COST: Business Leaders Say We Need Reform Now

Today, the Business Roundtable and Hewitt Associates released a report about a topic we've discussed many times -- the dangers of doing nothing to fix our health care system. The report, Health Care Reform: The Perils of Inaction and the Promise of Effective Action is blunt. Inaction could potentially mean the collapse of the employer-based health system and a blow to global competitiveness of American businesses.

The report projects that, without effective action, annual health care costs for employers will rise 166 percent over the next ten years.  By 2019, the annual cost of insuring an employee will almost triple, rising from approximately $11,000 to $28,530. (We also just posted on a separate study by the Kaiser Family Foundation that puts it as high as $30,800)  In a decade, the Business Roundtable estimates that total health care spending will reach $4.4 trillion, (one fifth of America's GDP). In 2008, total health care spending in the US was approximately $2.4 trillion dollars, about one-sixth of the American economy.

On a conference call Tuesday, Business Roundtable Chairman Ivan Seidenberg expressed concern that rising health care costs were sapping not only American's pocketbooks, but the ability of American companies to stay competitive in a global marketplace. America's G-5 competitors (France, Germany, Japan, and the UK) spend less money on health care per capita, an average of 63 cents for every US dollar spent on employee health care costs, he said.

Cost shifting is also a dangerous strain on employers, the report found. Uncompensated care costs approximately $86 billion every year. Out-of-pocket payments from patients cover $30 billion of this total, but the remaining $56 billion comes from direct government payments and indirect cost shifting to employers, according to the report. The Business Roundtable would like to see coverage expanded.

The report makes several policy recommendations,

• Reform the delivery system by changing Medicare reimbursement, moving away from a fee-for-service model, and realigning incentives to reward providers for quality and value in the delivery of coordinated care. (See our Health CEOs for Health Reform program for more industry leader's recommendations for delivery system reform.)
• Address the rising cost of health care so that more Americans can afford coverage and so that the $56 billion cost shift from uncompensated care to the government and private payors can be eliminated. The Business Roundtable believes health care coverage expansion will bring about a positive return on investment and improve affordability.
• Reform insurance markets to create a competitive marketplace that guarantees people can obtain coverage.

On today's conference call, Eastman Kodak, Inc. Chairman and CEO Antonio Perez said the recommendations reflect the Business Roundtable's desire to work with Congress, to build on what does work in the employer based system and eliminate what doesn't work. As the report says,

The debate over health care reform is increasingly being framed as a choice between the current system and the uncertainty of what reform may bring. But the comparison should be between the uncertainty of what reform may bring and the near certainty of what inaction will bring. Doing nothing is simply no longer an option.

The full report is available here.