Jeffrey Immelt on Health Care Cost Inflation
Health care is central to a country’s competitiveness, and its already monumental costs are rapidly increasing. The United States’ $2.5 trillion health care spend witnessed a 10 percent inflation in 2010, despite a tough economy with high unemployment, and this clearly threatens our global competitiveness, said Jeffrey Immelt, chairman and CEO of General Electric Co., during his keynote address at the University of Miami Global Business Forum, Jan. 12–14, 2011.
“Somehow, some way, there’s going to have to be something done about [the inflation],” Immelt said. “No matter how old you are, young or old, we are going to be working on health care in the United States for the rest of our lives. The challenge is, How do you do it without destroying it?”
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Jeffrey Immelt, Chairman and CEO, General Electric Co. |
Immelt called on the private and public sectors to work together to preserve U.S. innovation, increase access to health care and cut the inflation rate in half. If the U.S. could accomplish those three goals, he said, it would increase the nation’s global competitiveness. “Big business has the most to lose if we don't get it right,” he warned.
Indeed, Immelt called health care “the world’s biggest systems problem” — and it’s a problem he sees clearly from two angles. GE is the world’s largest health care diagnostic equipment maker, generating $18 billion a year in revenues. And it spends $3 billion annually on health care costs for its 600,000 employees.
Solving the world’s biggest systems problem requires stakeholders to think about systems, focus on transparency, implement the most appropriate technology strategies, and drive and improve efficiency in the health care delivery model.
Immelt outlined several strategies to control costs that he said would not stifle innovation. To begin with, costs at every level of the industry must be clearer. “There needs to be broad transparency in the industry so that people can really understand what they are doing. [Health care] is the least transparent industry of any that we deal with,” he said.
Consumers need to understand these costs, and they will play an important role in tackling them. Businesses must look for ways to “engage consumers to be healthier, more well informed and more accountable” in their health-related decisions, with a particular emphasis on prevention. “In the end, prevention is going to be the only thing that can help us really bend the cost curve,” he said. The future of health insurance, he added, will be high-deductible consumer-driven plans.
That is the route GE took in 2009 when it changed plans for the first time in 21 years. Preventative care is covered and catastrophic risk is off the table for employees. But for all non-preventive care and all medications, employees have high deductibles before insurance coverage kicks in. The company combined it with health education and programs aimed at making employees healthier. That, Immelt said, made employees more cost-conscious consumers. Taking that approach, Immelt said, could lower a company’s health care costs by between 10 percent and 20 percent. “People have to be accountable for their own health,” he said.
But changes in insurance plan structure can only go so far. As Immelt sees it, the health care industry itself is a trickle-down one that has always focused on providing best-of-breed innovations first, then gradually looking at ways to reduce costs. But that paradigm must change, he said. Companies must simultaneously develop technologies at multiple price points, and some — including GE — are now doing so.
Innovation is needed, particularly in treating chronic disease, which Immelt called the “Holy Grail.”. GE spends much of the nearly $2 billion a year it puts into health care research and development into chronic disease treatment and diagnosis. “All of the areas around marrying diagnostics and therapy to make therapy more effective is extremely important,” Immelt said.
For instance, he pointed to a new joint venture with Intel Corp. that is developing technologies to manage chronic disease and other aspects of aging, with an eye toward helping seniors live independently at home or in assisted living communities.
The health care industry must harness the power of information, as well, with Immelt saying that information technology is at the core of simultaneously lowering costs while increasing quality and access. To date, advances in health care IT have largely improved connectivity between various systems and allowed for telemedicine advances. About 90 percent of the impact of health care IT has been concentrated in those areas, in fact, Immelt said. Yet, he believes those areas account for only about 10 percent of the value that IT can bring to health care.
“There is so much knowledge that can be brought into health care. It should be digitized and put at doctor’s fingertips,” Immelt said. He also stressed using technology for remote health care, although he said it remains unclear how it will be done in the U.S. “I know for a fact that in other countries it’s really going to be driven by nurses backed up with information technology,” he added.
The bottom line: Unless the U.S. does something about health care costs, it will not see healthy employment figures. Somehow, Immelt said, the U.S. must promote accountability that drives productivity and gets inflation under control.
Simply making consumers more accountable for their health care spending won’t be enough to reduce costs. “Whether accountable care organizations can do it or not … I think it’s a good step. But health care costs in the U.S. are a big blob,” Immelt said. “Unless you take the whole blob and reduce it, the cost is just going to shift to other pockets. So we have to work on it as a system in its entirety, and that’s absolutely critical. That’s going to take public-private partnerships.”
