Directors Corner | 25th Anniversary | Why Do We Still Purchase Healthcare as We Did Back Then?

“It’s 1996 and you’re bored. What do you do? If you’re one of the lucky people with an AOL account, you probably do the same thing you’d do in 2009: Go online. Crank up your modem, wait 20 seconds as you log in, and there you are—”Welcome.” You check your mail, then spend a few minutes chatting with your AOL buddies about which of you has the funniest screen name (you win, pimpodayear94).  Then you load up Internet Explorer, AOL’s default Web browser. Now what?  There’s no YouTube, Digg, Huffington Post, or Gawker. There’s no Google, Twitter, Facebook, or Wikipedia.”

Farhad Manjoo, Jurassic Web, 2009

Established in 1996, this year the Colorado Business Group on Health is celebrating our 25th year. (“Celebrating” is a bit over-the-top. We’ll probably have lunch at Olive Garden.) Here are a few of the things that have happened and/or changed in the intervening quarter-century…

  • Your TV was probably a literal “tube.” It was only in 1996 that Zenith introduced the first HDTV-compatible front projection television in the US.
  • On that TV you probably watched ER, Seinfeld, or Suddenly Susan – possibly without getting up to change the channel if you had a state-of-the art remote.
  • In your morning newspaper (which you probably no longer schlep out to driveway to retrieve) you might have read that:

What’s most unlikely is that you bought anything on Amazon.  Bezos only founded that in 1994.  And what you certainly did NOT do was “Google” anything.  It wasn’t until 1996 that the Google web search engine originated as “BackRub”, a research project using PageRank, software developed by two PhD students at Stanford University.

In healthcare, 1996 actually had the slowest record growth in healthcare costs recorded since 1960. Despite this slow growth, health spending managed to top $1 trillion for the first time and, on average, spending for healthcare in 1996 climbed to $3,759 per person – an amount that the Coors family and other founders of CBGH considered “unsustainable.” So, with confidence in employer’s ability to change the market, key Colorado companies decided to take on healthcare costs. And, just about that same time, employers in the Northeast and along the Pacific coast, in Savannah, Georgia and St. Louis, Missouri, Las Vegas, Nevada, and in cities across the country did pretty much the same thing for very much the same reason. How’s that worked out?

In 2019, healthcare became the leading cause of bankruptcies in the US. By the end of 2020, U.S. health care spending had reached $11,582 per person – an increase of a whopping 20%. As a share of the nation’s Gross Domestic Product, health spending accounted for 17.7 percent.

And here’s what hasn’t changed:

Healthcare errors as a cause of death: These issues aren’t new; the first major report on medical errors in the US is from over two decades ago. In 1999, The Err is Human from the Institution of Medicine estimated 98,000 deaths due to error. At the time, this would be the sixth leading cause of death in the country.
A study in 2010 found that this number had almost doubled to 180,000 deaths. And by 2013, the estimate ranged from 210,000 to 440,000 deaths per year. This landed medical errors as the third leading cause of death trailing heart disease and cancer. Following the same pattern, it would still be the third leading cause of death today.

Researchers used four separate studies from 2000 to 2008 and hospital admissions rates from 2013 to analyze this problem. Based on extrapolated data of 35,416,020 hospitalizations, medical errors cause 251,454 deaths per year. This translated to 9.5% of all deaths per year.

Waste in healthcare: Approximately 25 percent of spending in the U.S. health care system can be characterized as waste. That’s between $760 billion and $935 billion annually. A study published in the Oct 8, 2019 Journal of the American Medical Association (JAMA) by researchers from health insurance provider Humana Inc. and the University of Pittsburgh School of Medicine links the waste to six areas of the health care system identified by the Institute of Medicine: failure of care delivery; failure of care coordination; over-treatment or low-value care; pricing failure; fraud and abuse, and administrative complexity.
A market so consistently inefficient and so inconsistently effect does not happen by accident. It has resulted from the manner in which employers have purchased healthcare for at least the 25 years since CBGH was founded – if not the last 40 or 50 years. Lack of affordability and unreliable outcomes are aberrations but core characteristics of the way we purchase and provide healthcare benefits.

Economic demonstrates without question that the market is perfectly designed for the results it gets. The only question is, Will employers act to change the market?