What's the solution? I don't think there one single "universal solution", though. Maybe it's time to think about nationalizing health? I dunno.....
Health costs top threat to profits
Corporate America is reeling from rising premium expenses
January 25, 2005
BY KIM NORRIS
FREE PRESS BUSINESS WRITER
Health care costs are moving front and center as the single biggest factor impacting corporate profits and U.S. companies' inability to compete globally.
Whether it's a strike at General Electric over the company's efforts to make employees pay more for health benefits, airlines' threats to file bankruptcy if workers don't give up some benefits, or earnings that are depressed by health care premiums, companies throughout the nation are talking about the need to get a grip on costs that have risen faster than all other economic indicators.
The issue got an airing last week when executives at General Motors Corp., the world's largest private purchaser of health care insurance, said the costs of providing health benefits to 1.2 million workers, retirees and dependants will cause the Detroit automaker to earn less than it projected earlier in the year.
In 2004, GM spent $5.2 billion on health care, $400 million more than in 2003. And the automaker said it expects to spend $400 million more this year -- or $5.6 billion. Cost increases -- particularly in prescription drug use -- wiped out tax benefits GM received from the Medicare Reform Act that subsidizes corporate drug spending.
"These health care costs are not in our control," said John Devine, chief financial officer of GM. "It's been especially frustrating the last few years. We work with our providers, our people, our union and with Washington, but it's largely outside our control."
Last week, the nation's largest auto parts supplier echoed the sentiment. Delphi Corp. said it lost money for the second year in a row, in part because of health costs.
More than a year-and-a-half ago, Ford Motor Co. Chairman Bill Ford told a gathering of business and political leaders that the spiraling cost of health care "is the biggest issue on our plate that we can't solve. Health care is just out of control."
"I thinks it's more serious than anyone thought," said David Cole, director of the Center for Automotive Research. "If there were 4-, 5-percent increases, that would be one thing. But this is double-digit, out of control -- it swamps any of" GM's "efforts to control costs of manufacturing a product."
"This is not just an auto issue; it's a societal issue."
Throughout the nation, employers -- which pay for at least half of the nation's health coverage -- are struggling to contain costs that have far outpaced inflation and are threatening companies' ability to grow, compete and, in some cases, continue.
"Our standard of living has not grown the way health care has," said Helen Darling, president of the National Business Group on Health. Members represent 233 of the largest employers -- businesses that collectively cover more than 50 million people.
"Everything you look at -- earnings, inflation, etc. health care is way out of line. It's the Pac-Man of the federal budget. ...Wherever you look, health care is the problem."
In 2003, GE's efforts to pass more costs on to workers prompted a two-day strike at the Connecticut-based conglomerate's locations nationwide.
The United States spends more on health care than any other nation. Health expenditures rose from $1.3 trillion in 2000 to $1.7 trillion in 2003. The health sector consumed 15.3 percent of the nation's gross domestic product in 2003, up from 13.3 percent in just three years.
Industry observers say the problem is bigger even than in the 1980s, before managed care came on the scene and curbed increases for a little more than a decade before costs started spiraling again.
Those who pay for health care -- businesses, government and individuals -- are becoming more vocal about the need to bring costs in line.
But that's about where the agreement begins and ends.
"There isn't a consensus, I can tell you that," Darling said. "Everyone agrees there's a problem, but no one agrees on the solution."
However, there are some broad concepts around which consensus appears to be building, all premised upon the almost universally accepted truth that the U.S. health system is inefficient, wasteful and hard to navigate.
Increase coverage, lower costs
Businesses and individuals paying for health care recognize they also pick up the tab for the 45 million Americans who aren't covered, through higher premiums, higher taxes and higher costs of doing business and buying goods and services. If everyone were covered, costs would be spread among the entire population and the insured wouldn't subsidize the uninsured.
But agreeing that people should have coverage is not the same as agreeing how to make it happen.
The UAW and U.S. Rep. John Dingell have called for a government funded national health-care system for a long time.
"If you look, you will find every country has national health insurance paid for by the government and not by the companies," Dingell told the Free Press last week.
Indeed, U.S. businesses are quick to note that their overseas competitors have a distinct advantage by operating in countries in which the government picks up the bulk of the tab for citizens' health care. That removes the burden from employers for covering active workers and retirees and leaves them free to deploy their financial resources elsewhere.
Nevertheless, big business generally has opposed government-run health care. That doesn't mean they are completely opposed to getting some help from taxpayers.
GM, for example, wants the federal government to make sure everyone has coverage. It supports the idea of government-funded catastrophic health-care coverage for individuals who ring up big health bills from a single event.
Accentuate the positive
A growing chorus of payers is calling for standardized ways to measure quality and set benchmarks and more public disclosure of how doctors and hospitals perform in relation to those benchmarks.
Companies like GM have taken to grading health plans, doctors and hospitals and charging workers more if they choose lower-rated providers.
Some large companies and insurers have implemented so-called pay-for-performance programs in which doctors earn incentives for better quality.
GE has taken a leadership role in implementing a program called Bridges to Excellence. It pays incentives to doctors who follow proven quality guidelines.
The fragmented nature of the health care system -- with its myriad payers, insurers, providers and users operating independently of one another -- is a recipe for mistakes, oversights, redundancies and waste.
"We need more integration," says Andrew Webber, president of the National Business Coalition on Health, a group of state and local health coalitions. "The system is very fragmented. Patients are handed off from one provider to another; there's no continuity of care. Providers operate in separate silos."
Billing procedures alone are a nightmare of paperwork and coding. Patient records reside in disparate providers' offices and are rarely consolidated. Doctors and hospitals do not share information that can lead to best practices and save lives and money.
Increasingly, payers are looking at how extensively providers are using technology when they grade them.
"Toyota and the Japanese demonstrated that if you put effort into re-engineering processes you could improve product and reduce operating costs," Webber said.
Contact KIM NORRIS at 313-222-8762 or norris@freepress.com. Free Press auto writer Jeffrey McCracken contributed to this report.
Health costs top threat to profits
Corporate America is reeling from rising premium expenses
January 25, 2005
BY KIM NORRIS
FREE PRESS BUSINESS WRITER
Health care costs are moving front and center as the single biggest factor impacting corporate profits and U.S. companies' inability to compete globally.
Whether it's a strike at General Electric over the company's efforts to make employees pay more for health benefits, airlines' threats to file bankruptcy if workers don't give up some benefits, or earnings that are depressed by health care premiums, companies throughout the nation are talking about the need to get a grip on costs that have risen faster than all other economic indicators.
The issue got an airing last week when executives at General Motors Corp., the world's largest private purchaser of health care insurance, said the costs of providing health benefits to 1.2 million workers, retirees and dependants will cause the Detroit automaker to earn less than it projected earlier in the year.
In 2004, GM spent $5.2 billion on health care, $400 million more than in 2003. And the automaker said it expects to spend $400 million more this year -- or $5.6 billion. Cost increases -- particularly in prescription drug use -- wiped out tax benefits GM received from the Medicare Reform Act that subsidizes corporate drug spending.
"These health care costs are not in our control," said John Devine, chief financial officer of GM. "It's been especially frustrating the last few years. We work with our providers, our people, our union and with Washington, but it's largely outside our control."
Last week, the nation's largest auto parts supplier echoed the sentiment. Delphi Corp. said it lost money for the second year in a row, in part because of health costs.
More than a year-and-a-half ago, Ford Motor Co. Chairman Bill Ford told a gathering of business and political leaders that the spiraling cost of health care "is the biggest issue on our plate that we can't solve. Health care is just out of control."
"I thinks it's more serious than anyone thought," said David Cole, director of the Center for Automotive Research. "If there were 4-, 5-percent increases, that would be one thing. But this is double-digit, out of control -- it swamps any of" GM's "efforts to control costs of manufacturing a product."
"This is not just an auto issue; it's a societal issue."
Throughout the nation, employers -- which pay for at least half of the nation's health coverage -- are struggling to contain costs that have far outpaced inflation and are threatening companies' ability to grow, compete and, in some cases, continue.
"Our standard of living has not grown the way health care has," said Helen Darling, president of the National Business Group on Health. Members represent 233 of the largest employers -- businesses that collectively cover more than 50 million people.
"Everything you look at -- earnings, inflation, etc. health care is way out of line. It's the Pac-Man of the federal budget. ...Wherever you look, health care is the problem."
In 2003, GE's efforts to pass more costs on to workers prompted a two-day strike at the Connecticut-based conglomerate's locations nationwide.
The United States spends more on health care than any other nation. Health expenditures rose from $1.3 trillion in 2000 to $1.7 trillion in 2003. The health sector consumed 15.3 percent of the nation's gross domestic product in 2003, up from 13.3 percent in just three years.
Industry observers say the problem is bigger even than in the 1980s, before managed care came on the scene and curbed increases for a little more than a decade before costs started spiraling again.
Those who pay for health care -- businesses, government and individuals -- are becoming more vocal about the need to bring costs in line.
But that's about where the agreement begins and ends.
"There isn't a consensus, I can tell you that," Darling said. "Everyone agrees there's a problem, but no one agrees on the solution."
However, there are some broad concepts around which consensus appears to be building, all premised upon the almost universally accepted truth that the U.S. health system is inefficient, wasteful and hard to navigate.
Increase coverage, lower costs
Businesses and individuals paying for health care recognize they also pick up the tab for the 45 million Americans who aren't covered, through higher premiums, higher taxes and higher costs of doing business and buying goods and services. If everyone were covered, costs would be spread among the entire population and the insured wouldn't subsidize the uninsured.
But agreeing that people should have coverage is not the same as agreeing how to make it happen.
The UAW and U.S. Rep. John Dingell have called for a government funded national health-care system for a long time.
"If you look, you will find every country has national health insurance paid for by the government and not by the companies," Dingell told the Free Press last week.
Indeed, U.S. businesses are quick to note that their overseas competitors have a distinct advantage by operating in countries in which the government picks up the bulk of the tab for citizens' health care. That removes the burden from employers for covering active workers and retirees and leaves them free to deploy their financial resources elsewhere.
Nevertheless, big business generally has opposed government-run health care. That doesn't mean they are completely opposed to getting some help from taxpayers.
GM, for example, wants the federal government to make sure everyone has coverage. It supports the idea of government-funded catastrophic health-care coverage for individuals who ring up big health bills from a single event.
Accentuate the positive
A growing chorus of payers is calling for standardized ways to measure quality and set benchmarks and more public disclosure of how doctors and hospitals perform in relation to those benchmarks.
Companies like GM have taken to grading health plans, doctors and hospitals and charging workers more if they choose lower-rated providers.
Some large companies and insurers have implemented so-called pay-for-performance programs in which doctors earn incentives for better quality.
GE has taken a leadership role in implementing a program called Bridges to Excellence. It pays incentives to doctors who follow proven quality guidelines.
The fragmented nature of the health care system -- with its myriad payers, insurers, providers and users operating independently of one another -- is a recipe for mistakes, oversights, redundancies and waste.
"We need more integration," says Andrew Webber, president of the National Business Coalition on Health, a group of state and local health coalitions. "The system is very fragmented. Patients are handed off from one provider to another; there's no continuity of care. Providers operate in separate silos."
Billing procedures alone are a nightmare of paperwork and coding. Patient records reside in disparate providers' offices and are rarely consolidated. Doctors and hospitals do not share information that can lead to best practices and save lives and money.
Increasingly, payers are looking at how extensively providers are using technology when they grade them.
"Toyota and the Japanese demonstrated that if you put effort into re-engineering processes you could improve product and reduce operating costs," Webber said.
Contact KIM NORRIS at 313-222-8762 or norris@freepress.com. Free Press auto writer Jeffrey McCracken contributed to this report.