The healthcare industry has been remarkably effective at extracting as much money as possible out of the U.S. economy despite healthcare being the greatest immediate threat to America. As a group, employers and individuals pick up the biggest portion of the U.S. healthcare bill. Unlike virtually every other input to an organization’s supply chain where the value proposition improves every year, the norm in healthcare for decades is you get less and pay more. Where employers in other industries have seen great improvements in productivity, healthcare hasn’t had a productivity gain in 20 years. In other words, for 20 years there has been a redistribution “tax” from highly efficient companies to the least productive industry in America.
Some company executives worry about the current populist presidential candidates, yet it’s the employers’ own healthcare purchasing practices that are the single biggest driver of the Trump/Sanders phenomena. In a nutshell, the data is clear that healthcare has devastated the middle class. To be clear, it’s not because employers aren’t spending far more on employees than they did 20 years ago. The problem is every one of those dollars and then some have gone to fuel the inexorable appetite of the industry. This has created personal legal exposure to CFOs and HR executives that is snapping many into action.
In this piece, I will highlight some of the most common tricks the industry has masterfully played on unsuspecting benefits leaders. In a follow-on piece, I’ll highlight the seven habits of highly effective benefits leaders that thwart the these tricks. Preview: As one of the health innovators (ZOOM+) puts it, it’s possible to deliver ”twice the healthcare, at half the price and 10 times the delight.” It might sound too good to be true but employers large and small are doing it and spending 20-55% less per capita on health benefits with packages that are better than what 99% of the workforce gets. It simply takes will. However, one first must understand the tricks that have led to healthcare’s hyperinflation. The healthcare industry has proven time and again that most of the new programs do little or nothing to positively impact the Quadruple Aim, despite touting how great these programs are.
Healthcare is a $3 trillion industry, but conservative organizations such as Pwc say that a third to a half of the healthcare spending doesn’t add value. Beyond the staggering impact on the middle class and legal risk that comes from overspending on healthcare, there is the impact on the market cap of companies. I’ve written previously about a manufacturer spending 30% less per capita on health benefits and how that has positively impacted their R&D investment. Even more impressive is the hotelier spending 55% less per capita on health benefits. In both cases, they are providing health benefits superior to 99% of the workforce.