurance premiums over the past decade has changed the way employers, physicians, and insurers manage their roles within the healthcare world. This trend of rising costs illustrates the increasing investment that is required in paying for healthcare, which is contrasted by the declines in quality, outcomes, and patient satisfaction. We’ll explore in detail the vast array of problems infecting the healthcare system and compare our statistics and market situation to those of other developed nations. And we’ll examine what has led us to this place and this crisis. It’s hard to remember that things weren’t always this way, so a look back in time will help highlight just how different things are today.

Historical Perspective In the scheme of world history, the 1950s were basically yesterday. But with the economic and technological development of the industrialized world, much has changed in the past several decades. Amazing amounts of innovation and progress have helped to cure disease, extend life expectancy, and provide treatments with far fewer adverse effects than previous options.

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Why Healthcare Matters

All this is good, but paying for and delivering these new therapies and other advancements isn’t possible without a massive infrastructure. This infrastructure has become increasingly complex, resulting in widespread consumer frustrations and confusion. Increases in Health Insurance Premiums Compared to Other Indicators, 1988–2007 20% 18% -

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1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

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