Healthcare Drives Economic Depression & Trump/Sanders Campaign Success

My single biggest moment of awakening to the devastation wrought on the working middle class was March 9, 2016. This was the day I woke up to the shocking news that Bernie & Trump had won the Michigan primary. The following is the Forbes article I wrote. Since then, the good news on what happened in the intervening 7 1/2 years is outlined in my State of Health Rosetta keynote from RosettaFest. My talk opened with the observation that the Michigan primary outcome was the primal scream coming from the working middle class that their suffering was becoming unbearable due to healthcare crushing the American Dream.

The graphic below was part of a WSJ article later in the 2016 election cycle. The data is nearly a decade old yet we know it's gotten worse. Happily, where Amazon and other large businesses and the federal government have failed, as was highlighted during the Rosie Awards, there are now 1000's of employers getting far superior care at far lower spending levels (while paying high quality clinical delivery organizations at the same or higher levels).

Forbes: March 9, 2016

The story behind the Sanders/Trump phenomena continues to hide in plain sight.?It's convenient to pin wage stagnation on cheap foreign labor. In reality, employers such as GM and Ford are spending far more on employees than they did 20 years ago -- the problem is every dollar has gone to?unmanaged healthcare spending.

Reasons and counter-examples are detailed below but the biggest is that?PPO networks have perpetrated a huge heist of the middle class. The data couldn't be clearer in the well-regarded?Rand study showing?the?U.S. middle class has gone backwards?(financially) in the last 20 years as a result. This is the definition of an economic depression. Whether it's Germany in the 1930's or America in the 2010's, citizens are vulnerable to misplaced scapegoating when they are in economic distress.

Yesterday, NPR interviewed economist Douglas Irwin on?why trade is an important issue in the presidential campaign. The Dartmouth College economist, who specializes in trade policy, pointed out that the key issue is actually healthcare as the shift in jobs due to trade has resulted, in aggregate, in more high-paying jobs.

Wages have been flat even though total compensation is up because healthcare costs are taking that wedge, that bite out of people's paycheck. So people don't think they've been getting a pay increase at all.

Despite the economist making the key point, the interviewer didn't go deeper as it didn't fit the narrative that?trade?is the issue. The reality is that healthcare is the underlying driver of job losses. I recall the headlines about every GM vehicle having a $2000 healthcare premium that made them less competitive. Rather than addressing the root cause, they simply shuttered plants and moved jobs outside the U.S. where healthcare spending wasn't an issue. In an earlier piece on?what was driving the Trump/Sanders phenomena, two Gallup polls shed light on the key issue that most commentators are missing. As I wrote earlier this week:

A recent Gallup poll and a poll done shortly after 9/11 shed light on how healthcare's hyperinflation and under-performance is fueling the Trump and Sanders phenomena. Financial anxiety and a general sense that things aren’t working sow the seed for movements. On the bright side, the?horrible under-performance of how healthcare gets purchased and delivered?has caused a few positive responses already:

Unfortunately, commentators and auto executives have been bamboozled into believing the biggest lie in healthcare--that it's impossible for employers to control healthcare costs.?Following the links above demonstrates the fact that it simply isn't the case. Despite having a tiny fraction of the number of employees compared to the automakers, a 500-employee manufacturer showed how it's possible to?solve healthcare's most vexing problem--pricing failure. Ironically, that small manufacturer was key to getting the?largest nonprofit health system in the country to join the movement to market-based, truly transparent pricing. In fact, that health system, Ascension, is all over the Midwest--the heart of the auto industry.

The key to success is having the CEO realize what the aforementioned local government has proven--i.e., that it's possible to slash healthcare costs while?improving?health benefits. Unfortunately, too many corporations have benefits brokers who've been complicit in healthcare's hyperinflation. In contrast, the Tulsa-based manufacturer has a benefits consultant that realizes?benefits brokers are going the way of stock brokers. These benefits advisers realize it's possible to avoid?nest eggs getting crushed by healthcare costs.

Jim Millaway is a long-time benefits consultant behind the?Transparent Open Network?portion of the?Health Rosetta?(the blueprint for how healthcare purchasing is being reinvented) that slayed the healthcare cost beast. He recounted to me an experience from a recent meeting in Michigan with heavy manufacturer CEOs. They were invited in to present the case study of what happened with Enovation Controls (the small manufacturer). Millaway said he'd never experienced anything like it in his entire benefits consulting career. Following the presentation, he was literally mobbed by approximately 20% of the CEOs at the meeting. These CEOs were at their wit's end with the healthcare industry and wanted what Tulsa had immediately.

Millaway's company is now in the process of meeting that demand. For example, in Rockford, Illinois there are many manufacturers. Originally one employer had heard about what was going on in Oklahoma and wanted to see if they could get it in Rockford. It was one of the early market tests of whether employers could drive the issue. Indeed, they could. In just a few months, Rockford went from no transparent providers to multiple transparent surgery centers. The local hospital didn't go fully transparent; however, they are doing the equivalent of Best Buy price match as they don't want to lose business. If you want to see what a true market price for a huge array of surgical procedures, imaging and lab tests are, I was able to find the?app that employers are using to obtain fair market prices. Typically, the prices are 80-90% less than billed charges, which is typically 40+% lower than the anachronistic "PPO Networks" that are generally little more than a glorified yellow pages.

A fatal flaw most employers make is blindly accepting the status quo. For example, if PPO networks are such a great benefit, why is it that healthcare's hyperinflation has been unchecked for decades, consumers rate the health insurance industry lower than any other industry and dealing with insurance headaches is the top driver behind record levels of burnout and suicide for doctors?

Despite the fact that?health benefits have wildly under-performed?relative to what employers are spending, my prediction is that the explosive growth of high-deductible plans will drive a true overhaul of healthcare purchasing. Why? The large out-of-pocket costs employees are having to incur will shine a light on a major area of risk exposure to employers. As outlined in "Benefits Brokers Are Dead. Long Live Benefits Advisors," the dereliction of fiduciary duties by employers is getting exposed and will drive change in healthcare that will accelerate the?trillion-dollar shift to new players and new business models. Healthcare will finally benefit from?radical simplification?and?deflationary economics?that has pervaded virtually every other industry.

The beauty of what forward-looking employers are doing is it's DIY health reform that isn't a "right" or a "left" solution--it's an American solution coming from the heartland.?Sooner or later, wise politicians will jump to the front of the parade of change that forward-looking employers are driving.