Transforming Health Care So We Can Keep Our Promises

Health care is literally eating our families out of house and home -- and our governments out of education, transportation and human services. Four key problems, writes Peter Hutchinson, make transformation necessary.
September 26, 2007
By Peter Hutchinson  |  Contributor
Leader of management consulting strategy for Accenture’s U.S. state and local government practice

A room full of newly elected governors was gathered in a seminar as they prepared to take office. A fiscal expert laid out the financial realities they were about to confront. The punch line came swiftly: Health care costs are rising so fast there will be virtually no new money available to pay for the promises you made in your campaigns. At that point one governor-elect leaned over and said to another, "I want a recount."

Health care is bankrupting America. It is bankrupting our families, our businesses, and our governments. In the last 25 years, the share of personal income committed to paying health-care bills has tripled, while the savings rate has gone negative. Health care is now the No. 1 cause of personal bankruptcy. American businesses spend so much more on health care than their foreign competitors that they face a serious disadvantage.

The fiscal squeeze is even more debilitating in the public sector. By 2005, state and local governments together spent 21 percent of their budgets on health, almost double the figure from 1972. Where did the money come from? Education, down from 39 to 32 percent; human services, down from 11 to 8 percent; and transportation, down from 8.7 to 5.5 percent.

The federal numbers are even worse. In 15 years, under current policy, Medicaid and Medicare will consume half of all federal revenues. (Social Security and interest on the debt will consume the other half.)

Health care is literally eating our families out of house and home -- and our governments out of education, transportation and human services. We need a recount.

Four key problems make transformation necessary.

First, we focus on responding to illness, rather than sustaining health. We have a "sick care" rather than a "health care" system.

Second, our system was designed to provide episodic care for acute illnesses, but the real burden and 80% of the costs have shifted to chronic care for diabetes, asthma, cancer, AIDS, etc.

Third, our system is so fragmented between myriad medical practices, hospitals, and insurance companies that it produces enormous waste and mediocre quality.

Fourth, our fee-for-service payment system means providers make more money by performing more services. Indeed, if a doctor or hospital makes a mistake or omits something important and the patient has to be treated again, they make more money!

Transforming the System -- Cost, Quality and Coverage

Our health care system is in slow-motion collapse. Tinkering around the edges will not fix it. It needs to be transformed.

Many governors and legislators are struggling to create universal health insurance. But solving the insurance problem without solving the quality and cost problems is a mirage.

Transforming health care will require cutting its costs by 25 percent, increasing the likelihood of patients getting the "right care" by 50 percent, and covering 100 percent of our population.

1. Make behavior matter.

According to the U.S. Centers for Disease Control, personal behavior has more impact on health than any factor. Nevertheless, we spend 88 percent of our health resources on treatment, but only 4 percent on changing personal behavior. If we want better health, behavior has to change. That means:

a. Changing minds. Launch sustained public campaigns on obesity, exercise, diet, smoking, drugs, alcohol, driving, etc.

b. Changing habits. Start by requiring vaccinations, dental, and eye exams for all school age children and provide them in schools.

c. Changing prices. Require health plans to give premium discounts based on healthy behavior. Tax cigarettes, alcohol and junk food at levels that reflect their true health care costs. Governments can and should make people responsible for the consequences of their behavior. This is the most powerful and least-used lever available to us.

2. Replace fee-for-service payments for procedures with prepayment of annual fees for patient care. Use competition between integrated managed-care systems to get the best combination of quality and price.

Governments are such large players in the health-care marketplace that what they do (or don't do) will drive the entire market. We can get better care at a better price if we:

a. Create a large statewide public-sector purchasing pool.

b. Define a basic package of care.

c. Include integrated long-term care.

d. Get competitive proposals from all plans in the state.

e. Rank all proposals based on quality and price.

f. Buy the best.

3. Create statewide systems for electronic health records (EHR), claims, and billing.

These can dramatically improve care and reduce costs.

4. Create state policies to encourage end-of-life planning for everyone.

Talking about end-of-life issues is not easy. Not talking about them makes the dying process more difficult and more costly.

5. Make health insurance universal -- mandate that all residents have it.

Combine a mandate with subsidies based on income so that everyone is covered.


Our well-being is being threatened by our health care system. It costs too much and delivers too little. If we fail to transform it, it will bankrupt us. Along the way, it will force us to abandon our promises to educate, support, transport and protect our people and our environment.

In the coming decade, we will change the health care system, or it will change us. The choice is ours.