While some companies trek to
Washington in search of bailout cash,
most are being forced to look inward for survival. What’s clear, however, is that all
business leaders must take a harder stance
on extraordinarily high line items like health
care costs.
Consider General Motors, in the limelight
of late due to its inability to compete, which
spent about $5.6 billion in 2006 on health
care for its employees or, by some estimates,
$2,000 per car produced. These are crippling
costs.
“While we spend the most on health care,
the health of Americans is worse than other
Organization for Economic Cooperation and
Development (OECD) countries,” says
Govind Hariharan, chair and professor,
Department of Economics, Finance &
Quantitative Analysis, Coles College of
Business, Kennesaw State University. “This
implies that, in terms of return on investment in health, we as a nation, and our companies, are less efficient than many of our
competitors.”
Smart Business recently spoke with
Hariharan about why more companies
would be wise to partner with employees
and insurers through wellness initiatives to
build a healthier, wealthier and more competitive country.
In what ways does the high cost of U.S.
health care impact our global competitiveness?
A healthy citizenry is perhaps the primary
engine for economic growth and prosperity.
Healthy individuals are more productive at
work, have lower absenteeism rates and generally are happier. The cost savings to the
economy from healthy citizens is huge.
The overwhelming majority of individuals
in the U.S. receive coverage through their
employer, and health care coverage, which
makes up 12 percent of benefits, is the most
expensive employer-provided benefit.
According to the Council on Foreign
Relations, the United States spends in excess
of $1.9 trillion on health care annually, which
is 134 percent more than the median for
OECD countries. Competing in a ‘flat world’
mandates that companies are cost competitive and efficient.
How are companies working to offset these
extreme health care costs?
One way is to reduce the reliance on workers. Robots don’t require expensive benefits.
The problem is that this results in unemployment, and robots and automation cannot
handle every job. A second way is to increase
insurance costs borne by employees, which
at best is a short-term solution. The third and
perhaps best approach is to encourage better
health among employees. Companies such
as Lockheed and providers such as Wellstar
are increasingly adopting wellness programs
that emphasize exercise, better nutrition and
smoking cessation. General Motors’ Life-Steps health promotion program, for instance, is estimated to have obtained a return
on investment of $2 to $3 per dollar spent on
the program, while others such as Citibank
have seen an ROI of well over $4 per dollar
spent on wellness programs.
What actions can insurance providers take to
help reduce health care costs?
Insurance companies have long been
blamed for everything and especially for not encouraging prevention. Insurers have come
to the realization that in addition to adopting
technology to reduce errors and waste they
must lead the charge for better health awareness and preventive care for the uninsured.
In Georgia, for example, Humana’s wellness
solutions provide services that help build a
culture of wellness through health assessments and health coaching. These wellness
initiatives drastically improve the ability to
identify diseases before they become more
advanced and costly. Through appropriate
incentives in the form of lowered premiums
and through wellness information and
resources, preventive health is becoming
central to the health care system in the U.S.
What can individuals do to help lower their
employer’s health care costs so the company
remains viable?
During tough economic times, preventive
care and wellness often take the backseat.
This is a big mistake. The only way for us to
become competitive again is to have a
healthy work force. While employers can
provide the incentives and structure, employees must take it upon themselves to take better care of their health. Doing so not only
helps them, it also helps their employers and
their country. It is the patriotic thing to do.
How would government-mandated universal
health coverage affect the current health care
environment?
While much has been discussed in terms of
the current system versus universal coverage, the debate is moot as far as health costs
and resultant global competitiveness of U.S.
companies are concerned. Whether it is paid
for through taxes or by the employer, the
costs ultimately come out of the same pocket, the citizen’s. Some efficiency gains can be
wrought out of hospitals and other providers,
but is unlikely to make a major dent in costs.
Increased emphasis on wellness and preventive care and appropriate incentives to bring
it about is the only way, in whichever system
we adopt, to generate the needed healthy
work force and a competitive economy.
GOVIND HARIHARAN, Ph.D., is chair and professor, Department of Economics, Finance & Quantitative Analysis, Coles College of
Business, Kennesaw State University. Reach him at (770) 423-6580, or [email protected].
