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Kaiser Imperatives for Healthcare Reform

1.)   starting with the high incidence and cost of treating lifestyle- and behavior-induced diseases, such as obesity

2.)   public and private stakeholders should make health care more affordable and improve its quality by minimizing the economic distortions that now tend to prevent consumers and providers from making value-conscious decisions

3.)   simplify the system’s pervasive and unnecessary administrative complexity to remove the waste that drives up costs, to facilitate the real-time flow of critical information, and to promote the introduction of productivity-enhancing technologies

Regardless of the mechanism for administering or financing the system, we believe that without addressing these three issues, the sustainability of the system will be threatened.  In other words, a necessary but perhaps not sufficient condition for managing the explosion of HC.

The premiums of commercial health insurance policies, paid largely by employers, help subsidize health care for the uninsured.  Since 1999, the cost of such a policy for a family of four has more than doubled. Today, it equals about one-quarter of the median US household income ($50,740).

It is the world leader in health care research and innovation: more than two-thirds of all Nobel laureates in medicine over the past decade worked in the United States, and more than 80 percent of venture capital in the global health care sector flowed there in 2007.  Wait times for elective surgeries, such as hip replacements, are up to three-quarters shorter than they are in nearly all other countries. About 40 percent of the world’s medical travelers—people who go abroad to obtain acute elective care—come to the United States.

In recent decades, the nature of medical risk in the United States has shifted dramatically.  About two-thirds of all deaths in the United States now result from chronic diseases most often induced by behavior and lifestyle—for instance, obesity and related chronic conditions, type 2 diabetes and related conditions, smoking-related cancers, and alcohol-related liver disease.

Today, for example, health care consumers—insurers, employers, patients, or others subscribing to insurance plans—find it extraordinarily difficult to discern or even define the benefits available at any given price and from any given provider and therefore cannot compare them.

On the demand side, consumers will have to become more responsible for their health care spending, for this would help mitigate the agency problem that currently hampers economically rational behavior and drives up costs throughout the system.

Ultimately, such moves would promote the widespread adoption of pay-for-performance reimbursement schemes and the further development of “infomediaries”—payers and other groups that help consumers make more informed decisions by providing information on prices, service, and quality.

Excessive administrative complexity is the third most important reason US health care is so costly. Research by the McKinsey Global Institute, for example, finds that in 2006, the bill for administrative costs in the United States came to nearly $500 per capita, nearly five times the average level across 13 other countries in the Organization for Economic Co-operation and Development (OECD).