Health Care
Health Care Throughout our country, there is widespread agreement that the health care system is too expensive and inefficient, yet there is little agreement on what reforms and solutions we need. Despite this lack of consensus, changes are underway, including here in our region, which could lead to permanent structural improvements in cost and quality. Any discussion of the health care system in <strong>Silicon</strong> <strong>Valley</strong> and, indeed, the United States, requires careful definition. First, is health care a quality-of-life or a cost of doing business issue? Is there a greater social good or a long-term cost incentive in providing universal access to care? While the system provides for our well-being, a deeply personal human need, it is provided as a quantified benefit of employment, or even a government-sponsored program. In addition, any significant changes in the regulation of the system pose a potential threat to its cluster of supporting industries. How, therefore, do we approach reform and improvements in the system? What best practices and emerging trends hold the most promise? This section will offer some different perspectives and seek to identify common ground. Regional business leaders are becoming more interested about the system, due largely to increased healthcare costs. Their concerns are being expressed through efforts such as the <strong>Silicon</strong> <strong>Valley</strong> Health IT Pay for Performance Program, which provides financial incentives for local providers to adopt electronic medical records and best practices in automation. In 2005, former Intel CEO Andy Grove published an article in the Journal of the American Medical Association drawing parallels between the microchip and medical industries, in which he suggested process improvements and lessons about efficiency which the medical system might learn from. 3 In general, employers continue to see their employees’ health as an imperative, but are struggling to reconcile price increases with the many other expenses that <strong>Silicon</strong> <strong>Valley</strong> companies face. By the Numbers–the Cluster Average wage in the bioscience cluster in 2004: $65,775. National average wage, private sector: $39,000. 4 By the Numbers –the Costs According to the Centers for Medicare & Medicaid Services, health care expenditures in the US were over $1,877 billion in 2004; this represented about 16% of GDP. Per capita expenditures were $6,280 per person in the same year. The Employer Perspective In Santa Clara County, the percentage of residents with insurance by their own employer or someone else’s (e.g. spouse, parent) is 76.8. 1 Most employers in California offer, and pay for at least some portion of, their employees’ health care/insurance: recent data indicate this is true for about 66% of employers, representing nearly 90% of workers in the state, with an estimated 63% of workers taking advantage of this benefit. 2 However, this percentage has been slowly decreasing, due both to some employers dropping coverage and fewer new small businesses offering insurance. Costs, as measured by annual premium increases, are rising at a rapid rate. Many recent studies peg the rate of increase in health care costs in the US ranging from 8-12% per year over the past 5 years, compared with an economy growing at 4% or less. The Business Cluster Perspective Hospitals, clinics, medical practices, insurers, bio-tech and pharmaceutical companies, and medical device companies are among the major business interests in the health care field. <strong>Silicon</strong> <strong>Valley</strong>’s unique ecosystem of venture capital, education institutions and the highly educated workforce they spawn creates a dynamic where changes in the policy environment for life sciences and medical fields are felt acutely. For example, the passage of the ballot initiative for state-funded stem cell research, and subsequent establishment of its managing institute in San Francisco, has been met with an enthusiasm far greater than the dollars it represents. Companies have been formed and made expansion decisions largely predicated on the institute and the commitment it represents to the industry. <strong>Silicon</strong> <strong>Valley</strong> is home to concentrated clusters in the medical devices as well as the research, testing and medical laboratories field, which are both large and rapidly growing in our region compared to other areas. However, Southern California, New York/New Jersey, and other regions are major competitors; and California struggles to maintain its position as other states aggressively pursue tax and economic development strategies to lure companies. 5 32