A major contributing factor to the health insurance crisis is an epidemic of obesity that’s boosting the health care spend and accounting nearly a quarter of health care costs. A Cornell University study published in the January issue of the Journal of Health Economics estimates obese patients incur medical costs that are $2,741 higher in 2005 dollars than if they were not obese. Nationwide, that translates into $190.2 billion per year, or 20.6 percent of national health expenditures, according to the research, which notes earlier estimates measured the cost of obesity at $85.7 billion, or 9.1 percent of national health expenditures.
While a major driver of health care spending, obesity is merely a distressing symptom of a larger dysfunctional set of American cultural economic and lifestyle choices that drive up health care utilization. They include poor work-life balance (long workweeks, long commutes to obsolete office spaces and associated stress), lack of exercise (and sufficient time for sustained daily exercise), too little sleep, unhealthy diets (and their commercialization via the “foodie” culture) and the expectation that health issues can be “repaired” by medical treatment and the state of the art pharmaceuticals.
In an information intensive economy, those who create, process, analyze and add value to information can do so from anywhere thanks to the proliferation of Information and Communications Technology (ICT) over the past two decades. Yet paradoxically, many Americans still engage in a daily commute to the office as if it were the 1950s of Dagwood Bumstead or the 1980s that inspired the more modern day office place comic strip, Dilbert. In those days, commuting to the office was necessary because that’s where the office equipment was — telephones, typewriters (and later, dedicated word processors), photocopiers and fax machines. Not anymore. Today, nearly any setting can function as an office where a knowledge worker can concentrate and be productive.
Nevertheless, on average Americans spend nearly an hour a day getting to and from an office that ICT has effectively rendered obsolete. That adds up to a lot of wasted and often stress filled time piled on top of an increasingly sedentary culture that battles the rising health care costs of lifestyle-induced chronic conditions linked to a lack of exercise, poor diet, and inadequate sleep. For the time crunched trying to balance family obligations with work, avoiding these adverse health impacts is even more challenging. Just look around any traditional office setting and chances are you’ll see plenty of stressed out, sleep deprived, and overweight people who are more likely use medical services and in turn increase their employers’ health care utilization costs.
What’s needed is a new model for traditional office-based work that can free up time for exercise, healthier home cooked meals and sleep that would otherwise be wasted on daily commuting. Fortunately, such a model better suited to today’s highly connected, information everywhere economy exists: ROWE or a Results Only Work Environment. A ROWE values getting the work done over daily office attendance. Early indications are that workplaces that adopt ROWE can achieve better health status at a time when workplace wellness is getting increased attention to slow the nation’s unsustainable rise in health care costs. A University of Minnesota study issued in December 2011 found workers in a ROWE realized increased health-related behaviors of more sleep and exercise — behaviors that can go a long way toward maintaining health and reducing medical utilization. ROWE is poised to become the successor to traditional “workplace wellness” programs that have been slow to demonstrate tangible progress in reducing employer health care costs.
Premiums for employer-provided health insurance rose by 50 percent from 2003 to 2010 as employers passed on high costs to workers, boosting their annual share of premiums by 63 percent over the seven-year period, according to a report issued this week by The Commonwealth Fund. That’s much faster than overall inflation and wage growth during the period. The numbers reflect an affordability crisis confronting health insurers given the rate of growth of premiums is taxing the ability of employers and individuals to pay them at the same time the nation struggles to regain economic growth.
The report looks to a combination of insurance market reforms, payment incentives and delivery system changes to potentially reduce insurance costs by an average of 1 to 1.5 percentage points per year over the next decade. But even with the higher savings figure, coverage would remain costly, putting the average national family premium at $16,912 in 2015 and $20,620 by 2020, the report estimates.
While not specifically called out in The Commonwealth Fund report, the premium increase data underscore the enormous social cost of the poor health habits of many Americans — unhealthy diet and lack of adequate exercise and sleep — that underlie chronic conditions such as heart disease and diabetes that in turn drive up medical costs. Insurance market reforms alone can’t address those factors that according to the Preventative Medicine Research Institute account for 75 percent of health care costs that can be prevented by lifestyle changes.
Los Angeles Times business columnist David Lazarus wrote last week about one of the biggest challenges to making medical care more accessible and affordable: rampant medical cost inflation. It will stoutly challenge the “affordable” part of the Patient Protection and Affordable Care Act (PPACA). Lazurus writes:
It’s a problem that affects all of us. As hospitals jack up prices to get more money from insurance companies, insurers in turn hike premiums for all members to cover their rising expenses. It’s a vicious cycle that exacerbates the unaffordability and inaccessibility of treatment in the United States.
It’s also a phenom that’s not responsive to competitive market forces to hold down the price of medical care and prescription drugs. A competitive market has two elements. One, many buyers and sellers. Two, competitive markets afford ample opportunity for buyers to shop around for the best deal. Most markets for medical care and medications have the first attribute but not the second. People who are sick or injured or facing conditions that threaten the quality of their lives and life itself aren’t inclined to question the cost. Especially when insurers and managed care plans are picking up most of the tab. As prices increase, payers pass through the higher costs to their insureds and plan members.
Of course, that can only go on for so long before premiums become so high they precipitate adverse selection, with healthier people dropping coverage and leaving payers covering sicker, costlier individuals. By requiring everyone to have some form of public or private health coverage, the PPACA hopes to stave off adverse selection and put more dollars in the coffers of insurers and managed care plans to cover those increasing medical and drug costs. However, without some mechanism to hold down the rising price of medical utilization — lowering demand through healthier lifestyles, for example — the PPACA’s insurance mandate may only buy a little time before we’re facing a more widespread health insurance crisis.
The enactment of comprehensive health care reform nearly one year ago aside, the U.S. health care system needs deep systemic reform that can meaningfully reduce medical costs and align risk and incentives among consumers, providers and payers. That’s the consensus among several panelists who took part in a health care forum Friday in Sacramento, California sponsored by the UC Berkeley Institute of Governmental Studies, School of Public Health and the UC Sacramento Center.
For Diana Dooley, California’s newly installed secretary of Health and Human Services, tamping down demand for medical services is an essential component of bending what all panelists agreed is an unsustainable, unrelenting upward trajectory in medical costs. People have to take more responsibility for their health, Dooley emphasized, suggesting that the current mindset that equates more medical care with better health must be abandoned. “We have an inexhaustible appetite for health care and it’s a significant cost driver,” Dooley said. “We have to have some very frank conversations around kitchen tables and in political dialogue and ask ‘How much medicine is enough?’ A lot of these cost drivers are our choices.”
Dooley’s absolutely right. Poor lifestyle choices are within the control of individuals and are the ultimate cost driver. I would add that those lifestyle choices are strongly influenced by cultural values that place too much emphasis on sedentary work, commuting and leisure time. Those values reinforce spending too much time sitting, too little time exercising and sleeping and the interconnected lifestyle issues of excessive stress and bad eating habits.
In this environment, it’s no wonder people’s health declines and they become overweight and develop costly chronic conditions like obesity, cardiovascular disease and diabetes. From the perspective of health insurers, all of that adds up to poor risk management. But most people don’t view it that way. Health insurance is seen more as a prepaid medical plan rather than a means of paying for unexpected, high cost medical expenses. Health breaking down? Get to the doc shop or the hospital and get fixed up. The problem is as Dooley and others on the panel pointed out, when too many people adopt this way of thinking, insurers and managed care plans end up paying out too much, jeopardizing the financial solvency of these payers. Hence, premiums keep futilely chasing after costs in a vicious, unvirtuous cycle.
Panelist Paul Markovich, COO of Blue Shield of California, underscored the seriousness of those escalating premiums in the individual health insurance segment. Premiums can go up only so much before healthier people decide to drop their coverage, leaving less healthy insureds in the pool. That is placing “tremendous stress” on the pool, Markovich said. “You have all heard of the death spiral (of adverse selection). We are absolutely experiencing some of that stress right now.”
Cindy Ehnes, the director of the California Department of Managed Health Care, noted during her seven-year-long tenure managed care plans attempted to preserve their troubled individual markets through risk selection — what Ehnes termed “cherry picking and lemon dropping.” Next, Ehnes explained, payers imposed high deductibles hoping to shift more risk to consumers and drive down the utilization of medical services. Now with the individual market facing structure failure, that strategy has played out, leaving only steep premium hikes as a last, desperate measure to keep the market solvent. That’s why premiums are high and headed higher despite high deductibles. People paying high deductibles naturally expect their premiums to be substantially lower than those with low or no deductibles. When they don’t see lower premiums in proportion to their high deductibles, they understandably drop coverage figuring they’re getting poor value for their premiums. That in turn takes more premium dollars out of the pool, forcing insurers to raise premiums even more just to stay afloat.
Not surprisingly, payers bearing the bad news of fat premium increases are coming under withering criticism from the consumer groups, the media, regulators and policymakers. Ehnes noted — and I would agree — simply chastising “greedy” payers isn’t going to help. There’s far more to it than that.
The health insurance crisis is essentially a health care cost crisis. Two articles in today’s Sacramento Bee provide insight. One spotlights hospital costs and the tensions they stoke between hospitals and insurers that pay their bills.
Another profiles Dr. Walter Bortz, a professor of medicine at Stanford University. Bortz criticizes the demand side of the health care cost equation, proclaiming the simple truth that rising health care costs can be contained with healthy lifestyle choices rather than more and more treatment once we become ill due to poor diet and lack of exercise.
Bortz’s profile reflects the philosophical divide between advocates of healthy lifestyle choices like himself and a medical industrial complex dependent upon treating people for costly, chronic conditions for the health of its own top line. Medicine as currently practiced in the United States is “a whorehouse” in Bortz’s blunt assessment.
The take away from these articles is we are being forced to choose the preventative lifestyle cost control measures Bortz advocates because our economy can no longer absorb the cost of providing “sick care” as it’s called by some. No amount of adversarial finger pointing between payers and providers can alter that fact and only portends the coming meltdown of the current paradigm.