Lessons to be Learned from the Health Care Debate
A few weeks ago, I attended a regularly scheduled board meeting at a credit union. The CFO was delivering his financial report that included the line item reflecting the cost for employee health care. There was a discussion about this important issue and the impact it was having on the credit union. Based on that conversation, it seemed to make sense to try to clarify some of the issues that can provide foundations for a greater understanding of this massive problem.
Regardless of the field in which you work, whether in the credit union industry, another not-for-profit organization, the corporate world, small business or government, the cost of medical care has been growing and is projected to continue growing as a percent of your pay and of the gross domestic product of the nation. Currently, health care costs represent 18% of GDP, up from 12% just 10 years ago and projected to become as much as 25% of GDP in the next 10 years. There is now a significant focus on reducing costs and gaining efficiencies through innovative solutions.
The theory is that controlling and limiting what the “Payer” receives and encouraging competition among insurers will force cost effectiveness on the entire system. While competitive pressures could serve as an incentive for innovative approaches to control medical cost, patients and medical providers must be willing to operate under new paradigms for this to happen.
New paradigms are occurring. Some “Payers” and “Purchasers” are becoming a single “person”. Some insurance companies are acquiring hospital chains and some hospital chains also are becoming insurance companies. For example, in the Pittsburgh area, the University of Pittsburgh Medical Center, a $10 billion integrated global nonprofit health enterprise with 54,000 employees, 20 hospitals, 4,200 licensed beds, 400 outpatient sites and doctors offices and a $1.5 million-member health insurance division combined with commercial and international ventures, is competing as an insurer and provider of service with Highmark Blue Cross Blue Shield, which is acquiring the West Penn Allegheny Health System, UPMC's rival hospital network. This has the potential for doing more than "doing away with the middle man". This paradigm shift can facilitate the development and implementation of new medical cost control approaches.