Causes and Implications of Rising Health Care Costs on Businesses Term Paper

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Higher Health Care Costs on Businesses

Without doubt, America faces some heavy challenges in the forthcoming years. First, still reeling from the terrorist attacks of September 11, 2001, the United States struggles to find the medium ground between protecting its border and sacrificing its people's civil liberties and stepping on other countries' sovereignty and freedom. Most recently, we've faced a large budget crisis, with huge line items such as Social Security and the social welfare net being threatened like never before.

Of course, we face our usual income disparity issues, with the rich getting wealthier, and the poor being evicted from the job market altogether, and with a sense of finality. Then there are the scores of environmental issues, crime issues and the large divide between the "blue" states and the "red" states.

But none of these problems may be as galvanizing and as critical to solve as the nation's health crisis. As is often reported, the United States is the largest civilized and industrialized nation with such a high percentage of its people sans health care, or the access to health care.

The cost of health care in America is astronomical, with the basic system working as follows: Employees purchase health care plans from their employers, which often subsidize the plans' cost for their employees. Employees then only pay small co-pays for each doctor visit and each prescription medication; of course, they are often limited in doctor-choice by their individual health plans.

Many factors are increasing health care costs, including malpractice suits against doctors, rising pharmaceutical costs via FDA-approval and patent litigation, higher administrative costs associated with doctor coding and billing and many others. There will be many implications of the rising costs in health care on business, but three of the biggest ones are the appearance of employee wellness programs, the changes in medical licensing for doctors and the quick shift to HSA plans in the forthcoming years.

Employee wellness programs are cost-effective

Employee wellness programs are the newest wave in our all-important war against spiraling health care costs. Every facet of health care has become more expensive over the last several years: This year's presidential election debates showed how health care has reached the forefront: Both candidates argued that something must be done about the phenomenon, with Republicans railing against malpractice insurance costs, and Democrats pointing fingers at the barring of cheaper drugs from Canada.

Flexible spending accounts are being evaluated as a step-up from health savings accounts as a way to incentivize employees to minimize their heath care cost waste, but the move might not be enough, especially considering the fact that many employees will choose not to use it, and companies may be forced to offer both FSAs and more traditional plans.

One type of system that is bound to work, however, is the employee wellness program. Pfizer has the quintessential model, from which we may springboard our analysis.

Pfizer, the multibillion dollar pharmaceutical, is in the health care business, and feels a strong benefit in offering cutting edge health benefits to its employees. That is why it trumpets its employee wellness program. The goals of the program are stated as follows:

Assist Pfizer to attract and retain the best people.

Develop employees into the most productive and engaged workforce possible.

Enhance employee and dependent health by primary, secondary, and tertiary prevention.

Maximize the value of the benefits offered by effectively managing health care resources.

Assist employees and dependents to be informed and efficient consumers of health care.

These goals apply to both employees and their families. Pfizer makes very public its employee wellness initiatives, both to popularize them, and to improve employee retention.

As a result, in some Pfizer offices such as in New York City, employee participation is at nearly 85%. In fact, here are participation numbers straight from Pfizer: "Interest and participation in the Premier Employer Program is very high. In Pfizer's New York location, 85% of employees participated in one or more of the programs described above, and 80% of employees used on-site health services in 1998. Over 46% (1,300 members) of the total population participates in the fitness center, and there is a waitlist of 200 for enrollment since 1,300 is the highest number of members this center can accommodate. The fitness center in Groton, CT had 672 members and at the time of this analysis was at full capacity (this center has since expanded). Participation rates at other locations are similar for on-site initiatives. Participation rates vary by program component." (

Pfizer pursues a number of different facets for its employee wellness program. Here is a list of some of these sub-programs:

Health risk assessment/identification initiatives

Wellness and health education initiatives

Disease management initiatives

Medical clinics

Fitness centers

On-site Physical therapy

Ergonomics program

Managed disability

Welfare benefits/health care delivery evaluation/enhancement initiatives

Employee Assistance Program (EAP)

Let us examine each of these in turn to determine the value of such a program to employee wellness initiatives in general. First, health risk assessment / identification initiatives. These programs are truly health care risk management at its best. Here, doctors evaluate which employees are at risk for, for instance, heart disease, lung disease, back trouble, diabetes, etc.

The value of early assessment is manifold. First, it adds to employee retention. Employees will look at a program like this and realize that the company has the employee's best interests at heart. Second, costs are saved in missed time at work. If a disease such as heart disease can be detected early, and perhaps prevented or ameliorated, the employee misses less time at work, health care for the individual's provider decreases, keepings premiums low. So, all around, it is a cost saver.

Then, we move to wellness and health education initiatives. Here, employee wellness plans truly flex their cost-savings muscles. Employees are educated on how to keep well, so they practice the best type of medicine of all: preventive medicine.

Employees are encouraged to keep good health, and taught specifically how to do so, again adding to the concept that the company truly cares about the employees, which in turn reduces turnover rates and the associated costs thereof.

Then onto disease management initiatives. Despite the best intentions, employees will develop diseases, and that is where employee wellness plans help as well. Once the employee has, for instance, diabetes, a company with an employee wellness plan helps that employee deal with the disease and thrive as an individual and an employee under those circumstances.

This again reduces the costs a company will face since a patient/employee will have to take less time off from work to deal with a disease, and will indeed be more productive during working hours if the disease is managed. It will also reduce the chance that the employee will have to quit because of the disease's symptoms, and force the company to hire someone else and face the costs of training and ramping up that individual.

By offering medical clinics at the office, employees need to take less time off from work to consult their outside physicians. This will keep the health care management of the employee on-site. Of course, the challenge here is to convince employees that their medical records will remain private and out of the hands of their bosses and subordinates. Also, it may be hard to convince employees that on-site doctors will give them unbiased opinions.

Fitness centers, of course, speak for themselves. They represent an added cost, of course, but are well worth it. Employees stay on board more often if there is on-site fitness center. And the on-site center is far superior to the reiumbursement for an off-site center simply because the employee is much more likely to go; and if the employee uses the center, he or she is more likely to stay healthy and not miss time at work.

With on-site physical therapy, employees will actually pursue the cures for physical ailments that they might not otherwise do. With the prevalence of back problems and carpel tunnel syndrome at offices, on-site physical therapy is even more important, as it is much more unlikely that employees will heal themselves if they must go off-site. With on-site help, employees will undoubtedly be more comfortable and productive on the job.

And in general, employee wellness initiatives have been proven in every study to reduce costs. However, companies are struggling to justify the costs because of the more intangible nature of the returns. There is growing concern over burned-out, stressed-out workforces but widespread adoption of corporate wellness programs in Canada has been discouraged by an inability to make a solid business case and justify the costs, according to Buffett Taylor & Associates. They argue that most Canadian companies do not view wellness as a strategic business imperative because they cannot link it to the bottom line.

Buffett Taylor & Associates have launched a new and comprehensive cost/benefit tool which, they claim, 'enables organizations to rigorously evaluate the impact of their wellness investment on their…

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