So how do we solve this problem?  It’s very simple, but the answer varies between pension and retiree medical expenses.

Pension Benefits

The future pension obligation for an employer is determined with the following factors taken into account:

• The pay taken into account and against which the formula will be applied;
• The assumed level of pay increases for current employees;
• The percentage of pay that will be provided;
• The life expectancy at retirement age;
• The investment return on monies in the pension trust;
• The discount factor applied to future year obligations; and
• The cost of living increases applied to pension payments.

Many employers also provide for a lump-sum pension payment right from their plans.

I want to zero in one of these factors: life expectancy.  The fundamental assumption under the laws governing pensions is that individuals “retire” and draw a pension when they are no longer working.  The end result is that employers are paying retirement benefits to individuals no longer delivering any services to them.  This is also true of other post-employment benefits, but, other than retiree medical coverage, these benefits tend to be temporary.

When the Social Security system and private pension plans were created in the 1930’s, the life expectancy for a benefit recipient retiring at age 65 was around 5-7 years.  Today, many organizations have agreed to retirement benefits at age 55, and the life expectancy is around 27 additional years.  In effect, pensions are paid over a much longer period of time than they were decades ago, both because of earlier retirement and longer life span.

Moreover, in the early days of Social Security and private pension plans, people truly stop working when they retire.  Today, many retirees from one employer, especially at age 55, go to another employer and work full-time.  This is sometimes called “double-dipping.” We want to provide income for the elderly who cannot work, but many pensions go to people who are working or are able to work.

Many solutions have been proposed to reduce the pension obligation burden, among them:

• Changing the pay calculation formula to reduce the wage or salary base subject to the pension formula;
• Reducing cost-of-living adjustments;
• Requiring an individual to work longer to begin collecting retirement benefits; and
• Reducing the percentage payout.

The common element of all these solutions is that they require employees or retirees to give something up. Inevitably, these solutions get resisted by employees or their union representatives.  But what if there were a solution that actually increased someone’s take-home income and cost the employer less?  There is such a solution.

The solution requires the tax law to be changed to allow someone to keep working, although at a reduced pay rate, but get enough of his or her pension benefit to take home more money in the current year. Current law allows someone to work part time for the employer and collect a pension, but limits that work to 750 hours a year.  We need a solution that allows an employee to collect a portion of his or her pension and work full time, although at a reduced pay rate.

How would this work?

Today, if someone makes $100,000 a year and has a pension that equals 75% of his or her pay, and gets the right to retire with a full pension at age 55.  In effect, the employer pays $75,000 per year for 27 years, plus cost-of-living adjustments.  Without adjusting for pay increases for an active employee or cost-of-living adjustments for a retiree, the employer is responsible for $1,725,000 if the employee lives to age 82.

However, imagine a law that allows the employer to start to pay down the pension immediately, but only if the employee takes a pay reduction.  For example, let’s assume the law allows the employer to pay $30,000 a year for the employee from the pension and $75,000 in base pay. The employee would get 5% more. The employee decides to work 10 additional years.  The first ten years cost the employer $300,000 instead of $750,000, and the employer can take an immediate reduction in its pension costs.

Why has this not been seriously pushed before?

• Historically, companies wanted older workers to retire so that they could replace them with younger workers.  The reduced pension cost of keeping an older worker was more than offset by the reduced cost of replacing the older worker with a younger work.  However, in my proposed solution, the employer can effectively replace a $100,000 worker in place with a $75,000 worker, without losing that older worker’s skills and experience.
• In many cases, the older workers were not as productive as those who replaced them.  Today, there is ample data to show that older workers are more productive, more loyal, and do higher quality work than those who replace them.
• Moreover, in many industries, it is extremely difficult to replace older workers, because there are fewer younger people with the same skills.  Such positions as mechanical and aeronautic engineers are particularly hard to replace.
• People always thought of pensions as a very small post-employment benefit that did not burden the employer.  Because of a combination of lower investment returns, higher percentage payouts, much lower discount rates on future benefits (which makes them higher), and longer life expectancy, the per-year cost of future benefits has grown dramatically.  This was not as attractive a solution under earlier conditions, but the math makes it much more attractive now.
• The math might be more complicated if the average employee can retire at age 55, but actually retires at age 62.  In that case, the program can be implemented at the average retirement age, rather than the initial retirement age.  There is still a savings, but it might be smaller, although still significant.

This is not a solution for every organization, because many employers simply need to shrink their workforce or to replace older workers with people who have very different skills. However, it should be available to employers who can make it work.

There needs to be another change in the law: employers need to be able to offer this kind of program to some workers, perhaps those over a certain age or a certain level of experience, but not other workers.  Right now, tax and labor laws severely limit discrimination within a workforce.  This is a great transitional strategy to help employers move away from defined benefit pension plans that no longer work for them..

Retiree Medical

I have talked about the easy solution to the retiree medical problem: helping people stay healthier longer, so that they do not have the long, slow decline with multiple chronic diseases that adds $200-300 thousand dollars to lifetime medical costs, relative to healthier retirees.  Taking the medical inflation rate down by 1-2% per year would significantly reduce what employers have to set aside for retiree medical coverage.  Moreover, healthier employees are more productive and do better quality work.  Employers just need the will and the skill to fix the problem by focusing on a culture of health for both employees and retirees.

The challenge for managing retiree health is more complicated, because retirees are more geographically scattered, but there are many opportunities for retiree outreach, especially if “corporate practice of medicine” laws can be modified to give employers an opportunity to provide primary care clinical services to retirees who do not have their own primary care physician.

These are win-win solutions, as opposed to solutions that involve cutting back benefits, and creating resentment by employees or retirees or their families.

The usual solutions are to put supermarkets in the inner city, or to have farmers markets in the inner city or urban gardens in abandoned lots.  While all of these solutions are excellent long-term answers, all have problems or limitations.

Supermarket chains are increasingly reluctant to begin an effort to put a supermarket in an underserved low-income, inner city area.  There is an old saying that “No good deed goes unpunished” and that certainly applies to supermarket chains that try to do the right thing.  Almost always, labor unions and community coalitions try to force the chain to make various kinds of concessions as a condition of withdrawing objections, and small businesses who perceive they are threatened by the supermarket fight to the death to keep it out.  Last September 29, The New York Times published a story about a supermarket chain that tried to open a store in the Bronx, and was stalled by several different special interest groups.

The farmers markets and urban gardens are good solutions for growing foods during the growing season, but they do not provide a complete solution for population food needs during colder weather.

What works all year around is a delivery service that regularly trucks food that is ordered online from the supermarket to convenient locations in the inner city that only need storage space and security from break-ins and thefts.  Churches, schools, community centers, and industrial warehouses located in inner cities all can serve this purpose. The Baltimore City Health Department is actually pioneering this idea in a program it calls the “Virtual Supermarket Project.”

When I have spoken with people who have attempted to solve the food desert problem with delivery services, they always say that the “economics of the proposed service do not work for the delivery service.”  That strikes me as a phony argument.  Certainly, if a delivery service tries to copy a door-to-door service it provides in a wealthier area, the economic argument would make sense.  However, delivery to a location that clusters or groups multiple orders, but is convenient for local residents makes a whole lot more sense.

This whole discussion reminds me of the economics of mail delivery, which, by the way, is a way of delivering fresh fruit over long distance from gourmet services like Harry and David.  Postal services that have more freedom to change their delivery model, such as the Emirates Post, deliver to clusters, and charge extra for door-to-door delivery.  When I was at Pitney Bowes, the major corporate customers we served through our mail delivery services increasingly wanted delivery to clustered mailboxes rather than to individual desktops or mail cubicles.

In some European countries in which postal unions are large and powerful, the delivery obligations are far greater than what we have here in the United States.  For example, in the UK, on some routes, letter carriers have to walk up several flights in apartment buildings and deliver mail through slots on the doors of individual apartments.  This preserves postal jobs, but it makes delivery service extremely expensive.

The reason I prefer delivery services as a near-term or even a medium-term solution is that the construction of a supermarket, even when the supermarket owner can run through the gauntlet of community special interest groups, locks residents into the choices that supermarket offers.  Delivery services give the residents an ability to buy from any grocery store or supermarket within a reasonable radius of the community, which creates more competition.  When a supermarket comes into a community, it adds a single competitor, often one that displaces some or all of the small food stores already in place.  A delivery service keeps local competitors in place, and adds competition from the outside.  Moreover, over time, it can even incorporate long-distance online purchases of non-perishable items to put even more competitive pressure on the local bodegas or convenience stores that fail to offer adequately healthy food.  Having access to delivery services makes everyone more willing to be competitive in their pricing and their services for poorer communities.

Supporters of these pieces of legislation consider them a necessary first step toward longer-term health care system transformation.   Many point to a September 2009 Harvard Medical School study which estimated that lack of health insurance cost 45,000 American lives each year. If this admittedly imperfect legislation saved those 45,000 lives, how could it be negative? Moreover, how could anyone who cares about human life not enthusiastically support this legislation?

The flaw in their thinking is that they assume that the legislation has no other consequences that might result in reduced health care access, and, therefore, a potentially greater loss of lives for other reasons.

People fail to seek out health care for many reasons, of which the fear of financial ruin is only one:

• A significant reason for failing to get health care is lack of convenient access.  Many low-income people who get health insurance through Medicaid or SCHIP (two federally-funded state-managed programs) or other state-funded programs for the poor and uninsured find that they cannot get access to physicians because those programs do not pay the physicians an amount that allows them to make a profit on those office visits, and many physicians refuse to accept Medicaid or even Medicare patients.  In fact, based on the Massachusetts experience, the increased demand on scarce health care resources in Western Massachusetts and Cape Cod has actually reduced access to physicians for these populations.
• Some people, including those with insurance, wait to get diagnosed for medical conditions or fail to adhere to drug treatment plans that would treat their conditions because they are afraid to confront the reality of their condition.
• Some people do not know that they are at higher risk for a particular disease, and, therefore, do not get screenings that would detect that disease in time to get treated.  One unintended consequence of regulations issued under the Genetic Information Non-Discrimination Act is that the process of gathering family history information outside the physician’s office is far more constrained, and, therefore, will happen less frequently.  While everyone should get medical advice from his or her primary care physician, a significant part of the population does not have primary care physicians, and, therefore, will never get that advice.  Since this legislation has made it harder to get appointments with physicians because it has increased demand, but not the supply of physicians, it has probably worsened this problem.

While supporters of these pieces of legislation can envision the improved access health insurance creates, they cannot easily comprehend the reduced access the greater demand-supply imbalance creates.

If 32 million Americans get added to the ranks of those seeking health care and we do not change the number of health care professionals, that means that physicians have to do one or more of five things to manage the increased workload, four of which definitely worsen the overall quality of system health care:

• Lengthening their work days and weeks, which means that they are delivering more diagnoses and treatments while fatigued;
• Spending less time with each patient, which means that they will gravitate toward quicker diagnoses and treatments, as opposed to a more holistic approach to the patient;
• Delaying scheduling appointments for discretionary care, such as preventive screenings, in order to deal with acute care problems of their patients, especially the newly insured; or
• Deciding to drop patients for whom they are paid the least or who are the most challenging (Medicaid and SCHIP patients).

The fifth tactic is to delegate more tasks to nurses and nurse-practitioners, which would not degrade care quality or access, but there is a shortage of these professionals as well, so it is not clear that this is a viable alternative for many physicians.

In Massachusetts, it appears that most physicians are either delaying non-emergency appointments or dropping Medicaid patients altogether.  Why is this significant?

• If, for example, I am not excited about getting an invasive screening like a colonoscopy, and I find that I have to wait six months, I might simply skip the procedure.  We also have to ask whether delays in getting patients in for colonoscopies, mammograms or blood tests because of increased demand will cause individuals to reach stages of disease progression that they would not have reached if the physician’s office were less busy.
• Under the best of circumstances, Medicaid patients fail to show up for appointments in private physician offices almost half the time. Both pieces of legislation create incentives for physicians to drop Medicaid and Medicare patients to absorb newly-insured patients coming from higher-paying insurance exchanges, especially since the Medicaid patients take the most time and have the most challenging medical problems. Putting low-income patients in a position in which they have to travel longer distances (especially if they do not own an automobile), seek out new physicians, wait longer for appointments, or wait within a doctor’s office longer even when they have an appointment makes it more likely that they will skip needed care.

We need an objective study by the Harvard Medical or a similarly reputable research organization that analyzes the behavioral responses of physicians and patients to an increased patient load, and that determines the health effects from those behavioral responses.  Will patients who would have been saved through their current access to health care now see that access decline so much that they either delay or skip needed preventive screenings and end up dying because of that?  I believe this is likely, but, obviously do not know whether it will end up being more or fewer than the arguable 45,000 lives that could be saved through giving people access to health insurance.

That is why I felt that the most compelling priority for lawmakers was to address the imbalances between health care demand and health care availability, not to do a massive health insurance expansion program and leave the health care availability problem largely untouched.

Many pieces of the federal legislation attempt to increase the supply of physicians and nurses, particularly in under-served areas.  However, many major obstacles to health care capacity result from a variety of state and local laws, regulations, and practices that this legislation did not touch, such as Connecticut’s certificate of need process, which is often used as a weapon to protect small, local physician practices against perceived competition from small retail clinics.

I do not advocate centralizing the health care system, but the real obstacles to health care access, which is what matters more than health insurance access, relate to many policies and practices yet to be addressed.

It took much political will for the President and the Congress to enact this well-intentioned piece of legislation.  I just wish they had staged the insurance expansion more in parallel with health care capacity expansion, rather than jumping out ahead with insurance and leaving the health care piece to be addressed more slowly.

We have known for a long time that government is more responsive to a well-organized single-issue constituency, even if the vast majority of voters would oppose the position the single-issue group is taking.  For example, that is why government officials have consistently been reluctant to take on the National Rifle Association, even though the vast majority of Americans favor a more aggressive regulation of guns than is the case today.  I am not making a value judgment about this issue, other than to say that elected officials think of the electorate as a collection of well-organized, passionate special interest groups than they do a mass of voters to which they have to respond.

We also know that elected officials and the media are much more likely to respond to a single dramatic event or story than they are to a gradual, broad-based, statistically significant trend, even if the broad trend has profound societal impact.  For example, although the statistical evidence of the deterioration of our transportation infrastructure is overwhelming and has been for several decades, it took a dramatic event, the collapse of the bridge on I-35 across the Mississippi River between Minneapolis and St. Paul to get Minnesota to act on its infrastructure problems.

Finally, we know that closing or shrinking a major community facility, even one which has outlived its usefulness, is extremely difficult.  That is why it is very difficult to close military bases and post offices.

Put all three of these observations together, and it becomes clear that it will be extremely difficult to take the steps that would flow logically from true health care payment and delivery reform and from meaningful prevention initiatives.  If government officials are successful in developing a healthier population that uses the health care system less often, and a health care delivery model that is smaller and more efficient, the logical consequence is that much of the capacity we have today will be unneeded.

However, the three issues will come into play:

• Unionized health care workers, physicians trade groups, hospital associations, and pharmaceutical companies, although they represent a small part of the voting population, are single-minded in protecting and expanding what they have.
• Closing a badly performing hospital produces benefits that are hard to dramatize, even though the whole population will get better care.  The story of a hospital worker who may be a single parent who loses her job is a highly visible and dramatic event.
• Closing a hospital in a community is harder than closing a military base or a post office, because it is a vital resource.

What do we do about this set of dilemmas?

• Acknowledge the problem.  When there are debates about the proper payment and delivery architecture of the health care system, let’s recognize what’s really at issue, and accept the fact that we need to think of transition plans.  Let’s cut through the rhetoric and get to the real issues.
• Take advantage of the natural personnel attrition that takes place in any marketplace.  The U.S. Postal Service has shrunk its employment significantly since 1996 and has improved its quality of service.  Trying to recruit more people into health care other than making sure we do not drop below critical mass is not a good decision.
• Make changes in such a way that they do not radically and abruptly disadvantage any existing interest group.
• Get the institution to redefine its mission and find other markets for its services.  For example, the highest and best use of a hospital may be to provide remote telemedicine services to smaller, less equipped facilities in rural areas here and abroad.
• Find a higher and better use for the capacity that would otherwise be closed, and think through how those who lose their jobs can be redeployed.

This last point deserves a little more explanation.  Health care facilities are like any other organized activity: they are a collection of assets that have been assembled to accomplish specific tasks and purposes.  Those assets have the potential to be repurposed and other assets can be substituted in their place.  They also have far more potential marketing and delivery reach because of the Internet.

The best example of which I am familiar is the closure of St. Joseph’s Hospital in Stamford, Connecticut, and the construction of a wellness center on the same site back in the late 1990’s.  To accomplish this closure was not simple, because many stakeholders had to buy into the opportunity.  Moreover, getting the wellness center in place required significant philanthropic contributions, a process in which I assisted.  However, the end result was the creation of a more appropriate, more modern, and higher value community resource than the hospital.

This kind of process will have to be repeated in thousands of cases around the United States if we are going to bend the health care cost curve and migrate to a higher quality health care system.

• It’s no different from any other situation in which you commit to spend money before you have it, and when you have confidence that you can get it, which, by the way, is why Bear Stearns and Lehman Brothers went bankrupt: they had fixed debt and contractual commitments, but found the short-term markets for getting cash temporarily closed to them.
• The obstacles to the cost reductions that could take health care spending down are formidable and, perhaps, unconquerable.

Atul Gawande, a brilliant professor at Harvard Medical School, made both of these arguments in a short comment in the April 5, 2010, issue of The New Yorker, in an article entitled “Now What?”

Relative to the first argument, he states that, whereas opponents of the legislation portrayed it as a “government takeover,” the legislation, in his words, “counts on local communities and clinicians for success.”  He uses many examples to point out how local communities will have to function differently in the future from what they have in the past to make health care costs come down.

His specific example addresses exactly what concerned me when I wrote my original commentary on the legislation and later when I responded to Congressman Murphy.  He described a very effective prevention strategy adopted by Children’s Hospital in Boston to reduce the rate of readmissions for children’s asthma by 80%.  This strategy included not only post-discharge monitoring, but also home audits to find sources of pollutants that triggered asthmatic attacks and even the provision of vacuum cleaners to families.

However, Gawande pointed out that admissions for asthma attacks were one of the leading sources of revenue for the hospital and that the hospital would have many more unoccupied beds.  As he points out, “So far, neither the government nor the insurance companies have come up with a solution.”

Gawande correctly points out that the health reform process has just started, and that these kinds of problems make the future “scary” because there is no obvious and simple path to driving thousands of communities to make decisions like these which are necessary for the promise of this legislation to be fulfilled.

From Congressman Murphy’s standpoint, as well as the standpoint of those who voted for the legislation, their view has to be that, at least, this legislation got things started, and, for that, we should be grateful.

I agree that it was better to enact imperfect legislation than to do nothing, but this legislation creates such an imbalance between inevitable spending on a currently flawed system and highly uncertain, but necessary, reforms to that system.  I believe we could have done better.

Nevertheless, our lawmakers have acted and we now have to move on and figure out how to stimulate those thousands of state and local reform actions that will mitigate the cost this legislation will create.

The theory behind this strategy is that smoking, not ingestion of harmful ingredients, is the health risk both to the user and to bystanders.  Clearly, when someone orally ingests nicotine, there is no second-hand smoke problem for others, and, for the user, there is no problem with small particulate matter in the lungs.  The remaining hazard is the chemical alteration of the body from the ingestion of nicotine and other substances.  Smokeless ingestion systems are less harmful than traditional cigarettes, but some degree of harm remains.

Even more interesting, Altria recently acquired a company that markets smoking cessation products, which positions it to offset the decline of sales of cigarettes.

This article poses two big strategic questions in the battle to improve health:

• Can we enlist those who have produced unhealthy products and services to transition to healthy or, at a minimum, less unhealthy offerings?
• Should we support the marketing of transitional products that retain addictive behaviors which are still harmful, but are less harmful than what they replace?

Do We Enlist the Offending Companies and Industries in Developing Healthier Alternatives?

My answer to the first question is that I am convinced that food, beverage, tobacco, alcohol, and drug companies have to be enlisted in finding solutions.  They create jobs, economic return to a wide range of shareholders, including public and private pension funds, and community value, and we should attempt to redirect, rather than destroy, them.  The challenge is how to break through the inertia they undoubtedly experience when their own industries and probably their own organizations have deeply-imbedded cultures that would prefer that nothing change.  It is not easy, and, in any industry, only a handful of players will be bold enough to move beyond a successful business model when it is still producing big profits.

Some companies are making the transition already. Pepsico is making a strong commitment to reducing the marketing of its most sugary beverages and to reducing the sugar and sodium content in all of its products.  Campbell’s Soup recently reduced sodium content in its soups. Wegman’s, a retail grocer in Rochester, New York, took the bold step of discontinuing the sale of cigarettes in its stores, a decision that must have cost it short-term profits.

However, many companies do not know how to make this transition, or fail when attempting to do so.  How does a pharmacy or retail grocer which makes a lot of money slotting and selling cigarettes replace the profits from those cigarettes?  Almost certainly, there is no comparably profitable retail item in the near term.  As someone who attempted to wean Pitney Bowes from being too dependent on postage meter revenues and profits, I can state categorically that the first step in moving toward change is to accept the fact that the future requires a higher volume of sales to replace what’s lost and a diversification into adjacent market spaces.  Companies that try for too long to hold on to an unsustainable business model or product line decline very rapidly when change comes.

I also believe that government can play a constructive role in setting standards and timetables for change.  Even in the most change-resistant organizations and industries, there are those who want to change and who know how to make it happen.  Government standards and timetables give them air cover to win the debate against change-resistant leaders in their organization or marketplace.  To some degree, governments have to recognize that there is a delicate balance between forcing change too fast and accommodating the most reluctant industry players.  Governments should find the center of gravity for an industry and peg their change decisions at that center or at an even more aggressive point, not at the slowest and most change-resistant point in a marketplace.

Governments also have to come down hard on industry players that want to take the easy way out by marketing that they have healthy alternatives when they really do not.  Those kinds of players hurt everyone else.  Governments also have to recognize that any mandated change will produce winners and losers.  They cannot worry about insulating losers from the consequences of their bad decisions.

Supporting transitional products and services that are harmless, but less so.

My moral position is that tobacco is different from foods, beverages and alcohol.  There is no demonstrable affirmative benefit from tobacco products, whereas there are positive benefits from food, beverages, and alcohol as long as they are consumed in moderation.  Moreover, tobacco is an addictive product and I am opposed to marketing even less harmful versions of addictive products, for two reasons:

• When there are reduced quantities of the harmful, addictive substance in a product, there is a great temptation to cause people to consume more of it and end up with the same quantity of harmful substance ingested.  Thus, for example, if a cigarette company reduced the nicotine content in a cigarette by 50%, it might be tempted to get people to consume twice as many cigarettes.  The tobacco company would love this result because it can make more money, but this is bad for the customer.
• It is too tempting for a marketer of a less harmful, but nevertheless harmful, product to be satisfied with reducing harm rather than eliminating it.  Inertia is a powerful force when companies make a high profit margin on even less harmful products.

Relative to food, beverages, and alcohol, the challenge is to get people to consume in moderation.  To the marketer, the goal should be to maximize profits and reduce consumption at the same time.  The best example of how to do this is in the coffee category.  Starbucks found a formula to get people pay well over $2 for a cup of coffee that used to cost about $1.50 in most diners.  The ingredients cost more, but not that much more, and, clearly, the barista added more labor value than the retail clerk at a traditional diner.  Thus, there is always a strategy of selling a premium product, and redefining the category.

The candy companies have used a somewhat different strategy.  They either keep the price flat or slightly increase it, but they reduce the size of the candy bar to increase profits.  The smaller portion size leads to reduced consumption, but increased profits.  The soft drink companies have done the same with the 8 ounce cans in place of the 12 ounce cans.

When I was a student in Madison, Wisconsin, in the late 1960’s, the state came up a clever way to address heavy drinking by students.  Instead of trying to ban alcohol from campus or to force bar owners to enforce a 21-year-old drinking age, they authorized the selling of on-tap 3.2% beer.  This watered-down beer tasted sufficiently like regular beer that it was very popular.  People got bloated with beer long before they could get drunk.  Air and water are great ways of reducing consumption without appearing to be operating in a “nanny” state.

Therefore, I take the view that there are a sufficient number of ways to transition to healthy offerings that we should never need to support partially harmful products and services.

There are a handful of arguments usually made against employer-provided health insurance, some coming from the political right and some coming from the political left.

Argument 1: Employer-provided health benefits are a vestige of political and economic conditions that no longer exist.

Opponents of employer-provided health benefits argue that, because such benefits began during World War II because employers were subject to wage controls, they must serve no useful purpose.

There are two flaws with this argument:

• If health benefits did not make business sense, employers would not have chosen to offer it at any time, or would have stopped offering it as soon as they were no longer subject to wage controls.  There were many other benefits they could have offered. Both the Conference Board and the Human Resources Policy Association, which have a majority of large businesses in their membership, have found in private surveys that the vast majority of their members want to offer health benefits.  They see it as a business imperative, not something they would prefer not to offer.
• The argument is irrelevant.  The merits of employer-provided health benefits need to be debated based on today’s conditions, not what triggered the decision by employers to offer them 65 years ago.

Argument 2: Employers do not belong as an intermediary between patients and doctors.  Patients do not trust their employers to provide health benefits, and would prefer to deal directly with the health care providers.

While I am sure that some employees distrust employers, the confidential surveys Pitney Bowes and other companies have done over a long period of time indicate that employees are highly satisfied with the way a first-rate health benefit is administered.

Employers who offer a stingy health benefit or who administer their health benefit program poorly or offer no choices among insurers, providers, or health plans will be rated poorly by employees.  However, judging health plans by the poorest offerings is liking saying that all elected officials should resign because some of them are crooks.  The best employer health benefit programs are far better in addressing patient needs than either Medicare or any private insurance program.

Argument 3: We are competitively disadvantaged because our employers absorb health benefits costs and our foreign competitors do not.

The comparison between GM and Toyota relative to the cost of health benefits, usually quoted at a $1,500 per car disadvantage for GM, is flawed at many levels:

• GM has a poorly designed health benefit largely because it made no effort to use the health benefit to drive healthy behaviors by its employees.  The Japanese have lower health care costs because they eat less, pay a lot more attention to infectious disease control, and are far more controlling than is the U.S. on health-related behaviors.  They also tightly control health care costs.
• The cost of health benefits is built into the Japanese tax system.  Everyone pays for health benefits, not just the employer and employee.  The real meaningful comparison is the portion of Japan’s corporate income taxes allocable to health care versus GM’s cost of health benefits.  It’s on the income statement, but as part of a corporate tax payment.

Argument 4: Employers have no reason to be delivering health benefits.

This argument is the most flawed.  Large self-insured employers can aggregate more economic and non-economic benefits when they invest in improving employee health than any kind of payer.  Besides reducing health care costs, employers investing in improved employee health get reduced absenteeism, disability, and workers compensation costs, improved productivity at work, improved quality of work, and increased loyalty and retention.

Some people who say that the VA system is a great health care system and want that to be the model for everyone.  If our goal was to produce the best broad-based health care system, they might be right, although employers have a significant advantage in being able to offer care on worksites, which produces much better use of the health care system.  However, if our goal is to maximize population health and give businesses incentives to invest in creating healthy environments, that would not be right.  The VA does nothing to make the environment in which people live every day healthier, whereas employers can make environments healthier.

In the UK and Canada, it has been difficult for national governments to get employers to invest in workplace health because employers gain no benefit from reducing health care costs.  The other benefits, standing alone or in aggregate, are insufficient to trigger investments in health benefits.  Put them together as the U.S. has done and some very good investments get made.

Another reason employers get big economic leverage from offering health benefits is that they alone, by controlling the work environment in which employees spend a majority of their waking hours, can provide an environment in which people eat nutritious foods, get sufficient exercise, do not smoke or drink alcohol on the job, and are safe from being victims of violence, accidents or injuries.

Finally, through a quirk of the 1974 Employee Retirement and Income Security Act (ERISA), self-insured employers have more freedom to innovate and to correct mistakes than either government payers or state-regulated private insurance plans. The best self-insured employer plans have lower costs, provide better health care, create a more productive environment, are more innovative in embracing good new treatments, and are faster to avoid popular, but bad, treatments like the high-dose chemotherapy that government mandated in the early 1990’s.

Argument 5: Employer provided health benefits only work for large self insured employers with stable populations, not for high-turnover large businesses or for small businesses.

This argument, which sounds superficially persuasive, is not borne out by experience.  Companies like Costco, Safeway, WalMart, Wegmans and Starbucks, all operating in businesses with traditionally high employee turnover, have managed to build strong business cases and to achieve success with employer provided health benefits.  They have reduced unwanted voluntary turnover because of their cultures of health and have improved work productivity.

The issue with small businesses is not their inherent inability to implement health benefit programs, but the rigid and misguided state insurance regulations that prohibit insurers from offering wellness incentives to the small business marketplace.  That is starting to change, and I am pleased that Connecticut now allows its insurers to offer wellness incentives.  Moreover, Quad Med and other large employers now offer health care to small businesses that share industrial and offer park space with them.  The UNITE Here Health Center in New York City offers a walk-in clinic for members of five labor unions in the Garment District.

I will continue to fight for employer-provided health benefits because they integrate health, health care, and insurance in the most productive way, and recognize that we have to create healthy environments for people to maximize their potential.

Harvard professor and author Louis Menand wrote a very insightful article in the March 1, 2010, issue of The New Yorker entitled “Head Case: Can Psychiatry be a Science?” In it, he describes the complexity of defining, diagnosing, and treating psychiatric disorders.  He quotes many experts in the field of mental and behavioral health disorders who, as he put it, in referring to the work done Professors Jerome Wakefield and Allan Horwitz

“…the increase in the number of people who are given a diagnosis of depression suggests that what has changed is not the number of people who are clinically depressed but the definition of depression, which has been defined in a way that includes normal sadness.”

He later points out that the traditional disease model with which we diagnose physiological disorders is of no help.  In cases in which we present a fever to a doctor, the doctor can conduct a test to determine whether the condition is a bacterial infection treatable with antibiotics, or a virus, which is not treatable.  With psychiatric disorders, particularly a mild case of depression, there are many false positives, because no one has found a test that, with any degree of confidence, demonstrates that someone has a biologically treated case of clinical depression.

Why is this important?  It is an example of why the traditional insurance model does not work for health care, and why giving everyone access to affordable “insurance” is doomed to failure. Insurance covers known or definable risks that do not increase through being radically redefined over time.  If they do, premiums go way up.  For example, life insurance policies are typically not issued to people living in a war zone in which the risk of death has exponentially increased and shows no signs of being predictable or controllable.  Insurance companies can feel comfortable insuring against death, injuries, or property damage to cars and homes because these risks do not jump out of control in a short period of time.

Health insurance has become more like life insurance in war zones, with one big difference.  In the war zone example, an external set of circumstances, the beginning of a war, has increased the risk.  In the case of health insurance, not only can external circumstances raise the risk and cost, but both the consumer and the providers of treatments can redefine the risks and increase the costs.

Think about a life insurance policy.  The risk against which to be insured is “death.”  Imagine if a life insurance policy were suddenly converted into a policy that insured against “death,” being diagnosed with a terminal disease, and losing one’s home.  None of us would expect the insurance company to pay for these other events, because the policy has a well-defined risk it covers.

However, the definition of “health” keeps changing, sometimes through patient behavior, sometimes through physician behavior, sometimes through the marketing done by pharmaceutical companies, and sometimes by operation of laws and regulations.  In the last 20 years, we have seen the expansion of “mental health” coverage to include mild depression that was not deemed worthy of insurance coverage.  While we expanded mental health coverage at Pitney Bowes because we believe treatment for mental conditions like clinical depression is foundational for getting people able to adhere to treatment plans for diabetes, heart disease, and hypertension, we also were able to put in controls that prevented runaway health care cost increases.

Similarly, drug companies have defined erectile dysfunction as a medical condition requiring treatment by a physician and a drug treatment like Viagra.  I have no problem with this process of creating new medical conditions that lend themselves to drug treatments, but we should not be surprised that health care costs keep going up.  Similarly, 20 years ago we felt sad for people who could not have children and glad for them if they were able to access fertility treatments to be able to fulfill their dreams of being parents.  However, to require that multiple-egg fertility treatments be included in every insurance policy issued in a state, as is the case in Connecticut, drives up health care costs for everyone.

There are many other examples of marginally effective or even ineffective treatments that patients and physicians, and eventually lawmakers, believe they have to make a requirement in every health care insurance policy, so the cost keeps going up.  The notion that, by having government control everything, we will see cost reductions over time, is not credible: government mandates which drive up costs have been part of the problem in the first place.  If anything, government control of health care will accelerate the process of adding more “requirements” to health care.

There are three cost drivers in health insurance:

• What gets covered and paid for;
• What is paid for each transaction in which there is a diagnosis consistent with a covered item; and
• The frequency with which transactions occur.

Government can be very effective in mandating what gets paid per transaction, and, indeed, through Medicare and Medicaid, for very low administrative costs and with high reliability, government, through its contracted third-party administrator relationships, does a very good job paying doctors, hospitals, drug companies, labs, and other care centers for services rendered.  In fact, although it is not clear whether a majority of physicians feel this way, a significant number of physicians would prefer the simplicity and predictability of payment of a single-payer system operated on behalf of the government over the confusing, complex, and resource-consuming challenges of submitting and defending private insurance claims.

What government does poorly is keeping control of what gets covered and paid for, and, because of its low administrative overhead and its payment on a transaction-by-transaction basis in what we call a “fee-for-service” system, controlling the frequency of transactions.  If I have a chronic disease like coronary artery disease, no payer can monitor whether it is appropriate for a cardiologist to see me 3 versus 5 times a year.  That decision has to be left to the physician, and I am certain that an attempt by government to regulate it would be met with extreme anger and resistance by patients.  Yet, a 20% reduction in payments to the cardiologists could be easily offset by increasing the frequency with which cardiologists see patients.

What would also happen is that physicians would spend less time with each patient, which would reduce the effectiveness of each visit, and the treatment paths would more often be more tests and more drugs, which will add cost to the system.  I remember having a problem with staph infections on my face in the late 1980’s and early 1990’s.  The private practice physicians whom I consulted had 5-10 minute visits, which only gave them the ability to diagnose the problem and prescribe a medication.  Dr. Jack Mahoney, the Pitney Bowes Medical Director, whom I first consulted in 1996 and who had the luxury of a 20-minute visit, determined that I needed to change how I shaved, and was able to give me advice that not only eliminated the problem at the time, but prevented it from ever coming back.  He was not rewarded for having encounters with me, but for making me healthy.

We need health promotion reform first, and health care payment reform next.  If we solve these problems and give physicians the ability to practice medicine well and to be rewarded handsomely for helping prevent disease, the insurance problem will take care of itself. Focusing primarily on insurance is a deeply flawed approach.

He stated that there were three fundamental differences:

• Democrats favor comprehensive reform and transformation; Republicans favor a more incremental approach.
• Democrats believe that access is the priority, rather than cost reduction; Republicans believe that if health care costs are reduced, the access problem will get solved.
• Democrats believe strongly that the government needs to set standards for health insurance and health care; Republicans believe that the market, particularly consumers, need to decide what they want for health insurance and health care.

Where do I stand?

• I am somewhere between the two parties on the comprehensiveness issue, although I tend to believe that comprehensive reform opportunities come along infrequently and we should take advantage of this one.  On this issue, I would agree with the Democratic philosophy.
• On the other hand, I do not believe we can tackle the insurance access issue without understanding why access has been a problem in the past. Runaway health care costs cannot be deferred until later.  Business and global competitiveness depend on addressing cost before access.
• Relative to health care needs, I believe the government should create a safety net for those unable to get coverage from private insurance, although I do not believe that safety net should include either guaranteed issue or elimination of pre-existing condition requirements for private insurance policies.  The burden for the least healthy members of our society, and them alone, should be borne by all citizens, not in a way that burdens every private insurance policy.  Government is totally ill equipped to decide on minimum coverage for everyone else.  Over the years, elected officials have repeatedly added coverage mandates to all insurance policies because of the power of special interest groups, whether or not the mandates represented good medicine.  Think back to the excessive expansion of bone marrow transplants combined with high-dose chemotherapy in the early 1990’s because cancer advocacy groups mistakenly believed it could save lives.  In fact, after a Congressional mandate was also adopted in many states, the treatment was found to be worse, on average, than doing nothing.  It shortened lives.

Some very smart people have said to me: “Why don’t we solve the insurance problem now, since we can, and we’ll get to cost reduction later?”

Aside from the competitiveness issues to which I referred above, there are two other problems with expanding coverage and not dealing with upstream prevention and health care system issues:

• Giving someone access to health insurance is not only not the same as giving them access to health care, it often results in lower quality care for everyone because of increased demand, and, eventually, decisions by doctors to stop treating Medicaid patients because they get reimbursed less than they do through commercial insurance.  Having an insurance card, but no doctor to use it with, is useless. Massachusetts has had universal health insurance since 2006, but both the access to care and the quality of that care have suffered.  More non-elderly adults report difficulty in getting access to physicians in 2009 than they did in 2007.
• To the degree that there is universal insurance, but inadequate access to doctor care, there is even more strain on our emergency departments. Many studies have pointed out that a majority of the people who access the emergency department for non-urgent care, that is, inappropriately, have insurance coverage, but either do not have timely access to care or are too impatient to wait until they can get access.  The system gets stressed at its weakest point, emergency care.

I am most disappointed that the Democratic majority in Congress and the very capable White House staff could not establish a prevention and wellness agenda, and begin to take on the badly broken fee-for-service health care payment system.

People who argue the practical politics of tackling the insurance issue always point out to me that politicians are swayed by hard-luck stories, individuals who died or went bankrupt because they could not afford sufficient health insurance to cover catastrophic health problems like cancer, heart disease, or a serious injury.  Unfortunately, no health insurance system can eliminate these tragic stories.  Moreover, increasing demands on the health care system without increasing the supply of physicians and nurses creates other kinds of tragedies.

Politicians are very moved when an individual tells a story about being unable to afford a “life-saving” cancer treatment because of no or inadequate health insurance. What puzzles me about these stories is whether the patient has attempted to get relief directly from the pharmaceutical manufacturer.  Every pharmaceutical company has programs to provide life-saving drugs for individuals who cannot afford them, and they provide relief for many patients every year.

However, the tragedy of someone who had no primary care physician because doctors in his or her community did not accept Medicaid patients, and, who, as a result, has an undiagnosed heart or diabetic condition, is a harder one to portray on the evening news.  The patient generally does not understand that, but for a stingy government program, he or she might have had access to a doctor who could have diagnosed and treated the condition earlier.  A public health official from India described the explosive growth of undiagnosed chronic disease cases as a “health tragedy in slow motion”

Implementing universal and affordable health insurance without addressing the imbalance between supply and demand in the underlying system will simply swap one kind of tragedy for another, at a much higher cost to the taxpayer and to businesses that can create jobs to bring many more people out of poverty.  The Democratic majority seems hell-bent to do something, even if it is the wrong something, relative to health insurance.  That’s too bad, and we will all pay dearly for the mistake.

“Within hours of announcing its findings, the Task Force faced a barrage of attacks from women, doctors, journalists and politicians across the U.S. The onslaught was swift, harsh, and emotionally charged.”

She goes on to point out that the Task Force was accused of making its decision based on a desire to save healthcare dollars through “rationing,” a term injected into the discussion by lawmakers, such as Congresswoman Marsha Blackburn, who said:  “This is how rationing begins.  This is the little toe in the edge of the water.”

On the surface, this appears to be a recommendation purely based on the economics of doing additional mammograms and getting a relatively low yield in term of saved lives.  Although, as a society, we can and should allocate scarce health care dollars based on where they can do the most good, it is clear that we are not ready to have a rational debate on health care based on traditional cost-benefit analyses.

However, what got lost in this discussion, which Ms. Searles characterized as advice “understood by many as a step backwards for women” is that there are sound medical reasons for this recommendation.

The Task Force’s recommendation could have been based on two medically-based rationale, aside from the psychological stress of having received a false positive reading from a mammogram:

• The breast biopsy which routinely follows a screening that detects the possibility of cancer entails medical risks of increased infections and bleeding, as noted on the Mayo Clinic web site. As a person who received a false positive on a prostate cancer screening a few years ago, I can testify to the risks of excessive bleeding.  For anyone taking medication for cardio-vascular disease, this risk is addressed by requiring the patient to suspend taking blood thinners for at least 10 days before the biopsy and for several weeks after it.  For a patient who already has cardio-vascular disease, that decision to suspend the taking of medication has some potential for increasing the risk of blood clots.
• The radiation to which a woman is exposed in receiving a mammogram has a potential cumulative impact in increasing her risks of cancer.  That risk is minimized by having the mammograms start at age 50, but increases to some degree by starting the mammograms at age 40.  As an article in the December 15 issue of The Wall Street Journal written by Shirley Wang cites two studies published in the Archives of Internal Medicine which demonstrate that exposure to increased radiation from CT Scans significantly raises the risk of cancer for many people.  In the article, Dr. Amy Berrington, the investigator from the National Cancer Institute who led the studies, notes that while the radiation exposure from mammograms is far lower than for CT Scans, women need to take into account the increased risk of getting cancer from the cumulative exposure to radiation from multiple tests.

To the degree that women have a benign tumor, but elect to get surgery to remove the tumor through a mastectomy, there is also the normal risks from any surgery and complications from it, including the risk of acquiring an infection at the hospital at which the surgery is performed.

This is not a simple decision, and it particularly illustrates one of the fundamental paradigm shifts Americans will need to make in thinking about health care.  There is a current perception by most Americans that more care is always better care, and that an attempt to scale back health care is a “takeaway.”  The argument that we cannot afford unlimited health care is a non-starter for those who believe that they deserve every bit of care that is available.

However, if we can start to get them to understand that, in many instances, more aggressive care can produce worse medical outcomes, we have a fighting chance to bring health care costs under control.  Our lawmakers, including HHS Secretary Sibelius, who distanced herself from these revised guidelines by saying that women should keep doing what they have always been doing, did a disservice to the long-term debate on how we get the best health care at the lowest cost for everyone.

The goal should be to get the optimal care, not the most aggressive care, for everyone.  Better yet, the goal should be to improve health, not rely on the health care system to correct preventable health problems.