Healthcare "Tax" has Crushed Nest Eggs by $1,000,000 Per Household

Many have heard that 80% of employer payroll increases have gone to pay healthcare costs over last 20+ years so employer costs have increased with little going in the pockets of workers. Over the last 50 years, the cost of consumer goods and services have gone up eight-fold with one exception -- healthcare. Healthcare costs have increased 274-fold. 

The average American household w ould have ~$1,000,000 in their retirement account

I did some very rough, back-of-envelope calculations on what could be put into people's retirement plans if there wasn't healthcare's rampant overtreatment and hyperinflation. I used historical rates of inflation, S&P growth and healthcare premiums. Over 30 years, if we didn't pay the "healthcare hyperinflation tax" the average American household would have ~$1,000,000 in their retirement account (assuming growth in a S&P index fund). Instead, the statistics on retirement savings for the average American are horribly low. With the status quo we are stealing our future both financially as well as what we do in how we overtreat (and thus harm) people. 

Many people also don't know that the average couple will have $300,000 of healthcare expense not covered by Medicare. The point of the open source Health Rosetta project is to not sit idly by. Proactive purchasers of health and wellness services at employers can address this today. No new legislation is needed. Having said that, local, state and federal governments should also leverage the proven insights/models outlined in the Health Rosetta. Some cities are taking action that I'll write about later. 

Not only are there huge direct costs to the "tax" the healthcare system has placed on us. There are a number of indirect costs we are all facing. 

Taxation Without Representation

Macarthur Genius Grant winner, Dr. Jeff Brenner spoke about the "tax" issue in a recent interview.  

One of the problems is that we have a giant economic bubble underlying this where we have hospital financing authorities underpinning, that are run by states that help hospitals float bonds. And we have this giant bond market called the hospital bond market that’s considered very secure, very safe, good investment. And you know, that bond market has floated too much hospital capacity and created and brought online too many hospital beds, far more hospital beds than we need in America. So you know, the most dangerous thing in America is an empty hospital bed. In the center of New Jersey, near Princeton, a couple years ago, we built two brand-new hospitals. These are two $1 billion hospitals, 10 miles apart, very close to Princeton. So one is called Capital Health, and the other is Princeton Medical Center. I don’t remember anyone in New Jersey voting to build two brand-new hospitals. But we are all going to be paying for that the rest of our lives. We’ll pay for it in increased rates for health insurance. And, boy, you better worry if you go to one of those emergency rooms, because the chances of being admitted to the hospital when there are empty beds upstairs that they need to fill are going to be much, much higher than when all the beds are full–whether there’s medical necessity or you need it or not. So I’d be very worried if you live in Princeton that there are now two $1 billion hospitals waiting to be filled by you.

There are several other indirect costs to the "tax". Each of the following major issues can be addressed if we design the health ecosystem in a rational way:

1. Consumers rate health insurance lower than every other industry on the Net Promoter Score (see NPS scores here). Contrast CIGNA's NPS at -1% (the lowest health plan is -24% and highest health plan is +28%) versus next generation players such as Qliance at +79%.
2. There are unprecedented levels of dissatisfaction and burnout by doctors. A major reason is we're layering more and more on top of a design failure. We need to focus on The Quadruple Aim: A Square Deal for Clinicians. 
3. As Bill Gates pointed out in a TED Talk, out-of-control healthcare costs are directly devastating education budgets that are critical to the long-term future. An accounting firm partner who is also a school board member outlined this in detail in Healthcare costs drain school budget. Since he bought his house, his property taxes have doubled -- all due to increased spending on Education. However, as he breaks down, all of the "education increase" was due to healthcare costs.
4. As US News & World Report found, due to healthcare costs, cities are unable to perform basic services such as filling potholes. More dramatically, there are 100’s of millions of unfunded pension commitments due to healthcare costs.
5. At the state and federal level, bridges are literally falling into rivers as healthcare costs have starved budgets of infrastructure investment. Both the NY Times and the non-partisan Center on Budget and Policy Priorities have reported on the tragic consequences of the spending on healthcare waste and over-treatment while roads, airports, bridges and rails fall apart. As a former Chair of the US President's Council of Economic Advisers said during the debt crisis, "we don't have a debt problem...we have a healthcare problem."
6. Household income has been directly impaired by healthcare costs. Despite significant employee cost increases over the last 20 years for organizations, almost all of it has gone to fund healthcare's hyperinflation rather into worker’s pockets. Washington Post, NY Times, WSJ, Time and others have reported, healthcare cost increases have been borne by both the employers and employees, not to mention shareholders.
7. A new wave of health-improving healthtech is held back due to outmoded health purchasing practices (see Tech Industry, Heal Thyself for more).
8. As Atul Gawande pointed out in his book and in the recent PBS Frontline special, we are doing a horrendous job dealing with end-of-life issues leading to a tortuous experience for those at the end of their life and it needlessly squanders money in the process.

I'll leave you with a quote from one of healthcare's enlightenment thinkers, Dr. Jeffrey Brenner about the opportunity to drive changes to what may seem like an insurmountable obstacle:

There comes a point in a democracy when the public’s had enough and they stand up and they get upset. And, you know, the baby boomers shifted every public system they’ve ever touched. They shifted schools, colleges and universities. They changed the institution of marriage, of child rearing, of employment. I think that they’re probably going to change the institution of aging, medical care and dying, ultimately. It would not take very much change in taste and preference to collapse the system.

You Can Be Part of the Solution

If you are fired up to improve upon the status quo, please provide input into the following related pieces and share them. 

• Health Rosetta - the solution to purchasing healthcare smarter
• 95 Theses - a set of guiding principles to guide the next generation of delivery, payment systems and technologies.
• Documentary - we need your stories and support.

As one doctor put it, "It's not our fault - but it's our responsibility to fix things." The same could be said for employers. One mid-sized hotelier with about 5,000 employees has taken many of the steps outlined in the Health Rosetta. The results and benefits have been impressive. The following summarizes their experience:

• Their per employee cost on healthcare is less than half of the national average
• Employees are able to go to a nearby high quality clinic dedicated to the employer on company time (not surprisingly, there is very little waiting time)
• The company pays for employee and dependents college education as a byproduct of not having to needlessly waste it on healthcare
• Employee retention hovers around 10% when the industry average is around 60%
• In the 20+ years since they changed their approach, they have saved over $200 million

If this approach was replicated nationwide, there would be a savings of $1 Trillion. The only barrier is CFOs and CEOs accepting the status quo as the company is fully compliant with regulations.