The health care system in the United States is in crisis, and it has become a business crisis. Costs are spiraling upward, and the implications for businesses and their employees are profound. As employers struggle with unrelenting, double-digit health-insurance cost increases, some firms have decided to drop coverage entirely and many others have shifted costs to employees. And the quality of the health care being paid for by companies and their workers remains highly uneven despite the ever-increasing amounts of money devoted to improving it.1
Underlying such problems is a broken health care market. Unlike companies in other markets, health care providers and organizations lack sufficient incentives to innovate broadly or to improve quality. Similarly, consumers are unable to make health care decisions in the same way they make decisions about purchasing education or housing. And businesses that are rigorous and demanding purchasers of other goods and services are meek and ill-prepared when it comes to purchasing health care. In no other area of supply would they tolerate such cost increases and uneven quality.
The seriousness of the problem is underscored by a recent survey in which U.S. CEOs ranked health care benefit costs as their number one economic pressure.2 To put the issue into perspective, consider that Sprint Corp. would have to add $750 million in sales just to absorb next year’s projected increases in its current health plans. As the vice president of benefits for a large company told us: “Health care is a disaster. Every line in our income statement has an officer’s name attached to it. Our CEO points out that I have my name on the one item that is out of control.”
An even bigger profit drain for companies than health insurance may be “presenteeism” — in which employees are present for work but are less productive because they are ill or preoccupied with the health of a loved one. A study of nearly 29,000 U.S. employees estimated that absence and reduced performance caused by common pain conditions cost more than $60 billion a year. More than three-fourths of the lost productivity was explained not by absenteeism but by lower performance while at work.3 Through research at several U.S. locations, Dow Chemical Co. has projected that presenteeism is its largest health-related economic impact, ahead of absenteeism, health insurance and workers’ compensation.