July 8, 2009

Who’s Got Your Back?

Hey, small business person! Yeah, you… the Startup CEO with less than 100 employees. You and I both know you’re paying the worst possible health insurance rates around. If you’re lucky enough to be able to afford to provide health insurance to your employees you’re lumped into a group insurance plan with absolutely no control over your rising premiums.

You want to do the right thing for your employees. You want to have at least a fighting chance to hire and retain your good employees, so they don’t run to the safety of a bigger larger company in these difficult times. So who’s lobbying for you?

“In a new report released [last month], the government watchdog group Common Cause found that major health care interests have spent upwards of $1.4 million a day to lobby Capitol Hill so far this year…”

According to Kaiser Health News, the National Journal reports that this political spending amount represents a 73 percent increase since 2000. The report also finds that campaign contributions to members of Congress jumped $40 million since 2000, to $94 million in the 2008 election cycle.

Health reform is “a historic confluence of issues that, as a consequence, has the Capitol swarming with lobbyists and awash with money,” NPR reports, “These days, just about every interest has a lobbyist. Drug manufacturers, hospitals, doctors, pharmacists, marriage counselors, chiropractors, unions.”

What? You don’t have a lobbyist in Washington? Uh oh…

* Filed by Brad Hefta-Gaub at 9:00 am under Entrepreneurship, Healthcare
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June 17, 2009

Will Health Care Reform Help Entrepreneurs?

I am always fascinated by watching the reaction of businesses to various issues related to government reform. The media loves to portray most businesses and business people as ruthless, greedy, and generaly anti-government. However, in my experience, things are always more complicated than they seem.

At the risk of starting a debate about big vs. small governement, capitalism vs. socialism, let me say that in my experience, businesses and entrepreneurs in general are largely motivated by a strong sense of “self preservation” and “selfish” motivation. I’m not suggesting this in a judgemental way, I’m just calling it like I see it. Most people are motivated by choices that benefit them, and entreprenuers tend to have a stronger sense of that compass that the average person.

So here’s the question, will Health Care Reform benefit entreprenuers? More specifically, since my company is a small business/high tech startup, will it benefit small businesses and high tech startups like mine?  (Hey, I’m an entrepreneur, I’m mostly motivated by selfishness!)

We have to first start by acknowledging that there is in fact no plan yet. Although the current administration has outline a set of principles that they would like to see guide the plan, they’ve been clear to put Congress in the lead of crafting the actual plan. Based on the fact that there is no concrete plan to discuss, I’ll avoid quibbling over the potential details of the potential reform, and instead zoom out and look at the bigger question of Health Care costs.

I won’t beat around the bush, based on my calculus, Health Care Reform would dramatically benefit my business. I also believe that it would be a net positive for the vast majority of High Tech Startups, especially in the Seattle area. Here’s my reasoning, with a little bit of data to back it up…

  • Health Insurance is a significant portion of the overall expenses of most small businesses. In fact more than 40% of small businesses report that health care costs eat up 10% of their payroll expenses (reference).
  • Many small businesses opt to not provide health care coverage because they simply can not afford it.  Thirteen million Americans, nearly one-third of the uninsured, are employees of firms with less than 100 workers. (reference) The portion of non-elderly Americans who are not covered by employer base health insurance is growing (reference), and much of this growth in uninsured comes from small business. The percentage of small businesses offering coverage dropped from 68% to 59%, while large firms held stable at 99%. (reference)
Not to put too fine a point on this, but this all comes down to the high costs of health care. And things aren’t getting better as costs continue to rise. And as costs rise, small businesses are forced to stop coverage or choose worse coverage in an effort to contain these costs.
  • In a recent national survey of small businesses, 75% reported that they did not offer benefits to their employees, citing high premiums as the reason. (reference)
  • And as is often the case with providing services on a smaller scale, since administrative costs associated with health insurance programs are fixed, smaller businesses pay a larger proportion of their premiums toward non-health related costs (like enrollment, marketing, and collections). (reference)
  • 54 percent of businesses with health coverage now or in the past two years reported choosing coverage with higher out-of-pocket costs in response to premium increases. Meanwhile, 35 percent reported switching to insurance that covers fewer services, and 12 percent dropped coverage entirely. (reference)
But it’s not just the direct costs that impact small businesses. I can’t count the number of times I’ve spoken with entrepreneurs who say they lost a great candidate because some larger company offered better benefits.
  • Forty percent of small businesses said that health costs have had a negative impact on other parts of their business (for example, contributing to high employee turnover or preventing business growth).
    (reference)
As an American and an entreprenuer, I believe passionately that America will do best when it fosters innovation. And as someone who has worked in startup technology companies my entire carreer, I am absolutley convinced that small enterprises offer the best opportunity for innovation and economic growth. Anything that helps small businesses focus on their business and innovation will, in my judgement be a boon for America. For that reason I am very excited about the prospects of massive health care reform in our country.

* Filed by Brad Hefta-Gaub at 12:24 pm under Entrepreneurship, Healthcare
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January 14, 2009

Fixing Healthcare - Is it an IT issue?

As a member of the Seattle Tech Startup community I subscribe to a great email distribution of local entrepreneurs. Today there was a lively debate about the recent news that the Obama administration idea of computerizing our nations health records. More details from this CNNMoney article - “Obama’s big idea: Digital health records”.

Since most members of the list are technologist, there was a huge debate about XML/HTTP and which technology standards would best be used to solve this problem. Being a technologist myself I would love to have jumped into that debate, just for the gear head thrill of it… but alas it misses the big point. So here was my decided non-technical reply to the group.

First of all, if any of you are really interested in exploring this issue/business deeply, I strongly recommend participating in the Health2.0 conference series. You can learn more about it here: http://health2con.com/

Last fall there was a great conference (3rd so far) where the primary focus was “User Generated Healthcare”… the conference was loaded with tons of great panels and keynotes. There was a great deal of discussion of the potential of an Obama administration (this was before the election) and the implications it would have on the health care industry moving forward.

There were many many “web” and “technology” companies presenting their various solutions for how to lower health care costs and more importantly how to “democratize health care” (I use the phrase very loosely).

The debates between technologists at the conference were not unlike the thread we’re having hear… in fact all the ideas discussed here are already being worked on by at least a half dozen companies in this space.

Which is a nice segue into the primary concern raised at the conference…. Peter’s email is introduces the concept nicely.

Date: Tue, 13 Jan 2009 10:28:36 -0800
From: Peter Denton
Subject: Re: [SeattleTech] Web app required. Budget: $100 Billion

Totally not trying to be naive here, but is there really incentive for the
hospitals, insurance companies, private practitioners, dentists, cosmetic
dermatologists to do this?

These companies not only lack incentive for progress… they actually have disincentives to make change. In fact, the argument made by most of the people in the trenches of Health 2.0 is that it is exactly _NOT_ in the interest of these entrenched companies to support this progress, and many of them are proactively taking steps to prevent progress.

Given there are countless examples of the federal
government truly showing its inability to create large, performing data
systems, is it going to convince the healthcare industry to work together
and create more risk in a risk-infested industry?

If only that were the biggest problem. Most of the companies in this space explicitly make money off of the inefficiencies in the market. Cleaning up those inefficiencies will negatively impact their bottom line, and they are therefore motivated to work against this progress.

I know that healthcare is a great national investment, as it is 99% a domestic product, but is this a good approach?

I’ll admit to being a bit cynical about this, but I’d almost be willing to bet that the whole idea of “standardized medical records” is a red herring intentionally suggested by the lobbyists to create a giant bureaucratic failure, in order to prevent real progress and reform.

Normally I’d argue for the free market approach, but the problem with health care today is that it is not a free market, but instead a market which is easily manipulated by the power brokers (in this case the insurance companies, pharmaceutical companies, etc). Although I’m not necessarily a fan of socializing these types of programs, I suspect that the only way to really reform this system is to create a single public system for health care… (universal health care, single payer, etc…)

The end result of such an effort would be a great deal of business carnage in some huge names, massive loss of wealth of investors in these companies, a huge short term burden on the tax payers, but at the end of the tunnel, potential for much more cost effective and higher quality health care for all of us.

Note to all of us on this list: Our own companies would greatly benefit from a reduction in health care costs… as it is one of the largest expenses we face in growing our companies.

* Filed by Brad Hefta-Gaub at 12:06 am under Entrepreneurship, Healthcare, Social Media
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