In 1960 medical costs in the United States were five percent of our Gross Domestic
Product (GDP). It’s been an epic climb from that basement to the twenty percent
expected by 2025. Medical technology costs, pharmaceutical expenses and
everything in between takes a larger part of every budget dollar, and in spite of this
expense trend it appears for the first generation in history that our children will not
live longer than we are living.

The elements that define this increase have not resulted in better bedside care or in
healthier Americans. We have more cancer per capita, more obesity, and type 1 and 2
diabetes across the board and, on the whole, we are not really too healthy these days.
Medical expenses are partly correlated to the increase in fat and the affixed heart and
circulatory ailments that move in lockstep with that, but we also are more addicted to
drugs and take a cocktail of prescription medicines with side effects that are worse
than the ailments we seem to be afraid of.

Medicine has become part of capitalism and, unfortunately for shareholders, investors
and interested parties, it should not be. It is lovely that high tech devices can enhance
medical care and interesting that capitalists argue for profits at the top of their lungs.
It just violates the spirit of medicine and it runs into a reality driven by insurance
marketplace ultimately defining how medicine must work.

Car insurance is an example of a fluid insurance and repair marketplace. An
automobile has a value that is established and its repair prices are known. The math
of this allows insurers to charge a rate that is validated in actuarial mathematics. If a
car is damaged beyond repairable, it is “totaled” which establishes a maximum value
which cannot be exceeded.

Also driving records are part of the overall structure and the rates which are levied on
the marketplace. This large number of operators creates finite math which every
insurance business must have to work in perpetuity. When we crank these facts into
the medical cost marketplace we run into a buzz saw of madness that sits at a
precipice of change.

The New York Times reported this morning “Amazon, Berkshire Hathaway and
JPMorgan Chase announced on Tuesday that they would form an independent health
care company to serve their employees in the United States.” The core premise it
seems is “a long-term effort “free from profit-making incentives and constraints.”
What took them so long? We have observed a trend to optimize in every business
process over the past thirty years. This cost is the runaway train that has escaped the
noose in miraculous fashion. Inventories are near zero, workforces are variable and
third party outsourcing and process optimization has wrung out the costs and honed
every organization to a zero error environment. Medical expenses have trended up
every year in an environment where most costs trend lower and its about time
someone cast the first stone of change here.

The math of medicine is interesting. Doctors are, for the most part, not paid massive
money and support staff like nurses and other medical experts are also paid
moderate wages. A company spending money to have every employee examined
and creating partnerships to reduce costs and incentivize behavior that reduces costs.
It makes perfect sense for a large company (or in this case group of companies) to
band together to attempt to lower costs with better outcomes.
It is high time to reclassify medical costs as “health expense” and to educate
employees on what is healthy, create bonus pay for employees who do the things
designed to create favorable health outcomes. Healthy employees are happy and
productive employees and that’s not just less expensive but it makes a happy
workforce.

It’s the last frontier of expense reduction to take on medical costs directly. Smart
companies can hire quality medical staff, build a hospital and bring employees to
centralized location for more intense medical treatments, negotiate drug costs to gain
lower price points and enhance the overall cost and trend metrics by incentivizing
employees to be healthier. We need to invest the $100 for gym membership that will
reduce cardiac care by $10,000, the $500 for plant based and organic nutrition that
will save $50,000 by knocking out colon cancer and the time and energy in stress
management that lengthens lives and creates quality outcomes. We spend one third
of our lives working and its nice to see companies looking at this unsustainable
situation and trying to make it better.

Be mindful, be watchful and good luck!