Wage Stagnation and Structural Unemployment

Friday, November 25, 2011

Wage Stagnation, a.k.a. “median wage stagnation”, can be defined as the lack of long-term real wage growth and can be best illustrated by U.S. worker wages from the 1970’s until present. Structural Unemployment occurs when there is a mismatch between the skills employers require and the skills of prospective workers. 

The current period of elevated employment is indicative of structural unemployment with thousands of job openings going unfilled, while many of U.S. workers lack the skills to fill them.  How are wage stagnation and structural unemployment interrelated with organizational productivity?  Many workers acquire their initial job skills during early formative years in secondary, trade or  higher education. Others may develop skills as the part of some informal or formal on-the-job training program through employers or trade unions.

Prior to World War II, skills developed early in life were generally suitable for the entire life time of many workers. However, as the post war world developed into the technology and information age, workers often are required to be re-trained or acquire new skills. Today, workers often change jobs and careers and reinvent themselves as whole industries undergo radical change and once solid jobs disappear.

The prime objective of a publicly or privately-held organization is to return economic value to its stakeholders, whether those are individuals, partners or shareholders in a common corporation. To do so, the organization must produce those goods or services demanded by its consumers, at both a price and quality that consumers require. To meet this objective, the organization must acquire, motivate, and retain individuals with the characteristics and skills to produce those goods and services.

Jobs that once could be had with a basic high school education, now often require additional technical training in numerical controlled machining tools, robotics, intermediate math, problem solving, and logical thinking processes.  While traditional four-year degrees in higher education have been the gateway for many workers to advance, numerous industries still continue to offer well paying jobs with two-year degrees and through trade and apprenticeship programs throughout the nation.

Organizations continue to find that in-house sposonered training is required to better engage new employees while building long-term relationships and developing future team leaders.  In order to become and remain productive and competitive, many organizations have resorted to partnership with local educational institutions to provide job related trade and skills training for current and future employees. Regard less of how it occurs, businesses with specific skill requirements have found that they must take action to ensure a significant inflow or skilled workers.

While issues with Wage Stagnation and Structural Unemployment cannot be addressed by any one organization, without real wage growth and a means to effectively deliver skilled workers to a business sector when needed, enterprises will continue with competiveness.

Walmart, Is Doctor Sam In?

Friday, November 18, 2011

Can the world’s largest retailer roll back prices on primary health care? Last week, the world got a look at the possible aspirations of Walmart’s latest venture, managing chronic diseases such as diabetes, asthma, high blood pressure, heart disease, and other illnesses. Walmart has been accused of destroying thousands of family owned and operated hardware, sporting goods, and clothing stores with its overwhelming marketplace presence. However, in the face of Walmart’s potential expansion into the primary health marketplace, it has eliminated health care benefits for its own employees who work less than 24 hours per week. Will patients vote with their wallets and abandon their primary care physicians in favor of Dr. Sam?

Many, if not most Walmarts have onsite pharmacies; others include optometrists; so why not include a primary care office? And some Walmart locations do offer walk-in clinics. It is hard to explain how a guy from Bentonville, Arkansas out did the Sears, Penney’s, and other retail mainstays to become an American institution, but he did. The basis for Walmart’s success has been its ability to put what the customer wants, at the price the customer is willing to pay, when the customer wants it on its store’s shelves. So how would this model that work in health care? Not many of us want a colonoscopy at any price.

For starters, it is unlikely that Walmart would perform even minimally invasive medical procedures within its stores. However, routine physical check-ups, diagnostic and basic laboratory screenings, health care and wellness coaching and counseling, as well as medication adherence and monitoring could be accomplished in a way to ensure patient privacy and protection. And while it is true that laws regulating health care do vary from locality to locality, so do most other regulation relatives to operating any business.

Would Walmart be able to appropriately staff a primary health care facility? It would not have to; it would merely sub-lease a space within a store to any existing or new medical practice that would then staff it with the required medical skills needed. Initially the facility might restrict the types of patients seen to routine physicals, health and wellness, and coaching and counseling. However, over time, patients requiring more extensive treatment could be seen as both Walmart, their medical providers, and the public became more comfortable with the services rendered. While Walmart would never (never say never) perform highly invasive procedures, it could certainly redirect a significant amount of traffic from the small medical practices as well as underserved communities throughout its market area. Walmart currently operates over 130 walk-in clinics in some 29 states. A good start on being the nation’s largest primary health care provider? And who operates these clinics, local and regional medical providers.

Walmart could become the dedicated primary medical provider for small and medium employers by contracting directly with the employer. Consider this adaption of the model, Walmart provides basic and routine well care, pharmacy, dental, and vision services on a capitated basis; while catastrophic and major medical care and hospitalization coverage is provided by a fully or self-insured health care plan. Capitated rates could be relatively low $10-$15 PMPM and catastrophic and major medical based on community rating. Sounds like an HMO, look out Kaiser, here comes Dr. Sam!

Health Care Cost and Consumer Accountability

Friday, November 11, 2011

For decades, the true cost of health care has been hidden by the inability of the consumer, a.k.a. the employee and their dependents, to see the total cost of services provided. Documents such as the Explanation of Benefits (EOB) are great resources, however they are delivered long after the care itself is provided. Medical providers are often ill prepared and ill equipped to provide complete costs upfront since they themselves do not know the expenses associated with many services not directly provided by their facility. Many consumers do not realize that they do have a degree control over when, where, and how many non-emergency services are provided. Consumer Directed Health Plans were thought to provide the incentive for health care consumers to “shop” for medical services, in the same way that they would shop for a car. The problem is that there is no “Kelly Blue Book” for health care procedures which is easily accessible to most employees and their families. The result is that consumers are often unknowledable about the total cost of a medical procedure, and thus lack the information to shop around for the lowest cost or for that matter, the highest quality provider.

While some form of high deductible and consumer directed health plans have been marketed by carriers since the later 1990’s, only in the last decade have Consumer Directed Health Plans begun to be offered through employers in significant numbers. An April 27, 2011 report in Plansponsor stated that Consumer-Directed Health Plan participation increased 22% between 2009 and 2010, to an enrollment of 28 million, according to analysis by Mercer’s National Survey of Employer Sponsored Health Plans commissioned by the American Association of Preferred Provider Organizations. While sounding impressive, CDHP’s have a long ways to go to match the estimated 69% take-up rate for PPO plans reported in the same survey. The survey went on to report that 51% of employers with 20,000 + employees offered employees a CDHP.

The increasing popularity of Consumer Directed Health Plans is a simple economic function, i.e., lower premium costs to both the employer and employee. Typical private insurance premium costs for CDHP’s can range from $40 to $230 per month less for individual and family coverage respectively than standard PPO’s.. Employer sponsored plan premiums for both fully and self-insured plans can be significantly lower with the combination of group pricing, employer contributions, HRA/HSA incentives, and pre-tax employee contributions.

But the question remains, has Consumer Directed Health Plans contributed to lowers overall costs, a better informed, educated, and knowledgeable health care consumer? In a recent 2011 survey commissioned by ACS , A Xerox Company and carried out by Buck Consultants, 56% of HSA participants reported that their qualified plan offers a reasonably priced health care option compared to other alternatives. The survey also concluded that "… employees are benefiting from more educated, responsible health and wellness decisions … ".

Survey participants with HSA’s report:

     54% - Saving more money to cover medical costs

     18% - Engaging in healthier lifestyle choices

     18% - Researching preventive care programs

     28% - Shopping for lower priced prescription drugs

     31% - Better health care planning throughout the year

Results such as the ACS - Buck survey are certainly encouraging and appear to point to an emerging trend in the consumption behavior of some health care consumers. However, we are still taking about less than one third of health care plan participants being enrolled in a Consumer Directed Health Plan. And while 28 million individuals is no small number, it does represent a minority and of greater concern, individuals who may be healthier participants and are thus less likely to need health care. Leavening a concentrated pool of less healthily individuals in the remainder of the population.