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Grace Ross: How to Cut the Cost of Healthcare

Tuesday, April 24, 2012


Grace Ross, GoLocalWorcester MINDSETTER™

I always worry when the reports come out about the costs of personnel to governmental units and organizations, like cities and towns and non profits, pretty much any organization whose responsibilities are supposed to be services.

I find myself having to keep reminding folks that government, although it does not seem to be the case these days, is actually supposed to be working for us as people.

Service sector organizations’ primary cost is personnel. They don’t have big machinery that they have to put all their money into to build widgets. It’s the cost of the people doing the people work that only people can do.

Those are the primary costs. We all hate when every supposed service means interacting with automated phone systems that rarely can answer a real question. And often these days you cannot even figure out how to get to an operator, let alone an authorized human being. Given the difference with a fully staffed operation, I’m not sure why people think government spending should not be primarily on staff.

Our primary goal of government is to get the job done to provide services to people in all sectors, so of course it takes more people out of the overall budget than other kinds of investments. The financial services industry, for instance, is the opposite end. They can do it almost all by machine and their costs are mostly about other expenses, not their people.

The other factor that seems to be ignored is that the things that cost us the most about personnel have to do with making our people effective. Our people are more effective the healthier they are, the less stressed out they are, if they have decent housing, decent food, a place to go exercise, fresh air and clean water. Those factors make our people healthy.  If people are our primary business expense, keeping them healthy is what decreases the costs to our businesses.

With over a decade of pundits complaining about Americans not saving money and how much we spend and all of this stuff about the huge debt run up that’s been created in the last 10 or 12 years, it turns out that if you subtract out the cost of health expenses, Americans are saving just as much money as they did 10, 15, 20 years ago as a percentage of their costs.

So how come it’s the healthcare costs of the employees of cities and towns and other service sector organizations that end up getting the spot light?
It’s because healthcare costs have gone through the roof. They go up much faster than pretty much any other expense we have. Our government claims that we don’t have bad inflation, but if they figured out inflation the same way that they did until the 1980s, it would become clear that we have very bad inflation. That’s especially noticeable now when most people’s incomes are now dropping.

It turns out that the reason healthcare costs more – just like our utilities cost more than they use to and other sectors that have gone up – is because most of our healthcare dollars don’t go to pay for healthcare.

They go to pay for overhead, big CEO salaries and the money insurance companies spend lobbying to change the laws so that CEOs can make more money and our healthcare can cost more and more and more all the time. In terms of the costs of actual visits, we do fewer visits to doctors than we used to as a population; our healthcare usage isn’t going up. It’s the other costs of healthcare that are going up.

But there are lots of actions we can take to cut the costs of “healthcare” – but they need to be real, not rhetoric, and they need to be system-wide.
It’s going to take some long-sighted smart planning, because it turns out that what makes healthcare cost more is overhead, incentivising not using health services and creating unhealthy living circumstances. Costs go up when people wait too long to get care, don’t do preventive care while having increasingly stressful jobs, living circumstances and not enough resources to survive, all of which don’t lead to generally healthy lives with clean air and clean water.

Healthcare systems that reverse these trends the best provide cradle to grave health coverage. That way people aren’t waiting to get healthcare, there aren’t gaps where they get really sick and then they get healthcare later and they have to spend lots of money to make up for illnesses that could have been prevented in the first place.

It has to be care that’s all lifelong because it turns out that if you’re healthy and your neighbor is sick, you’re more likely to get sick from them being sick. So what keeps the overall population healthy also brings down healthcare costs – maintenance for everyone is cheaper than expensive crisis intervention for the many who can still afford to pay for.

So if you need health maintenance for everyone, then we have to get over the overhead costs for everyone; arguably we in the U.S. pay 30% for non-medical costs – paper pushing, advertising, expensive top administrators, thousands of different billing systems and increasing lobbying expenses of the huge healthcare industry.

It turns out that all other industrialized countries already have systems where everybody’s covered cradle to grave. They don’t have a huge amount of private interests making huge profits off the rest of us – actually making more money the sicker we are. It’s called single payer healthcare and there are a dozens of different versions of it. Basically, it is one system and everybody’s in and everybody pays into one pool of money that is used to pay for everybody’s healthcare.

Medicare works somewhat like this – especially before they broke it into pieces and privatized part of it. But it’s still the cheapest health system and covers everyone when, given the ages covered, people’s health is at its worst. And guess what? It’s when Americans turn 65 that we go from some of the shortest life expectancies in the world to the longest life expectancy in the world.

It turns out as well that health care outcomes are much better when doctors are paid for being there and getting work done and medical staff are paid that way too. This is in contrast to paying piecemeal for each person they treat and each little piece of the process with incentives to limit care; in our system, not paying for teamwork and prioritizing health maintenance, each doctor wants their little corner of the universe and they don’t work well with each other. That makes our healthcare coverage the most expense with worst outcomes.

There’s only one way forward, even if there are dozens of versions of it to choose from: a single payer system.

If our city and town governments want to do something about their costs, they need to stop bellyaching and fighting for cuts which will decrease the health of our work force and join with the rest of us in fighting for one system that covers everybody: that’s cheaper for everybody with less overhead and less wasted money and more money spent on healthcare earlier, so that we’re all healthier and it’s cheaper. 


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