Belmont University

The Elephant in the Room

When asked about what issues concern them most, small business owners consistently identify three issues: taxes, regulation and health care. Answers for our archaic and convoluted tax system are out there, with the Fair Tax being one of the best so far. Regulation is being addressed, albeit slowly, through initiatives to examine the impact of laws on small businesses. But, health care has become the elephant in the middle of the room that no one wants to really talk about. There are a few ideas out there, but most are just band-aids.

Our health care system is an artifact of the old economy of the last century. It was developed when health care was cheap and employers were mostly very large. Well, health care is no longer cheap due to amazing advances in technology and pharmacology (and due to an explosion of litigation I might add), and half of the country is now employed by small businesses. It is also an artifact of the corporate-union-government alliance that dominated our country in the 1900s.

I believe that there are two fundamental principles that must guide us through the inevitable health care crisis that is looming on the horizon. First, we must bring personal responsibility back into the payment of health care. Health insurance was originally established to cover only catastrophic illnesses. Over the years, it has moved toward a semi-socialized program that has most of the costs covered by employers and the federal government. But in the end, all these two entities do is take our money through lower pay and higher taxes. We need to take these "middle men" out of the system for all routine health care. It would cut out huge administrative overhead costs that corporations and government spend that if we kept in our pockets would give us more money than we now have to spend on health care.

Second, we need to bring the market back into health care. Government controls health care at the local, state and federal levels. The pages of laws and regulations that control health care would make the 60,000 pages of the tax code look like a short story. The percentage of health care dollars that actually go to direct health is incredibly small. Some studies over the years have shown that 80% of the dollars in the system go to administrative costs. Government's attempt to manage health care have contributed more than any other factor the the health care cost crisis.

Unfortunately, our current health care system has deeper roots than our tax code. And rather than addressing the root causes of the impending crisis, politicians are busy finding "solutions" that while they may get them good press and win them more votes, will only make the problem worse. Real solutions will take courage and vision.


Posted by Jeff Cornwall on January 3, 2007 08:08 AM |

Comments

I agree with your comments on Healthcare. Unfortunately, it appears that we are rushing headlong into socialized medicine. I don't see us missing the bullet this time around as we did with Hillary Care. It is the belief of too many people in this country that "free" services offered by government are really free.

Birdied by: Denise Garbacz | January 3, 2007 09:52 AM

I didn't see my trackback posted here, so I thought I'd just comment.

For your conclusions to be correct, the following would need to be true:

1. Non-managed (”traditional”) health plans would need to be less expensive than managed care plans. However, the decision of most corporations to select HMOs, EPOs and other managed care options suggests the opposite.

2. Government managed care, such as Medicare, would have to be more expensive to administer. Though there are plenty of contradictory articles on the web, research suggests that government Medicare is less costly to administer than private Medicare HMOs, though those HMOs insure healthier patients.

3. Some significant portion of health care costs would need to be “discretionary” rather than urgent or emergent. The opposite, in fact, seems to be the case. Health plans find themselves needing to incentivize members for preventive care. These plans find such incentives to come out positive on a cost-benefit analysis because they avoid the sorts of catastrophic conditions that you suggest should be the true use of health insurance.

You seem to ignore the fact that good health is a very real public good. People with overall poor health, whether from poor nutrition, poor lifestyle, or poor preventive care, are more susceptible to the contagious diseases that are at the center of concerns about pandemics. Access to health care could even be considered a homeland security or national defense issue: healthy individuals are less susceptible to bio-terror attacks and would be better able to join the military in a time of true national emergency.

As a student in another entrepreneurial MBA program, I really enjoy your blog. Keep up the interesting, challenging, and informative posts!

Birdied by: Josh | January 5, 2007 10:05 AM

Our UK company is just beginning to setup a US subsidiary and hire US workers. I am stunned at how intrusive healthcare is into the hiring process and how significant a cost it is. The current US healthcare system certainly does nothing for US worker's competitiveness. Yes, we'll hire US workers, but our vision of the US being friendly to small companies has foundered on the healthcare issue.

Birdied by: Simon | January 13, 2007 07:16 PM

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