The Big Picture … Big Numbers
Yes! Health reform is needed and more than likely inevitable. However, we all know its form is yet to be defined and will be long in coming.
There is no questions the cost of medical services in America is expensive. Regardless of the bottom-line cost of health care services, the real issue is the overall consumption of “our” health care dollars at every level…not just doctors. In order to stimulate a discussion on comprehensive health reform, we need to begin at the top.
A FactOne Hundred Sixty-eight Million (168,000,000) Americans receive health insurance through their employers. In order to appreciate how much this represents in dollars, let’s do a few simple calculations. First, the average American family has 2.6 members per household. With that said, we can derive that of the 168 Million Americans insured by employers, approximately 53 Million are families and 28 Million are individuals. On average, annual insurance premiums for a family is $10,778 and $3,991 for individuals. After a few taps on the trusty pocket-calculator (53 Million x $10,778 + 28 Million x $3,991) we find that $684 Billion is spent annually on this group, representing 31% of America’s $2.2 Trillion annual health care costs – That’s $1.8 Billion per day, $75 Million per hour, an amazing $1.25 Million per minute and a paltry $20,833 per second.
The Health Insurance Industry CulpritThe insurance industry epitomizes the “Law of Large” numbers. In fact, numbers so large and insane that it is easy to lose sight of the non-health related costs that simply get lost in the clutter — Numbers like $9,455 per hour. Certainly, compared to $75 Million per hour, as expressed in the previous paragraph, $9,455 per hour is a mere pittance. That is of course, unless you are the one being paid $9,455 per hour such as CIGNA’s CEO, Mr. Hanway (Mr. Hanway earns $9,455 per hour representing his $59 Million compensation over the past three years as CIGNA’s CEO.)
Meaningful health reform cannot occur unless everyone commits to making a substantial contribution. In that regard, we need to reach out to the likes CIGNA’s Board of Directors and demand for them to justify this startling single cost to the American Health Care problem.
Greed isn’t just for Wall StreetAs the title of this post implies, we are going to look at health care reform from the top down. The magnitude of the dollars that flow though health insurance companies is almost incomprehensible –$700 Billion annually. So, let’s put this number into perspective.
- If we lay dollar bills end-to-end, it equals 144 “round trips” to the Moon and back.
- If we pile up dollar bills, we have a column 47,500 miles tall, equal to 8,658 Mt. Everests stacked upon one another.
- $700 Billion dollars is equivalent to the income of 15.1 Million US households.
- If we can encourage the nation’s insurance companies to reduce their operating expenses by a paltry 5%, the savings could subsidize the health insurance premiums for 3.3 Million families.
Face it, every organization, large and small, has waste and could easily shave 5% to better society. At the risk of picking on CIGNA, of its $53 Billion in revenue over the past three years, $101 Million was paid to its top five executives – with Mr. Hanway receiving the lion’s share. As large as these numbers seem, they represent a paltry 2/10’s of one percent of CIGNA’s revenue. Regardless of relative size, the magnitude of executive compensation should not be marginalized because it is a small percentage. What is important is the underlying greed that CIGNA’s Board of Directors endorse. Each of us represents some small part of America’s Health Care crisis. Regardless of the small role we each play does not excuse ignoring the simple fact that “the whole is the sum of its parts” – all the parts beginning at the top.
The Value of NothingIn Raj Patel’s insightful book “The Value of Nothing” he illustrates that the actual cost of products and services is far greater than the price we pay. According to Patel, a McDonald’s hamburger may only cost you $1.59, but when you factor in the hidden costs of government subsidies for beef, grain, water and compound it with the very tangible cost of childhood obesity, diabetes, heart disease, etc., the actual cost of that McDonald’s burger soars to an astonishing $200! Apply the same logic to health care and a $125 doctor’s office visit actually costs thousands of dollars. Albeit a cost that is “not in your face” but a societal burden none the less.
According to the Center for Disease Control (“CDC”), there were more than 880 million visits to physician’s offices in 2001 – averaging 3.1 visits per person. With a few keystrokes on one’s pocket calculator, Mr. Hanway’s annual compensation represents 2 ½ Cents for every physician’s office visit in America – that’s just “one man’s” annual salary. Compound this with every high paid health care executive (e.g. insurance companies, hospitals, etc.) and it is easy to see that these individuals contribute substantially to America’s health care crisis.
Copyright (c) 2010, Thomas Banks. ALL RIGHTS RESERVED
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