The debate over health care is a current news staple as U.S. senators and congressmen trumpet the merits of plans to expand coverage and lower costs for all Americans. No matter what the resulting legislation will be, it will have a deep impact on businesses, both large and small. That was the topic of a panel discussion called “The business of health: expert insights and perspectives,” presented by Mays Business School in November.

Hosted by the Full-Time and Executive MBA Programs, the panel brought together expert opinions from industry insiders, as well as an audience of more than 200 professionals from various industries. Presenters included a physician, the VP of benefits at large multinational company, and a member of the Mays management faculty. Moderated by Loren Steffy, business columnist at the Houston Chronicle, opinions varied, but all agreed on one thing: health care reform is imminent and vitally necessary.

A costly necessity

J. James Rohack, MD, was the first panelist to jump into the discussion. As a physician, the president of the American Medical Association, and the director of the Center for Health Care Policy at Scott and White Clinic, Rohack had a lot to say about the topic of reform. “The AMA decided two years ago to get involved in health system reform as frankly we noted…that for those that didn’t have health insurance, they lived sicker, they died younger, and the federal government said your access point is the emergency room,” he said. With the uninsured gaining primary care through ERs, we’re already paying for universal health care, as the cost of treating these people comes from everyone else paying a higher premium, Rohack contends.

A distinguished panel of industry leaders, policy experts, and Texas A&M faculty members met on November 12, 2009 at the Federal Reserve Bank of Dallas, Houston Branch to discuss how pending historic changes to the health care system will impact the business community.
A distinguished panel of industry leaders, policy experts, and Texas A&M faculty members met on November 12, 2009 at the Federal Reserve Bank of Dallas, Houston Branch to discuss how pending historic changes to the health care system will impact the business community. (view more photos)

Congress is concerned that reforming the system will add to the national deficit. Inaction will do the same, says Rohack. “The reality is these bandaid approaches…have grown the problem.” The AMA has been working with Congress to devise a solution since 2001. If serious action had occurred three years ago, the cost would have been less than $50 billion. Instead, stopgap measures were utilized, so that now, to “fix” the system the price is $210 billion—and will increase to $310 billion by 2012, when four million Baby Boomers will start to draw Medicare benefits.

Rohack is critical of proposed changes to Medicare that would reduce the amount paid to physicians. Fifty percent of health care in the U.S. is provided by solo practitioners or offices of less than three physicians. They are small business owners, Rohack says. The proposed Medicare cuts would reduce the profitability of these practitioners by 21 percent and the current business model will not be viable. This creates a new dilemma. If physicians have to close their practices, it will exacerbate access problems. That is especially true in rural areas where there are a disproportionate number of Medicare patients, he says.

John Kajander, senior vice president of the Texas Medical Center, echoed Rohack, noting that hospitals receive a large portion of their revenues from Medicare patients. That kind of subsidy already provided by the government means that all non-Medicare patients are paying 25 percent more to pay for others’ care. The money is already being spent, he says. When it comes to reform, it’s just a reallocation of where the money comes from.

To those that are concerned about “death panels” and government involvement in health decisions, Kajander was unsympathetic. “We should never kid ourselves. We’ve got health care rationing today,” he says. If you’re at a public hospital and you’ve got cancer, you may have to wait several months to see an oncologist and start chemo—and that wait may be too long.

Americans tend to have a negative perception of anything that sounds like socialized medicine, however, there are lessons to be learned from the Canadian health care system, says David Kasper. His company, Waste Management Inc., operates in most states and several other countries. As the vice president of benefits, he is familiar with the health care options for his employees in the U.S. and Canada.

Kasper says Americans demand more amenities from hospitals (such as private rooms, cable, etc.). Canadian hospitals are very basic by comparison. But nobody in Canada goes broke when they get sick.

Kajander commented on this as well, noting that the American system is inefficient, but that Americans might not be willing to make certain trade offs (such as choosing your own doctor) in order to reduce costs.

The public option still being debated will provide everyone with a bare minimum of coverage, Kasper says. To those that are worried that all business will cease to provide insurance and will pay only for the public option, Kasper says we must remember that many employers see benefits packages as recruitment tools; they want to offer what’s going to net the best employees. Small businesses are the ones that will save the most through a public option, if it’s offered. However, some larger companies will stick with private insurance or their own self-insurance programs, predicts Kasper.

Wellness programs key to savings and health

Waste Management Inc. is self-insured, providing tailored coverage for their 45,000 employees. Kasper says they look at health care expenditures as an investment. “It’s a very labor intensive business. People are our most important asset…We cannot operate unless we have people on the job doing what they need to be doing…Their health and productivity is…directly linked to the success of our organization,” he says.

A large part of Waste Management’s focus is on wellness programs, where healthy behaviors, such as not smoking and proper weight maintenance, are incentivized. Kasper says that legislation should incent employees to do the right thing for their own health, placing a monetary emphasis on prevention and healthy behaviors.

Rohack agrees. “Half of health care costs are because of choices people make…We can fix the system, but people are going to have to be engaged in healthier choices,” he says.

Michael Wesson, associate professor of management at Mays, mentioned corporate examples of wellness programs that are working, such as the incentive program implemented by grocery chain Safeway (see Wall Street Journal article: “How Safeway Is Cutting Health-Care Costs” ). They’ve reduced healthcare costs enormously, he says. As has IBM, who have dropped employee co-pays to encourage better preventative care from employees. New legislation should provide concrete funding for wellness programs, says Wesson.

What should reform look like?

Where in the country is health care being done well? In non-profit community health centers, says Rohack. The costs are lower and the outcomes are high. He also held up Lasik eye surgery as an example: the cost has decreased over the years, even as the procedure has improved. Why? Because it isn’t covered by insurance, so customers shop around to find where it can be done most affordably, forcing doctors to provide quality and economy. It’s rare to have that level of price comparison with other medical procedures.

That’s part of the problem, says Wesson: the price of medical procedures is too mysterious. Most patients have no idea how much it costs to receive healthcare, and most doctors have no idea what the real cost of a procedure or drug will be for their patients. He doesn’t believe that the current legislation pending before Congress does anything to alleviate this issue or to bring consumers into the picture.

A distinguished panel of industry leaders, policy experts, and Texas A&M faculty members met on November 12, 2009 at the Federal Reserve Bank of Dallas, Houston Branch to discuss how pending historic changes to the health care system will impact the business community.
Following comments from each of the speakers, the panel answered questions from the audience.

Wesson says everyone should have health coverage, but he is concerned about the price tag associated with the reforms before legislative bodies currently. The challenge before Congress is to expand coverage and lower costs. He says many versions of the bills before the House and Senate expand coverage, but are lacking in the cost reduction guarantees.

Robert Ohsfeldt, professor of health policy and management at the School of Rural Public Health at Texas A&M System Health Science Center, commented that there are about 48 million uninsured in the U.S. One of the main challenges in passing a reform that would expand coverage is convincing the other 256 million people in the U.S. that it is needed. “Those that have insurance for the most part don’t see this as a crisis that needs to be addressed right now,” he says, noting that whatever changes are made, people will complain.

Bruce Broussard, chairman and CEO at U.S. Oncology says that in markets that are highly competitive, there is a lower cost-delivery system. For that reason, the introduction of a government option will reduce cost by increasing competition. He also mentioned that potential litigation drives up the cost of health care significantly. If that problem could be solved through tort reform, the cost savings would be dramatic. (Rohack was quoted on this topic in the article “Trial lawyers plan tort reform fight” in Politico. ).

Reform is essential the panelists agreed. As Broussard and Ohsfeldt asserted, the cost of health care must come down. It’s unsustainable at its current level.

Complete video from the event is available at mays.tamu.edu/health.