Business, Heal Thyself

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REINHARDT: And I think that is a healthy development.

TIME: Because it will create pressure for better Medicare benefits?

REINHARDT: Because it's time for young people to start saving.

SHEARER: This group of people 55 to 64 tend to have a lot of health conditions, but they don't have a lot of options. There will have to be a public-policy response to make sure they have some options.

WILENSKY: We talk a lot about the baby boomers and the impact they're going to have on retirement spending, Medicare, Social Security, ad nauseam. What people don't always think about is that the baby boom was followed by the baby bust. So it's really a double whammy. Both of those are going to cause this continuing labor shortage and require employers to be unbelievably creative in keeping older workers.

ALTMAN: The day will come when almost 65% of all voters will be 50 or older. So that is going to fundamentally transform the politics of this issue. It also means we will focus more on issues like prescription drugs and less on equally or more compelling problems like the uninsured.

REINHARDT: Ten or 15 years ago, the ratio of health-care spending for 55-year-olds to 25-year-olds used to be about 2.3 to 1. Now it's closer to 3.5 or 4 to 1. An older person now costs more. It's the new technology.

DARLING: It's also drugs.

REINHARDT: And it will be ever more difficult to have social solidarity within the company, as younger people realize the hit they're taking in their paycheck.

ALTMAN: Every time I increase our pension benefit to fight companies that have stock options in Silicon Valley, my younger employees go crazy because they couldn't care less about the pension.

TIME: Is there any consensus among businesses and consumer groups that providing coverage for the uninsured is a good thing for everybody, that higher premiums reflect the number of uninsured?

WILENSKY: Not when it comes time to put their money down, no.

ALTMAN: There's always been tremendous support for the goal. Very little willingness to pay and absolutely no agreement on how to get there.

TIME: What's behind the increase in health-care costs?

WILENSKY: The two biggest drivers are hospitals and prescription drugs. In pharmaceuticals, there's been some inflation in prices, but that accounts for a relatively small amount of the increase. Most of the increase has been the substitution of newer, more expensive products for lower-priced products.

REINHARDT: Another reason is, this system is administratively very expensive. We spend $390 less per capita on health care than Germany because our clinicians are very efficient, but we spend $360 more per capita on administration. In other words, everything we squeeze out of the clinicians, we blow on administration.

TIME: Aren't there ways to get control of administrative costs?

WILENSKY: The information-system issue has been around for a long time trying to get away from writing down paper charts, billings, just going to a more automated electronic system.

REINHARDT: But there are exciting products UltraLink, Vivius which people are using to build an electronic interface between employer and employee and also the provider. In the next 10 years, we'll have major breakthroughs there. I'm amazed it hasn't come earlier.

TIME: Why hasn't it?

WILENSKY: You've had information-systems decisions made for the radiology department, for the ambulance, for the other parts of the hospital. Very little thought has been given to how they can communicate.

TIME: Is there anyone who does a good job managing these systems?

REINHARDT: American Airlines. It uses a system called UltraLink.

WILENSKY: The Children's Hospital and Health Center San Diego was attempting to get around this, but it is very rare.

TIME: Is it clear how much cost savings you would get through evidence-based medicine, in which doctors follow conservative guidelines for treatment, based on medical research?

WILENSKY: No, it isn't. What is clear is you would get a lot of value for your money. There is a general belief that on balance you would save some, but people want to have access to the newest, latest medical technology, even if it's not really clear that what you buy is worth the increase in cost.

ALTMAN: I'm all for evidence-based medicine, but I don't think it's a solution to the cost problems. In reality, in medical practice there are some things that are clear you do, some things that are clear you don't do, and a lot of mush in the middle.

SHEARER: Oregon set up a commission to study the effectiveness of different medications. Eventually this is going to lead to the state of Oregon selecting preferred drugs and negotiating for the prices. Our drug costs are increasing at 17% a year. If we could make some inroads into bringing those increases under control, we could save billions of dollars a year. This is one little glimmer of hope.