Bending the Cost Curve

We have heard the “bending the cost curve” phrase discussed endlessly during the healthcare reform debates and it is important to look at what it means and the impact it will have on our economy.  What we are talking about is not really decreasing the cost of healthcare but just slowing down the rate of growth.  The cost slope must slow as it is growing out of control and becoming a bigger and bigger part of our GDP.  This just can’t continue and everyone seems to agree with that point.

Last weekend there was a very interesting editorial in the New York Times written by Ezekiel Emanuel.  Ezekiel is one of the famous Emanuel brothers from Chicago.  He is a world-class oncologist who worked closely on healthcare reform.  His brother Rahm is the mayor of Chicago who previously was Chief of Staff for President Obama.  Perhaps the most famous brother is Ari who is a Hollywood agent who was the inspiration for Ari Gold on the HBO show Entourage but that it not important for healthcare reform.  Take a quick look at Ezekiel’s piece where he points out that we can be both healthy and rich.  Cutting back should not compromise quality and if done right will make the system so much more sustainable.

The numbers in the article are quite interesting.  If we can lower the rate of healthcare cost increases by 1%, that will mean a 4% increase in GDP by 2030 which would result in $7,000 for every family.  This cost savings will not result is massive unemployment but rather a huge boost for the economy.  Emanuel points out that bending the curve does not mean cutting back from the $2.8 trillion dollars we currently spend on healthcare per year.  All we are talking about is pushing back the date when the system reaches $4 trillion. Keep in mind that Emanuel points out that there is estimated to be $700 billion a year in waste that needs to be and could be removed from the system.

The key point from the article is that healthcare reform does not mean we are cutting back.  It merely means we are are slowing down a run-away spending system.  Reform is all about efficiency.  It is forcing us to address the waste we all know is there and to begin to try to do things in a better way.  The money saved in healthcare will be spent on other things that will result in an even greater growth in our economy.  Even more people will be employed and there should be more money for businesses and employers to spend on non-healthcare related goods and services.  You see reform is all about making the marketplace more efficient and isn’t that really what our economic system is all about?

The real beauty of reform may be in some of the systems being put in place.  Accountable Care Organizations make so much sense.  These are groups of healthcare professionals joining together to figure out how to deliver higher quality care at lower prices.  When they succeed they get a significant share of the savings.  The healthcare insurance exchanges will provide the most transparent and most competitive marketplaces possible for purchasing healthcare.  It will allow everyone to get the pricing and the benefits of the largest employers.  It’s about market efficiency.  Bringing more people into the formal system rather than having them delay care and then receive extremely inefficient and costly care in our country’s emergency rooms just makes so much sense.  Entrepreneurs everywhere are working feverishly trying to be a part of the healthcare reform and share in the rewards when this all works.

The concern really comes from those who are fighting the change because they think they are better off in the old system.  This perhaps could be large hospitals and companies that benefit from over-testing and procedures that are not needed and in fact are often redundant.  On the edge of this issue are the pharmaceutical companies.  They could either stick to their old ways and allow the generic companies to gain even more share or they could dive into the reform, reinvent themselves and be a part of the solution.  It is obvious that they will need to change eventually just to survive.  The key is that the earlier they do change the more competitive advantage there is to attain.  It will be interesting to watch and even more fun to be a part of it!

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