The Health Care Cost Crunch

A businessman's letter to the President:

I understand that there are a lot of health-care-related issues you have to think about as President, but the biggest one for businesses like ours is rising health care costs. Health insurance premiums jumped 11.2% between the spring of 2003 and the spring of 2004, according to a survey by the Kaiser Family Foundation and the Health Research and Educational Trust. Our company's health care costs -- we're self-insured -- will rise another 20% next year, from $2.5 million to $3 million. And yet, the consumer price index increased only 2.3% last year. We haven't seen that low a level of inflation in health care costs in a long, long time. Indeed, there have been double-digit percentage increases in premiums for four years running, forcing more and more small businesses to stop offering health insurance altogether. In 2004, only 63% of companies with fewer than 200 employees provided health benefits, down from 68% in 2001.

The fact is, every other health-care-related problem will grow worse unless we address the issue of rising costs. That means getting health care providers to think more like business owners. As you know from your own experience in business, most companies wouldn't last very long in a competitive market if we didn't keep our overhead in check and control our price increases. But because health care is a seller's market and the customers have nowhere else to go, the health care providers can pass their costs along -- and they do.

There are two steps you can take as President to hold down health care cost increases, and neither one of them involves new legislation or regulation. First, you can use your position to foster better understanding of why costs keep rising, to show the terrible impact that this is having, and to focus public attention on the need to make changes. Then you can ask health care providers to take the initiative by agreeing voluntarily to restrain their costs as other businesses do. Challenge them to keep their own price increases within the overall level of inflation. Start a national campaign around it. Single out for praise the providers that accept the challenge and hold the line. Let the industry know that, if they help you handle this problem, you'll be able to help them in other areas.

The second step is to encourage hospitals and clinics to put small-business owners on their boards. Very few hospitals do that now. Although their boards have really good people, the members often have no connection to the marketplace. It's an inbred system. That's why I agreed to sit on the board of the local hospital that provides health care for SRC employees. I wanted to make sure they were represented. The other board members pay attention if I present my case forcefully, and I can be enough of a pain that they make sure they have their ducks in a row before bringing up any new spending increase.

And they do listen. I was in a restaurant the other day, and one of the hospital's leading surgeons came over to my table. "I want you to know that we've heard what you're saying about keeping our costs in line with inflation, and we're working on it," he said. That's what I like to hear. Because of the hospital's efforts, it costs our company about $90 a month to provide a single employee with health care coverage, compared with a national average of $308 a month, according to the Kaiser Family Foundation. As President, you might be able to bring that average down if you can get other boards of health care providers to listen to the business owners who are footing the bill.

Please understand, I'm not saying you should drop your own ideas for addressing the health care situation. Most of them we support. Health savings accounts certainly have the potential to help small businesses like mine. Because employees would be using their own pretax dollars to pay for medical expenses, they would no doubt become smarter consumers of health care services, which is good for everyone.

Most of us in small business are also behind your effort to curb medical malpractice suits through tort reform. It's just not enough. The $24 billion that the health care industry doled out in malpractice awards in 2002 represented less than 2% of its total costs for the year, according to the Congressional Budget Office. Measures like capping attorneys' fees and limiting awards will help reduce health care costs in some areas, but we need to do more.

As for allowing small businesses to band together in associations that would let them qualify for discounted health benefits, it sounds like a good idea, but be careful. There's a danger that associations would favor companies with a young work force and reject those with older employees -- with the result that some people who have coverage now might lose it. And before you spend a lot of your political capital on getting a bill for association plans through Congress, you might want to check out how many additional people would actually be covered. I understand that's a matter of some debate.

Nevertheless, these are steps in the right direction. You can help us most, however, by using your considerable clout as President to get the health care industry to bring its cost increases under control.

More here

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation.

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