Corporate America Helped Create the Healthcare Mess

 

      In the mid-1950s and early 1960s, major employers like General Motors, IBM, GE and others decided to offer many new free or low cost benefits to reduce their need to pay higher wages. One of the favorites was healthcare benefits.

Corporate executives and the healthcare professionals encouraged these programs since most of the labor force was young and in good health so the cost to provide the services was low and it was able to defer expenses to the future.

In addition, the healthcare professionals were delighted to provide the services and not require their patients to pay the bills. Insurance and other organizations grew to provide these services and maintain the programs and keep costs as low as possible.

However in the 1970s the situation changed. Many American companies, including the giants were aggressively attacked by foreign, primary Japanese companies and became more aware of the increasing healthcare costs. GE for instance didn't even recognize how much it was spending on healthcare since it was delegated to the decentralized departments and divisions and there was no corporate level oversight. It initiated a study and found that it was spending in excess of a billion dollars and so it centralized the programs and deceased the costs.

In addition many of the giant companies moved their manufacturing to the Far East and didn't provide healthcare in these emerging countries. Many other companies went bankrupt and even their pensioners lost their benefits. Finally the workforce began to age and this increased the cost of healthcare benefits.

By the late 1990's healthcare became a target for corporate cost reduction, the benefits declined and cost to the employees increased. Suddenly the medical and other healthcare providers recognized that the free lunch was over and they began to seek other ways of financing their expenses. This is when the Federal Government became even more involved and used Medicare to control costs by continuing to decease the fees they paid to the providers and other insurance companies began to uses these fee schedules to determine how much they would reimburse the providers for services offered.

Today the situations is coming to a boiling point with the introduction of the Affordable Care Act, commonly called Obamacare. This is forcing all of the healthcare providers to recognize they must change the way they do business and become more "business" oriented.

In our next blog we will focus on change #2- the increasing control by the Federal Government.

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