The American people have created the greatest economy in the history of the world. While we account for less than 5 percent of the world's population, we produce nearly 30 percent of the world's total economic output. Our citizens earn significantly more and enjoy far better lives than any other country on Earth.

Senior Fellow Newt Gingrich

Health care threatens to tear this apart. Government is incapable of solving the problem. But American business can act decisively to transform health care and build a brighter future.

America's employers have paid much of the health-care bill for more than half a century, and until the last 20 years or so, this was simply a cost of doing business. Not anymore. According to a recent survey by the Business Roundtable, more than 40 percent of CEOs cite health-care costs as the greatest threat to their businesses--more than energy, litigation and pensions combined.

They have reason to worry. According to McKinsey & Company, by 2008 the average Fortune 500 company may spend as much on health benefits as it earns in profits. Our current path is simply unsustainable.

As the ultimate payer of health-care costs, along with their employees, the nation's employers have the power to change this. Cutting benefits, raising premiums and increasing co-pays and deductibles are not viable long-term solutions. Rather, employers must be bold and leverage their purchasing power to push transformational solutions.

First, employers should radically redesign the way they purchase health care. Our current system pays doctors, hospitals and other providers based on the volume of services and procedures performed, not on their outcomes. A new model must compensate providers based on the quality and efficiency of the medical care they deliver.

As with any supplier, employers should hold their health-care suppliers accountable for delivering better health outcomes at lower costs--and drop them if they do not measure up. Employers and their health plan partners are leading projects that "pay for performance," but these are the exception, not the rule.

Knowing which doctors and hospitals deliver the best care is absolutely vital. The data that can best do this is Medicare claims history. Medicare has detailed information on nearly every doctor and hospital in the country, and employers want to use it to identify the best performers. Unfortunately, the U.S. Health and Human Services Department will not release the data. Americans have a right to know this information, and employers must continue to demand it. It will save lives and save money now.

Second, employers must invest in creating healthier employees. Not only do healthier employees enjoy a better quality of life, but they are very good business. IBM has more than 40 wellness programs that address health promotion, industrial hygiene and safety, medical management and benefit design. These programs have reduced emergency room visits by as much as 24 percent and reduced hospital admissions by as much as 37 percent. Researchers in the American Journal of Health Promotion reviewed 73 studies of similar work-site health promotion programs and concluded that employers had an average return of $3.50-to-$1.

The key to healthier employees is incentivizing healthier behavior. Blue Cross Blue Shield of Michigan will soon introduce Healthy Blue Living to their employer groups, which can cost an average of 10 percent less if employees adopt healthy lifestyles. This is absolutely the right approach because it rewards consumers, improves health and saves money for everyone.

Introducing and promoting enrollment in new insurance offerings, such as high-deductible health plans with Health Savings Accounts, is critical. Just this month, UnitedHealth Group released a study concluding that employers saw a 3 percent to 5 percent decline in health-care costs for employees in consumer-directed plans, while they saw an 8 percent to 10 percent increase for those in traditional plans. More important, health outcomes were better for those in consumer-directed plans. Every employer, particularly small businesses, should embrace consumerism because it delivers better health, lowers costs and expands coverage.

Third, employers must promote the adoption of health information technology. In Michigan, the Health Alliance Plan and Henry Ford Health System partnered with the Big Three automakers to implement electronic prescribing in the region. Last week, Henry Ford announced that in the first 17 months of use the technology stopped nearly 100,000 prescriptions for drug-interaction or allergenic alerts. This undoubtedly saved lives. The $1 million investment generated a $3.1 million savings in the first year alone, primarily because of increased generic drug use.

These changes are profound, but they are the bare minimum that employers must make to see real results. They will be difficult, disruptive, and take time. But real change requires real change. The key question is, "Do the nation's employers have the will to change?" For the sake of the country, we certainly hope so.

 

Newt Gingrich is a senior fellow at AEI. David Merritt is a project director at the Center for Health Transformation.