Health care costs in the United States are approximately $2.1 trillion annually and represent 16 percent of our overall economy as compared to roughly 9 percent in 1980. In other words, health care is a large and growing business and a number of people and companies are making a lot of money because of the current system. When people say “reform,” they really mean change. These changes will inevitably cause some to benefit and others to lose. A definitive consensus answer on the best system will never occur.
What is good for an individual is not necessarily good for society. A recent Wall Street Journal article, “The Myth of Prevention” by Abraham Verghese, does a good job of illustrating this reality.
Take high cholesterol as one small example of the larger problem. Prescribing a statin is conventional wisdom to lower the risk of having a heart attack. It certainly makes sense statistically and, as one of those individuals whose life might be saved, it makes total sense to me. However, from a societal perspective, so many people are now taking this class of drug that it costs the overall system $150,000 for every life that is saved. Does this make sense? Are there better alternatives?
Steven A. Bird, CEO of Safeway and founder of the Coalition to Advance Healthcare Reform, argues the answer is yes. At Safeway, he is promoting and implementing a market-based solution that he believes can reduce our nation’s health care costs by 40 percent. His plan focuses on two key insights. The first is that 74 percent of all health care costs are related to four chronic conditions: cardiovascular disease, cancer, diabetes and obesity. The second is that 80 percent of cardiovascular disease and diabetes, 60 percent of cancers and more than 90 percent of obesity are preventable by lifestyle changes by the patient. Therefore, he argues that, just as auto insurance companies offer discounts to drivers with good driving records, health plans should offer discounts to employees based upon healthy behaviors. By building a culture that emphasizes health and fitness and encouraging personal responsibility, Safeway and its employees are benefiting from lower costs. Enrollment in the program at Safeway is voluntary.
Not everyone is going to be willing to make changes, but we need to start somewhere. If more plans offered financial incentives (lower premiums and smaller co-pays), many others would likely choose this option. Changing the behavior of patients would go a long way towards improving our system. Additional benefits could be achieved from changing the behavior of health care providers. Our current system encourages quantity of care versus quality. We need to find ways to give doctors the financial incentives to do what is best for the patient while keeping affordable care in mind.
We understand the controversy: Patients need to be protected and doctors need to be held accountable. However, excessive litigation does increase medical costs. Several states (a good example being Texas) have passed tort reform and have had success reducing costs. A state-by-state solution is not the answer. We need to find a meaningful compromise that can be implemented at the federal level.
We believe health care reform is necessary. Our current system is economically unsustainable and is increasingly becoming a significant tax on future generations.
While change is not easy, the time for action is now. We are hopeful a rational compromise can be implemented.
Scott W. Wagasky is a principal and director of business development for AMBS Investment Counsel LLC, Grand Rapids.