In a Sinking Economy -- How to Stay Focused


Posted on 23 December 2010

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By John August
Kaiser Permanente Labor Management Partnership

Last week was just one of those weeks. Many people could not ignore economic news, despite the abstract way we talk about it that makes so many people feel powerless and intimidated.

The administration announced its “compromise.” Bush-era tax cuts, including those for the richest people in the country, would remain in effect for another two years. The president’s own party was in revolt. Why, many Democrats asked, is it necessary to allow hundreds of billions of dollars of additional debt to provide tax cuts to the people at the very top of the income scale?

The other side of the argument, of course, endorses “trickle-down” economics. That theory holds that if capital flows to the wealthiest, good jobs will be created.

Many people recognize that these debates and compromises are getting us nowhere.

Polls indicate that people support tax increases as long as services like health care will improve and cost is contained in ways to sustain and improve services.

Partnership is part of the solution

What I love about the work we are doing in the Kaiser Permenente Labor Management Partnership, with nearly 100,000 unionized frontline workers and our management and physician counterparts, is that we are engaged in making a tangible contribution to the fiscal crisis in health care. The skyrocketing cost of health care is one of the forces driving deficits in the nation.

We are showing a path for improved services and ways to contain cost. That’s exactly what people are asking for!

About 80 percent of health care spending in the United States is consumed by about 10 percent of the population, as Kaiser Permanente CEO and Chairman George Halvorson reminds us in his book Health Care Reform Now! That figure is driven by spending on chronic conditions, such as diabetes, coronary artery disease and congestive heart failure. When caught early, many of the serious consequences of these illnesses and of many cancers can be prevented—and thus the disease is more cheaply controlled. In other words, to contain costs, you have to prevent disease and improve health!

If 17 percent of GDP is spent on health care, that is $2.5 trillion. If 80 percent of those dollars are spent on chronic and preventable conditions that mean that there is $2 trillion where health care spending could be substantially reduced. If that 80 percent of health care spending was reduced by just 10 percent, $200 billion would be taken out of the cost of health care.

Eliminate waste

The Institute for Health Care Improvement (IHI) suggests that as much as half of the cost of health care spending is driven by waste. IHI defines waste as medical, surgical and drug errors; readmissions, preventable infections like central line, sepsis, pressure ulcers; and patient falls. If improvements were made to eliminate waste, another $1 trillion could be taken out of the cost of health care, for a total of $1.2 trillion reduction in cost.

For example, the total annual cost of treating pressure ulcers in the U.S. is estimated at $11 billion by IHI. The cost of treating colon cancer was more than $12 billion in 2006, according to the National Cancer Institute. Both of these conditions are largely preventable!

So much of health care spending comes from government in the form of Medicare, Medicaid, veteran’s benefits and the cost of the Federal Employee Health Plan. Right now, the costs of these programs are partly responsible for driving up the nation’s debt. Even more importantly, as the overall cost of health care goes up, these uncontrolled costs eat into workers’ paychecks. They make US products non-competitive because this cost that gets passed on to the price of goods and services.

A model for success

In our work in partnership, we are having great success throughout the system in eliminating pressure ulcers, patient falls, sepsis and other hospital-based infections. We are improving diabetes prevention, cancer screening, blood pressure screening and other important measures to control and prevent heart disease. The KP model of integrated care, along with our unit-based team approach, is showing the path toward safer, less expensive care.

We cannot save the system on our own, but the more successful our model is, the more attention others will give it, and the more likelihood they will adopt our approach. There is a systems approach to reducing the cost of health care which in turn can reduce some of the pressures on public expenditures, taxes, and the state of the economy.

Our partnership stands in stark contrast to the current debate about the economy, which is all about short-term and very painful tactics, like elimination of much-needed services, jobs and benefits of workers, which have failed time and again. Lack of vision and leadership are the heart of this failure.

Our model is a profound opportunity for a whole new paradigm in the U.S. Different groups with different interests are cooperating with one another, setting narrow self-interest aside and instead working for the interest of the community as a whole.

If we focus on short-term interests at KP, we will miss the whole systems approach. Focusing on narrow self-interests, we could wind up in the same boat as the rest of country. We are fortunate that our partnership demands that we don’t!

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John August is the Executive Director for the Kaiser Permanente Labor Management Partnership.