With Obamacare imploding could the Cleveland Clinic model be the solution for American Healthcare?
BY JOHN MAULDIN
Millions of Americans are learning just how much their Obamacare premiums will be next year. But even if you have health coverage through your employer—or you’re 65+ and on Medicare, like me—you’re going to see severe inflation in the healthcare part of your budget.
In his 2021 year-end letter, Baupost's Seth Klarman looked at the year in review and how COVID-19 swept through every part of our lives. He blamed much of the ills of the pandemic on those who choose not to get vaccinated while also expressing a dislike for the social division COVID-19 has caused. Q4 2021 Read More
But there’s a possible solution to the healthcare problem. The Cleveland Clinic has achieved remarkable results with its 100,000+ employees and dependents. They are making people healthier and reducing medical costs. And it’s a model that I think could work on a much broader scale.
Cleveland Clinic solution?
Photo by shane_d_k
The success of the Cleveland Clinic model
Cleveland Clinic CEO Toby Cosgrove turned his own workforce into a test case back in 2010. He wanted to help people avoid the six key conditions (high blood pressure, high cholesterol, excess weight, diabetes, asthma, and tobacco use) that cause most of our health issues. His idea was to provide workers an incentive to get healthier: lower insurance rates.
Cleveland Clinic workers who opt to take part in the Healthy Choice program see a practitioner who monitors weight, cholesterol, etc. and offers help to improve health. Those who meet their goals or make progress toward them can save 28% or more on their health insurance premiums.
Since 2010, almost two-thirds of those with one or more of the six key conditions managed to get them under control. And the vast majority have kept it that way. The incentive system and aggressive monitoring have succeeded in changing people’s behavior patterns.
The Cleveland Clinic’s CFO was skeptical at first—as it cost hard dollars—but he’s now a believer. After the Clinic slowed the rise in its healthcare costs, actual healthcare outlays flatlined for a few years. Last year, they fell 2%.
The Cleveland Clinic is now helping other companies develop similar programs, like cement company LafargeHolcim. Since implementing their wellness program, they’ve literally cut almost 50% of their projected cost increase for 2015. That’s real money saved.
Here are two large organizations in completely different industries, both cutting their healthcare cost growth in half or more. Better yet, the employees are healthier (and presumably happier, since they share in the cost savings). And numerous other companies are seeing the same type of results with similar wellness programs.
Implementing this model on a national scale
Would a similar program work on a national scale? If so, it would remove one of the main impediments to economic growth.
One aspect of the healthcare challenge you don’t often hear about is its drag on everyone’s time. Trying to find a provider who can treat your condition and who accepts your insurance… filling a prescription… these things take too much time. The burden multiplies if you have children or elderly parents under your care.
All that time adds up across the economy. It takes us away from our work, causes us mental stress, and eats up our leisure time. It may well explain some of the puzzling worker productivity declines in recent years. Healthcare is both a direct cost and a kind of invisible tax that sucks away time and money we could all use in better ways.
Before we get too excited, I can think of some reasons the Clinic’s model might not work everywhere.
Still, it would be fascinating to see one or more states apply something like this program to their low-income Medicaid populations.
Would people stop smoking, eat healthier, exercise a little, take their meds to bring down their cholesterol, and work towards weight loss and other health markers if you gave them a $2,000 cash reward every year?
I suspect many would—and the rewards would be less expensive for taxpayers than treating the behavior-driven illnesses that plague our society.
The broader finding is key: Give people financial incentives to adjust their lifestyle toward better health, and they will respond. I suspect the same will be true just about everywhere, though the specific incentives will vary.
Just about the only thing economists agree on is that incentives matter. With the proper incentives, people will change their lifestyle.
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