A Health Care Crisis Hidden in Plain View

Harford Business Ledger: March 2008

All businesses, large and small, continue to be faced with issues related to what many people are calling a health care crisis. The issue on the forefront for most of us has been dramatically increasing premiums. The difficult thing about dramatically increasing health care costs, from the point of view of the business, is that the expense does not enhance revenue in any way, does not increase employee productivity, and has no positive effect on the operation of the business. Unlike an expense related to the purchase of a piece of equipment or hiring an additional employee, health care costs are simply a non-productive expense. To make matters worse, most employers pay the lion's share of the cost -- some pay all of it. Although health insurance is a valuable benefit of employment, most employees are vaguely aware of the cost, enjoy receiving the benefit, but don't really realize or appreciate the full impact on the business that employs them of three or four years of premium increases ranging from 20% to 40% annually.

This situation is bad enough right now, but I fear that it will become dramatically worse in the near future. There is another crisis looming: the physician population is declining rapidly in numbers. During the Johnson administration (1963-1969), the federal government realized that medical education expenses were so significant for the institutions providing them that government assistance was necessary to make sure medical schools kept graduating a sufficient number of physicians to meet growing needs. Thanks to government support, by the mid to late 1980's graduation rates were meeting demands -- but then, government assistance was allowed to wane. The result -- medical school graduate numbers began to fall. And they've continued to fall ever since!

Another recent phenomenon has developed to make matters worse. Between 65% and 70% of current medical school applicants are female. Statistics indicate that most female physicians do not work full time for a full career -- and don't criticize me for political incorrectness; it's just what the statistics indicate!

All this has led to a competition for doctors analogous to what we find in professional sports. In order to land physicians for your community, a local hospital has to offer "perks" such as signing bonuses, salary guarantees, moving expenses, payment of malpractice premiums and payment of support services. Once this all trickles down to further inflate health care costs, the plight of the small businessperson is not likely to get better. As a business owner you should be braced for this eventuality. Do all you can to support trade organizations that represent your interests, and communicate these concerns to your elected officials -- before it is too late!

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