U.S. Employers Sacrificing Competitiveness in the Global Economy

Health care as an industry has become big business at the expense of employers and employees. With 60% of Americans getting their health care coverage through their jobs, large and small employers alike are justifiably concerned about rising costs of care.

The current health care delivery system is long overdue for change. No meaningful transformation can occur without a collective employer voice. Until now, the majority of CEOs and CFOs have remained a silent majority. The time to speak up is now – we are sacrificing our competitiveness in the global economy by paying so much more than needed for health care and health system sustainability.

The proof is in the numbers.

The ongoing RAND Hospital Pricing Transparency Study continues to show that employers routinely pay two-to-five times more than what is needed for health care and prescription drugs. RAND also confirms there is little correlation to the quality of care received and prices paid for those services.

Quality not only includes providing the best evidence-based care, but also avoiding unnecessary tests, procedures and surgeries. A recent report on hospital waste and overuse on more than 3,100 U.S. hospitals from the Lown Institute, a nonpartisan health care think tank, found that in Houston alone several hospitals ranked in the bottom 50. The National Academy for State Health Policy shows a widening gap between what employers pay and what is needed for hospital mission sustainability.

The old argument from hospitals is employers must be charged excessively because of inadequate reimbursement from other payors. The truth is most U.S. hospitals make a profit from Medicare and/or Medicaid. Additionally, the rise in premiums paid by employers and their employees is not due to utilization but to inflated prices, and that added revenue is going more towards administrative costs and facility fees, not to physicians and better health care.

Why should I care?

High health care costs are a drain on job and wage growth and business development, all of which impedes the ability of American companies to compete globally.

Most CEOs consider employees to be their greatest asset, yet employee quality of life is slowly eroding. Funds previously earmarked for salary raises are now being used to support rising employer premiums, resulting in greater costs to employees. Additionally, high deductible health plans force many employees to forego needed medical care resulting in even higher costs for delayed care. Recent studies show a laundry list of issues for employees due to unaffordable health care, including saving for children’s education and a looming retirement crisis.

As a benefits director for a large company recently shared, “Our business and our employees are being crippled by health care.” This current system penalizes employees with smaller paychecks and higher burdens. Where’s the value in that?

In response, C-suite leaders are beginning to react to evidence of egregious employer price discrimination such as that identified in California by the recent Sutter Health litigation. Increasingly, they’re unable to look away from the direct relationship between anti-competitive business practices of the health care industry and rising costs that threaten their business and their employees’ financial and physical well-being. Perhaps that’s why a recent survey of executives at 300 of the country’s largest companies found that nearly 90% of believe the cost of providing health benefits will be unsustainable within five-to-10 years, and that one viable option for saving the system is some kind of new intervention by the federal government.

What can I do about it?

Few CEOs would knowingly pay such inflated prices for any other element of their business supply chain, yet they continue to foot an exorbitant bill for health care, which is no different than any other service or product they purchase for their business.

It is time for C-suite leaders to take action on behalf of their business, their employees, their city and their country. It’s time to step up and demand change and accountability, which can only come from a collective C-suite voice.

Known solutions exists. We must eliminate the inefficient and wasteful system focused on disease that prioritizes tests and procedures. It needs to be replaced with a focus on advanced primary care with referral to specialists based on value that also emphasizes the importance of mental health services. We must reduce the outrageously high prices Americans pay for drugs compared to the rest of the world and reduce the price discrimination faced by those with private health insurance paying roughly 300% what Medicare pays for the same services.

Some health care industry players have benefited greatly from the status quo at the expense of employers and are openly resistant to change. The tools, data and information needed to demand a value-based health care system are now available to employers and their intermediaries. Those best positioned to drive this needed transformation are employers, but it will not happen without C-suite engagement and resolve.