“The bills on the table now [address] Medicare cost growth containment,” Nichols says, “which is the key to the system because Medicare drives the behavior of hospitals and doctors. The private sector is not a big enough buyer to do that. They’ve tried for years and failed.” Medicare, Medicaid, and the Children’s Health Insurance Program, on the other hand, accounted for more than 40% of total health-care spending in the United States in 2007.
The idea of spending money now for an uncertain future return on investment is a difficult pill to swallow for many CFOs, most of whom have just come through the most grueling year of their professional lives. “If we measure our ROI quarter by quarter, we’ll never do this,” says Dishman. “But if we get more people to stop smoking, it will pay off. If we have better disease management, it will pay off. You just can’t measure it quarter by quarter.”
As CFO went to press, a final bill had yet to be signed into law. But even if a version of reform passes, as experts on both sides of the aisle anticipate, it will take years for the impact to be fully understood; the major provisions included in the reform proposals won’t take effect until 2013.
Some finance executives will never support the changes, viewing them as a government intrusion into something corporations and individuals should handle on their own. Others may grow more comfortable with the idea of reform once they see what the final plan looks like, and some, no doubt, will want to see better data about the efficacy of reform before they take a firm stand.
But for those who believe the health-care system is holding back their companies — and even the country — there is an eagerness for change. “Health-care reform is one of the keys to a vital future,” says Walgreen’s Miquelon. “We can’t have that burden on our economy.”
Kate O’Sullivan is a senior writer at CFO.
A Test Case
Massachusetts passed major health-reform legislation three years ago with the goal of expanding coverage. How has it fared?
In 2006, under Republican governor Mitt Romney and a heavily Democratic legislature, Massachusetts passed a health-reform bill aimed at providing universal coverage to its citizens. The law required that individuals either have coverage through their employers or purchase it on their own (sometimes with subsidies), an approach that has inspired some current national proposals.
Three years later, says Michael Widmer, president of the Massachusetts Taxpayers Foundation, the number of insured in Massachusetts has increased by more than 400,000 people, dropping the percentage of uninsured to 2.6% by August 2009. The cost to taxpayers has been in line with the state’s projections, with an average additional cost each year of $88 million out of a total state budget of $30 billion.
To some degree, the Massachusetts experience is atypical: the state is historically liberal, and residents have been more supportive of universal coverage than the broader U.S. electorate. More notable, perhaps, is the fact that the business community was also committed to working for reform.
Jim Klocke, executive vice president of the Greater Boston Chamber of Commerce, says that so far businesses like what they see. “There’s a rumor, which is totally incorrect, that it has broken the state budget,” Klocke says. “In fact, it has completely tracked expectations.”
There are some major differences between Massachusetts’s reform and national reform, however. More than 90% of the Bay State’s population already had insurance prior to reform, compared with 87% nationwide. On a national level, more people will need subsidies. Massachusetts also had access to federal matching funds, which a national plan clearly would not have. And despite having a Republican governor and a Democratic legislature, the state enjoyed a less divisive political climate. — K.O’S.