Who Needs Universal Health Care? It's the Economy.
Who Needs Universal Health Care? Businesses
Businesses need to stop being responsible for health care – policies should be attached to a person, not a company. In the new economy, company run health plans are obsolete at best, a competition killer at worst.
In 1947, the three major industries were mining, the federal government and construction. Run by long term entities, these industries required training and had geographical constraints. They expected to pay future liabilities of pension funds with current earnings. Considered to be long term jobs, employees expected to have life time health care from a single source.
In contrast, in 2016 the top three jobs were in the management of companies, information technologies, and administrative and waste management services. These are jobs tend to be fungible: that is the skills translate from one company to another, so both employees and recruiters look for the 'next best fit'. In this more fluid work environment, the average worker is likely to hold ten different jobs before age forty. For workers, changing jobs 10 times before 40 means they are likely to have 10 different providers. Before the Patient Protection and Affordable Care Act (PPACA), generally known as the Affordable Care Act (ACA), such turnover dramatically increased the likelihood that there would be a pre-existing condition that could make employees ineligible for some or all of needed coverage. And the number of jobs in a lifetime is only projected to grow.
Turnover is Expensive
The costs to businesses of managing a large ever changing workforce can be significant. The largest industries by growth between 2015-2025 are projected to be health care, more health care and personal services. These are industries that have a turnover rate as high as 19% annually. While health care is the largest growth industry, administrative and sales rank among the highest in expected actual number of employees. Research suggests that one in ten companies experience turnover rates for sales employees above 55%.
The costs for such turnover are high:.
- 16% of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328.
- 20% of annual salary for midrange positions (earning $30,000 to $50,000 a year). For example, the cost to replace a $40k manager would be $8,000.
- Up to 213% of annual salary for highly educated executive positions. For example, the cost to replace a $100k CEO is $213,000.
The constant task of finding health plans, understanding the benefits and costs, explaining those to the changing workforce, and managing their concerns and complaints is a job that requires skill and expertise outside of that required by the industry. That means finding and hiring a skilled Human Resources director, who may also be moving as better jobs or family situations change.
Excluding the Great Recession, the 6 million Americans who work part-time but want full-time jobs today are at the highest level in about 30 years or so. The number has come down since its peak during the recession but some experts believe America now has a "new normal" -- a permanently high number of part-timers.
Universal health care, owned by the employee, would encourage such companies to hire full time employees, reducing the costs of managing mulitple staff by paying overtime when more are needed for sales or holidays. That would result in:
- Improved brand reputation, especially from wealthier shoppers who chose well respected companies.
- Employees with a higher incentive to guard against damages and shoplifting.
- Fewer accidents by exhausted workers trying to hold down two or three jobs.
Personal insurance – that is universal insurance owned and managed by individuals – is also an incentive for personal responsibility, both on the part of the employee and the insurance company.
Preventative steps, such as early intervention for diabetes or heart disease, can save money later on. Nutritional advice, substance abuse and even family counseling prevent poor work habits, tardiness and poor attitude, while making employees feel better, which in turn makes them less likely to need more time off work.
Can we afford Universal Health Care
Every major economy of the world has figured it out. A study, the fifth in a continuing series dating to 2004 from the Commonwealth Fund, compares the healthcare systems of 11 countries with advanced economies on measures of quality, efficiency, access to care, equity and healthy lives. As was the case in the four previous studies, the U.S. ranked last overall, despite spending almost 50% more per-capita ($8,508) than the nation with the second-highest spending (Norway, with $5,669).
While Americans are loath to add taxes, the reality is that many families are paying a thousand dollars or more every month to keep plans in place. Unfortunately, they are not paying doctors. The amount compensated to physicians accounted for 8.6 % of total healthcare costs in the United States. That was about $216 billion of the $2.5 trillion spent on healthcare.
Where some of that money is going is for administrative costs that protect profits for investors. The move from nonprofit to for-profit has increased costs dramatically, while adding layers of bureaucracy that makes healthcare in the United States more costly with poorer outcomes. Studies have shown that things get worse for patients and for providers in countries that spend a larger percentage of their healthcare dollars on administration (as opposed to public health, or providing patient care, for example), as reported in Medical Economics.
A look at some of the larger providers highlights the issue. In July 2016 UnitedHealth reported revenues that quarter totaling $46.5 billion, an increase of $10 billion since the same time last year. Aetna’s CEO, Mark Bertolini reported an annual operating revenue of over $60.3 billion, another record. Yet an Aetna spokesman T.J. Crawford wrote a brief statement describing the company's losses under the Affordable Care Act with a follow up press release: “As updated on our Q3 earnings call last week, we now expect a 2016 pretax loss in our individual products (on- and off-exchange) of approximately $350 million.” However, in the last quarter of 2016, Aetna reported operational earnings – profit earned after subtracting from revenues expenses that are directly associated with operating the business – of 20%, with the year ending at 7%. The 1% loss from the ACA was clearly balanced by profits.
While a market economy is dependent on successful businesses, in this case the benefits of one industry are outweighed by the costs to the rest of the economy.
As Berkshire Hathaway CEO Warren Buffett has said, healthcare is “the tapeworm of the American economy.” In December 2016, the 100 largest U.S. corporate pension funds faced a $412 billion shortfall, $74 billion higher than the end of 2011, according to the consulting firm Milliman. The problem faced by corporations pales next to those of states, many of which are simply turning their backs on their problem, with Governors passing the debt onto future Governors.
The question on balance is how to support a market economy. We need to evaluate all the costs of a health care system that doesn't support the majority of businesses hiring Americans. While not a panacea for all the ills of our jobs world, universal health care would strip away a very troublesome layer of decisions that keep employers focused on the wrong things. As Mr. Buffett went on to say, President Obama's healthcare law is a "step in the right direction," but the high cost of insuring employees remains a drag on business. He added that Berkshire Hathaway’s costs for healthcare are over $2 billion a year.
Imagine if $1.5 billion went toward Universal Health Care and Berkshire Hathaway kept the rest.
Solutions to the problem are not easy, as the Affordable Care Act has shown. As the damage to the economy from underfunded pension plans, workers not caring for their health, and businesses continuing to be distracted by health care grows, an effort must include the best ideas for a unified plan from all sides. Walking away from the problem is no longer an option.