NCPA - National Center for Policy Analysis

HOW SAFEWAY IS CUTTING HEALTH CARE COSTS

June 15, 2009

Health care spending has outpaced the rise in all other consumer spending by nearly a factor of three since 1980, increasing to 18 percent of gross domestic product in 2009 from 9 percent of GDP.  This disturbing trend will not change regardless of who pays these costs -- government or the private sector -- unless we can find a way to improve the health of our citizens.  Failure to do so will make American companies less competitive in the global marketplace, increase taxes, and undermine our economy, says Steven A. Burd, CEO of Safeway Inc., and the founder of the Coalition to Advance Healthcare Reform.

Safeway believes that well-designed health care reform and utilizing market-based solutions, can ultimately reduce our nation's health care bill by 40 percent.  The key to achieving these savings is health care plans that reward healthy behavior.  As a self-insured employer, Safeway designed just such a plan in 2005 and has made continuous improvements each year.  The results have been remarkable, says Burd:

  • During this four-year period, Safeway has kept its per capita health care costs flat (that includes both the employee and the employer portion), while most American companies' costs have increased 38 percent over the same four years.
  • Safeway's plan capitalizes on two key insights gained in 2005; the first is that 70 percent of all health care costs are the direct result of behavior.
  • The second insight, which is well understood by the providers of health care, is that 74 percent of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity).
  • Furthermore, 80 percent of cardiovascular disease and diabetes is preventable, 60 percent of cancers are preventable, and more than 90 percent of obesity is preventable.

Personal responsibility and financial incentives are the path to a healthier America, says Burd:

  • If the nation had adopted the Safeway approach in 2005, the nation's direct health care bill would be $550 billion less than it is today.
  • This is almost four times the $150 billion that most experts estimate to be the cost of covering today's 47 million uninsured.

Source: Steven A. Burd, "How Safeway Is Cutting Health Care Costs," Wall Street Journal, June 12, 2009.

For text:

http://online.wsj.com/article/SB124476804026308603.html

 

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