Today’s healthcare system is an absolute mess. It’s outrageously expensive, needlessly complicated and driven by transactions instead of relationships. Of course, the system is broken…. Or is it? To begin to transform healthcare, it’s important to identify and correct our misconceptions about the system.
Misconception #1: Americans spend nearly $3 trillion a year on healthcare (and rising).
Three trillion dollars is about 18{cd266c1509fca34f59dc93da7daf12a6ee52c6401aabb2126e757d9de7c223fc} of our nation’s gross domestic product (GDP). We rank terribly against other developed countries for overall healthcare system costs. But there is a major problem with this statistic. It doesn’t represent what’s really happening.
Canada, which ranks much better than the U.S., is spending less than 12{cd266c1509fca34f59dc93da7daf12a6ee52c6401aabb2126e757d9de7c223fc} of its GDP on healthcare — but I am calling foul on this stat. I lived in Canada for 23 years and I was a patient of the Canadian healthcare system on several occasions. The truth is many Canadians come to the U.S. for healthcare because it is not easy to access in Canada. In fact, if you’re in Canada and need healthcare urgently, you may find yourself in a terrible bind.
The Canadian healthcare system simply doesn’t match up to the U.S. system for quality, accessibility and true effectiveness. The most privileged people in Canada wait for services that the poorest Americans can access almost every hour of the day. So how can Canada’s better healthcare GDP ranking be explained? Let’s start by breaking down U.S. “healthcare” spending:
Do we really spend $3 trillion a year? Or is a substantial portion of this money wasted but billed as “healthcare” spending?
I believe that true healthcare costs in the U.S. are closer to $1 trillion (6{cd266c1509fca34f59dc93da7daf12a6ee52c6401aabb2126e757d9de7c223fc} to 8{cd266c1509fca34f59dc93da7daf12a6ee52c6401aabb2126e757d9de7c223fc} of GDP) and that many industries are turning a nice profit by structuring their systems to capitalize on predictable waste, administration, inefficiencies and poor planning. I’m not saying that there isn’t any waste or unnecessary administration in Canada – there’s lots of it. I’m also not saying that the Canadian healthcare system is better than in the U.S. I am saying that we allow big industries to earn humongous profits. Canada does not.
“Waste” is a bit abstract, so let’s provide a couple of examples. In Canada, an MRI completed at a cost of $300 to $500 in an independent facility is not also performed at a hospital for $2000. A gall bladder surgery that can be performed for $3,200 will not be performed at another hospital for $14,000. This happens in the U.S. many times every day. This difference in cost is “waste,” not “real healthcare.”
“Poor planning” is also a little abstract. Imagine a diabetic child running out of her 90-cent glucose monitoring strips that are essential for determining the correct dose of insulin she needs. It would not be uncommon for this situation to lead to a $20,000-plus hospital admission. So, was the hospital costs a result of a need for “healthcare,” or was it really because of “poor planning?” It may be overboard to claim that this design was deliberate, but limiting basic, inexpensive routine care, education and diabetic supplies benefits the status quo players in healthcare.
Misconception #2: The healthcare system is broken.
Most people, commonly state that the healthcare system is broken. I have concluded that the American private healthcare system is working exactly as intended.
America’s healthcare system is run and controlled by trillion-dollar industries with multi-hundred-billion-dollar companies that are publicly traded and exert a lot of influence on the government. With all the talk about the expenses resulting from the Affordable Care Act, the most profitable stocks from 2009 to today were U.S. insurance, pharmaceutical, hospital and other healthcare companies. In fact, the percent growth in American health insurance stocks during that period are up 700{cd266c1509fca34f59dc93da7daf12a6ee52c6401aabb2126e757d9de7c223fc} to 1000{cd266c1509fca34f59dc93da7daf12a6ee52c6401aabb2126e757d9de7c223fc}.
These public companies have a goal (and fiduciary duty) to grow revenue and profits by any legal means. Because they can easily leverage their size and influence, I believe it is reasonable to conclude that today’s U.S. healthcare system is working perfectly for what it was designed to do – return shareholder value to these companies. It’s just not working that well for the rest of us.
Are there any business owners or employees who still feel that the healthcare system exists primarily to serve them? If the system did exist for you, wouldn’t you expect to see much more transparency in pricing? Would you accept insurance premiums that go up 10{cd266c1509fca34f59dc93da7daf12a6ee52c6401aabb2126e757d9de7c223fc} to 40{cd266c1509fca34f59dc93da7daf12a6ee52c6401aabb2126e757d9de7c223fc} percent every year? Wouldn’t your employees be able to make appointments much more easily and have more access to their doctors via the phone? Wouldn’t their doctors’ appointments begin on time, minimizing time wasted in a waiting room? Clearly, the system is not designed to serve the employer and employee.
The more we have studied it, the more we see that the only two stakeholders in the entire healthcare system who are aligned for costs, quality and customer experience are the purchaser of healthcare (the employer) and the user (the employee). All other stakeholders have incentives to make decisions that are not aligned with the employer and employee. At the very least, there are many things that happen in the healthcare system that do not benefit the employer and employee but do benefit other stakeholders in the system.
But there is a secret:
When an employer and employees team up and recognize their aligned interests, they gain a tremendous new capability for lowering healthcare costs, getting better quality and results and receiving the customer experience they want.
Even though it could seem that the more organized stakeholders of healthcare (e.g., the hospitals, insurance companies, brokers, doctors, etc.) are conspiring to take advantage of employers and their employees, we would encourage you instead to consider that, in most cases, the people running the system are very good people who want the best and want to help people. This is why they pursued a career in healthcare in the first place. It is just unfortunate that the system in which they work has evolved and now essentially forces them to add the costs of profitable waste and unnecessary administration, and often they don’t even know they are doing it.
It doesn’t have to be this way — and there are ways that employers can take back control. It always starts with challenging the status quo thinking, and by taking a common-sense approach to simplifying and gaining price transparency. Designing an employer health plan that makes routine care super easy, convenient and affordable is always the foundation for minimizing the high-dollar expenses that eat up most of the healthcare claims budget.