Financials

America’s Greatest Economic Failure

The healthcare system is the greatest economic failure in American history.

That may seem like a very strong statement to make, but look at the evidence. In 1960, the U.S. spent 5.2 percent of its Gross Domestic Product (GDP) on healthcare. In 2010, the U.S. spent 17.9 percent of GDP on healthcare — that’s almost one dollar of every five dollars in our economy.

Okay, some might say, it may cost a lot but doesn’t the healthcare system keep people healthy? Only a very small sliver of the $2.6 trillion — yes, I said trillion — that we spend on healthcare goes towards keeping this nation’s workforce healthy and productive. And despite the fact that America spends far more of its GDP on healthcare than any other nation does, a whopping 86 percent of all full-time workers in the U.S. are obese or suffer from a chronic health condition that raises employer costs.

And what do we do about it? We pull up at the bottom of the cliff with an expensive ambulance and wait for people to fall off.  Then, we make money treating the injuries from the fall. Falling off a cliff can hardly be considered a contribution to our country’s wealth and it certainly adds no value in our efforts to compete in a worldwide economy.

Remember, as healthcare went from consuming 5 percent to almost 20 percent of our economy, that means that the productive part of our economy was dropping from 95 percent down to about 80 percent. That represents a 15 percent loss in the relative productivity in the economy.

The irony, says author and health-care industry thought leader Joe Flower, is that “We could have better health care at half the cost, without denying care to anyone, just by driving economic incentives back into the system.”

The U.S. has built the most sophisticated medical treatment machine in human history. There is no other place I would rather be if I fall off the cliff, than right here in the USA. Our failure, instead, is an economic one.

If the president were to announce a $1.5 trillion loss in our economy, it would be the biggest news story since the Great Depression — bigger even, since the U.S. lost only about $300 billion in GDP during the Great Depression, although that represented a larger share of our GDP at the time.

What must be done?

In the new book, The Future of Health-care Delivery – Why it Must Change and How It Will Affect You,  author Dr. Schimpff writes the following:

“In the past, illnesses tended to be ‘acute,’ meaning that they occurred and were treated, and the patients either got better or died. But today, most illnesses are chronic and complex. Although smoking has declined, obesity and lack of exercise have led to rapid increases in diabetes, heart disease, stroke, and high blood pressure . . . and many other chronic illnesses that last a lifetime. Unless  and until we as a society deal with our behaviors, our health status will not improve. [We must] accept more personal responsibility for our health and for our health care, [and] our insurance should be tiered so that we pay more if we persist in our health-adverse habits, like smoking and obesity.”

We as Americans are no longer falling off the cliff. Like a herd of sheep, we are jumping off the cliff due to our lifestyle choices. Until CEOs who buy healthcare for their employees start incorporating accountability for lifestyle into their benefit designs, nothing will change. In addition, economics need to be inserted back into the healthcare system itself. Instead of making more money by providing more treatments, providers should be held accountable and make more money as they keep people healthy.

In my next post, I will discuss how employers can do this by partnering with providers. Accountability Care Organizations that are being organized around the country to care for the indigent and the elderly but also represent tremendous partnership opportunities for employers.

[Darrell Moon is CEO of Orriant, a wellness program provider serving companies nationwide.]

Category: Financials

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About the Author: Darrell Moon

Darrell Moon is CEO of Orriant, a wellness program provider serving companies nationwide. He founded Orriant in 1996 to change the dynamics of healthcare and give employers some control over the ever-increasing costs of the healthcare be

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  1. R. Mallory Starr, Jr.

    April 4, 2012 at 4:26 pm

    And despite the fact that America spends far more of its GDP on
    healthcare than any other nation does, a whopping 86 percent of all
    full-time workers in the U.S. are obese or suffer from a chronic health
    condition that raises employer costs. A question is why is this? One dynamic is the eating patterns of those people who are obese. Another may be the issue of varying degrees of depression which is often driven by stress resulting from the gap between workers ambition and actual achievement. Many work places are hyper-competitive which is a dual edged sword in  that competition can bring out the best, but, it also can result in a culture in which people compete by inflating their contributions instead of being in reality the best as measured by results focused balanced score cards. Another factor is that many work settings are still theory X and not theory Y. Adaptation to the complex work rules and regulations is a further burden on people at all levels of organizations. 
    What to do about all of this?  I think a carefully selected task group could come up with some solutions. Further, a system in which employees are assigned mentors and a structured mentoring program could provide supportive counsel and consultation to employees at all levels. This may even be more effective than the traditional Employee Assistance Programs (EAPs) that were publicized in the 1980s mainly. One more intervention could be workout sessions in which groups from all levels examine their workplace policies and procedures such as performance evaluations. This would be consistent with the thinking that Larry Griener of Harvard B School expressed in his HBR Classic — “Phases of Corporate Development” in which he mentioned a Habit-Reflexive Organizational Structure which is a step beyond the Collaboration Phase. I believe the diagnosis of the problems is available — it is now time to do something about it which means action– interventions and more program evaluation.
    R. Mallory Starr, Jr.

    •  R. Mallory Starr, Jr., thank you for responding to this article and your great comments. You may be surprised to find that many of the solutions you describe have already begun to emerge through innovative providers. OrriantVoice.com is a website that searches for these innovative solutions to better health for half the price and promotes them to the public. Check it out.
      Thanks

  2. I hope that America soon takes charge of its healthcare costs. This issue is bigger than most think.

  3. Davidducharme1

    April 9, 2012 at 6:10 pm

    It’s about time we start injecting economics into our 3rd largest cost of doing business!  Moon is right, we need to focus on stopping people from falling off the cliff rather than picking them up in an ambulance at the bottom.  Wellness mixed with old fashioned incentives has had some tremendous success in doing this.

  4. R Hittmeyer

    April 9, 2012 at 6:24 pm

    I’ve always thought that health insurance should include a routine meeting with a Physical therapist,  trainer and nuitrtionist to design programs for each of us to improve our Physical abilties/health and keep us in shape.(as earlyas 30 yrs old then every 10 years)  Perhaps a gym membership should be covered, the more you attend (and work out) the more you are reembursed. hopefully more information and professional encourgement would help us become self motived to achieve better health. and productivity

  5. Travis Sabin

    April 9, 2012 at 7:46 pm

    Darrell,
    Great way to frame the issue. A lot of people see rising health care costs as a problem, but I don’t think they have a good way to put it in context of truly how bad it is – this article does a fabulous job of pointing that out. The solution is there, it is just going to take a massive, nationwide culture shift to get us there!

  6. Broylance

    April 10, 2012 at 1:25 pm

    Excellent article! Holding individuals accountable and reducing overall healthcare costs will help lift this economy out of the dumps. Time to whip our healthcare system into shape! 

  7. Darrell, thank you for the post – I’m a big fan of wellness / incentive programs.  While it is certainly believable that wellness programs can drive down costs in the long term as we create generations of healtier citizens, what are you thoughts about immediate problems like unnecessary tests, $400 aspirin in the emergency room, and the information that we spend a disproportiate portion of our spend on end-of-life care (which is government subsizdized) relative to other countries?

    •  

      Adam, Thank you for your comments. Having run hospitals for
      a number of years all over the country, I am well aware of the gross inefficiencies
      that are rampant in the system. Driving economics into the health care system
      is the greatest hope we have for a better system at a much lower price.
      Addressing the feeder system by getting people to take personal responsibility
      for their own health will clearly have the greatest long term impact, but is
      not the only area where economics can help us fix the system. I have created a
      website, http://www.OrriantVoice.com, discussing
      each of the 5 key solutions to the health care cost crisis; Change Lifestyles,
      Change Economics, Partner with Providers, Target Risks, and Incent Results. CEO’s
      of companies can have a tremendous impact on each of these strategies. I
      believe they hold the greatest promise for impacting long term change, not
      politicians. Companies need to change the way they purchase health care
      benefits for their employees. The recent National
      Business Group on Health’s 2012 Employer Survey shows promising trends in
      this direction. Please share if you have further thoughts.

      • Thanks Darrell – I’ll check out the website – I’m a big fan of ‘owning’ your own health care – our own company has an HSA / High Deductible plan and we’re going to implement the ‘reward’ system at our renewal.

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