Newtown, CT – March 17, 2017
The clouds are gathering, the storm is brewing, it’s going to be a bumpy ride, and it won’t be over any time soon – A series of reports published today by our colleagues at the Center for Sustainable Heath Spending give an indication of the gathering clouds. The price of care is now trending at its highest rate in three years, and healthcare employment is stalling. Interestingly, and for an in-depth understanding of the significant growth in health sector employment during the past decade, Ani Turner’s post on the Health Affairs Blog offers deep insights into the transformation of the sector during that period. The upshot is that a significant portion of the recent employment has shifted away from hospitals and more towards ambulatory and long term care, responding to the aging of America and the growing crisis in caring for the frail and elderly. Stalling health sector employment isn’t, in itself, negative news, especially when you consider that it now represents close to 11% of all U.S. employment. In fact, when the overall unemployment rate is low, and the economy is growing, fewer jobs consumed by the health sector means more jobs that actually help the rest of the GDP grow and reduces the portion of the health care sector, which now stands at a whopping 18.2%. But the storm is brewing and, to a large extent, will get a lot worse. At some level, it should, because with close to 20% of the economy devoted to healthcare, over 11% of all jobs, and prices rising faster than in any other sector, the value the American people should be getting simply isn’t there.
What this means to you – For years Altarum economists Charlie Roehrig, Ani Turner, and Paul Hughes-Cromwick have published compelling data showing the unsustainable rate of health sector cost increases. These increases have now come at the expense of other domestic priorities. The Administration’s recently released budget illustrates what happens when the hard choices on discretionary spending are made because much of the budget is consumed by entitlement programs, including healthcare. That’s not to say that taking a scorched earth approach to federal budgeting is good, but it does mean that, sooner or later, unsustainable means just that. And here’s what’s really frustrating: the solutions to bending the cost curve are well known, as are the solutions to improving quality. Overall, we know the value of the care we receive for the price we pay for it should be substantially higher, but it isn’t. A paper published in December shows just how bad variation continues to be, and how it is often masked by looking at performance at the wrong level of aggregation. The point of the paper is self-evident, but needs to be said. There are hospitals and physicians in this country who do a significantly better job than others, and yet those that are in the bottom decile get paid the same or more than those at the top. Another paper published this month by Jamie Robinson and colleagues also shows how a reference benefit program can reduce prices by bringing real market competition at a level that consumers understand and act upon. And yet almost no employer of any size is implementing this simple benefit solution or significantly penalizing providers that deliver lower quality care. In 1999, when the Institute of Medicine published “To Err Is Human,” it called upon employers and other large purchasers to look at themselves in the mirror because their benefits and health plan policies were culpable of contributing to the problem. Back then, leading employers banded together and brought real change to the market, and then their efforts fizzled out. Today the storm is upon us, and it will be a bumpy ride for a while. So take a hard look in the mirror, because that’s where the solution lies.