2.  Doctors Drive Demand -We do what our Doctors tell us, and for many reasons Doctors send us to get more tests and treatments than we ultimately need.  In most cases they mean well-they just want to make sure they haven’t missed anything and the patient doesn’t get sicker, but in other cases they maybe worried about malpractice so they make doubly sure of the diagnosis or they may be greedy and they might own a piece of the imaging or surgery  so they put more money in their pocket.  In any case, Doctors hold the highest level of respect in our society and we rarely question their judgement and we usually do what their told.  The extra tests and services cost a lot of money.

3.  Government is Cheap  Underpayments in Medicare (20% or more) and Medicaid (35% or more)guarantee that Hospitals and Doctors lose money on patients covered by government plans.  So what do they do?  They perform more services on Medicare and Medicaid patients while they have them to generate more money per patient and they charge non-Medicare and non-Medicaid patients with private insurance more to make up the shortfall.  Doctors deserve to make money because they provide a service of great economic value (life saving, in some cases) and they have invested more in their education and training than any other profession.  They’ve taken the risk and they deserve the reward, but Government plans will always underpay –they think they are saving money but in reality they drive up utilization and shift costs to the private sector and that  costs all of us more.

4. Were Fat  More than 50% of Americans are overweight, and heavier people get more chronic diseases and are just generally sicker than people who are not heavy.  Sick people consume a lot more medical care, and that costs a lot of money.  We eat fast food because it taste’s good, it’s easy, it’s convenient and it’s cheap.  We don’t eat healthy because it’s a lot harder to find,  it takes planning and imagination and discipline and it’s a lot more expensive.  We don’t exercise because it’s hard, it takes time and it takes planning and discipline and energy and effort and we don’t have the energy because we’re just too fat and lazy.  That makes us sick all the time and we consume a lot of medical services.

5.  We Don’t Pay Enough  That’s right–healthcare is too cheap for most of us.  Our insurance plans pay for practically everything so we have no financial incentive to ask our doctors if we really need that extra test or that new brand name drug their prescribing.  We rarely find out how much the services actually cost or how much the insurance carrier pays on our behalf–we just pay our co-pays and deductibles and make sure the insurance company pays the rest.  Not to mention the fact that it’s cheaper to just get the treatment or the prescription than it is to eat healthy and exercise anyway.  

6.  Incomplete Information in the Market  Efficient makets assume that all parties in the transaction have complete and unfettered access to all of the information that exists regarding the supply, demand and price of services they are trading in.  In healthcare, there is a woefully incomplete information set regarding key factors in the transaction for services– namely price, competitive alternatives, substitute service and most importantly quality– and these conditions.  Transparancy initiatives are still in their infancy stage and the adverse effect of market inefficiences will exist until such time that the key economic considerations are readily and accurately available to both consumers and suppliers of service.

6 1/2.  It’s Still a Cottage Industry  Or at least a modest neighborhood, and our highly fragmented delivery system in loaded with inefficiencies because of massive administrative silos, redundancies, miscommunications, errors and inconsistencies that generate widespread customer satisfaction problems.  These problems have existed forever in the system because there is no central technology platform and no single point of ownership responsible for fixing the problem and no incentive for ensuring that the patient enjoys a high quality customer service experience.  Bad service costs alot.

…I’m beginning to wonder.  I’ve used this quote a lot over the past year to help put the financial meltdown and the ensuing economic chaos in perspective. We have been down this road many times before—recessions, wars, stagflation, massive deficits, terrorism, oil embargoes, even depressions.  We’ve learned to survive and learned to thrive.  It is only by enduring and overcoming challenges like Milli Vanilli and Boy George, that we are able to enjoy the likes of Miley Cyrus and Lady Gaga today.  You get the point.

“Don’t worry–now is the time to capitalize” I’ve said.  “Now is the time to separate ourselves from the competition—now is the time to be a bright light among the naysayers…”

Don’t get me wrong—I am more optimistic than ever, and I REALLY-REALLY-REALLY believe that this is an incredible time to capitalize.  I’m just not sure that Paul Harvey was right—I’m not sure there really have been times like these, especially for those of us in the health and benefits business.

We know the reasons.  The dramatic winds of political change, fueled by the banking crisis, the multi-trillion dollar loss of economic wealth and the death of old line manufacturing like the automobile industry has shifted the power in America from Wall Street to Washington in a big, big way.  So change is here.  You asked for it, you got it!

We will see major healthcare reform legislation this year, with a dramatic increase in the role of government in healthcare and health insurance.  We will see the continued commoditization of the health insurance industry, fueled by the intense struggle employers are in to reduce costs, protect jobs, and survive…so what does any of this mean for those of us responsible for managing health insurance plans—in the business community, the public sector or in the health and employee benefits industry?

I may not know exactly what the future holds, but I do think there are a few simple ingredients to succeeding in this new world:

•    Lead, follow or get out of the way: Be part of the solution.  Lead the way for principled change and promote new solutions, or help to implement the new, forward thinking of other leaders.  Do not be a barrier to progress, stand for solutions, not the status quo!

•    Value Innovation: He who delivers the most value at the lowest cost wins…understand what is most important to people, and find the most efficient way to deliver it.

•    Embrace Ambiguity: Say good bye to the status quo, but be patient as the new world order evolves.  Expect and embrace uncertainty, and look for new opportunities to crate value.

The focus of this blog is not survival but success… How can we provide the innovation, leadership and inspiration we need to seize the economic opportunities that abound… to thrive, not just survive?

I think it’s a fairly simple recipe for success, and I hope that my thoughts on the subject will be helpful, insightful, and inspirational.  If not, enjoy the music while you wait.