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Getting at a Real College Cost Driver: Health Care

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There are few public policy issues that impact every American, regardless of age, race or socio-economic status. Right now, health care is one of those issues where policy decisions can have a life-altering impact on many Americans.

The health care reform debate is finally at the top of the nation's agenda because employers simply cannot afford to continue coverage for their employees under the current cost structure. Tuesday night, in President Obama's address to the joint session of Congress, he laid down the marker:

So let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year.

His first budget, released today, includes a $634 billion "down payment" for health care reform.

Understandably, everywhere today, U.S. employers are grappling with real and necessary issues of consolidating production, changing services, reducing inventory - and managing escalating health care costs. Entire industries are banding together in formal coalitions to advocate for health care reform.

So what if there was one industry, which not only employed millions, but had the best thinking, ideas and solutions for reform, yet that industry stayed out of this national discussion? It wouldn't make sense, but there is one: higher education.

While not typically viewed as an "industry," the nation's colleges and universities combined employ 2.2 million people full-time. Compare that to the U.S. auto industry with 809,000 employees, or the United States Postal Service, with 615,000 employees.

The car makers, which spend over $6.8 billion in annual health care costs, and the Postal Service, with over $2 billion in annual health care costs, are both engaged in the debate. They know, like so many others in the private and public sectors that the cost of continuing health care coverage for their employees jeopardizes their ability to stay in business.

But higher education hasn't stepped up. Colleges and universities have furloughed workers, left open positions vacant - and of course, continued to raise tuition and fees. Those decisions have a direct impact on the consumers of higher education. So, at the very heart of higher education's cost structure is the rapid rise in the cost of benefits for employees - particularly for health care. Despite the huge burden created by health care costs for institutions of higher education, they've largely been absent from reform discussions. Instead, just like a virus that adapts to changing circumstances and becomes more virulent over time, the underlying cost structures in higher education have become more demanding of resources and more difficult to tame when state revenues or endowments decline.

Other employer-based coalitions have been working for years in Washington to ensure their needs are met. Yet, higher education organizations and institutions are neither part of these groups, nor working together on their own. This means the higher education enterprise is in a reactive, not proactive position.

Actively taking part in health care reform should be a top public policy priority for every post-secondary education employer in the nation. And, that's not only because of the costs, but because higher education has something incredibly valuable to bring to the table: expertise. Colleges and universities have the potential to produce some of the best thinking and real solutions for health care reform.

The combination of strength in numbers and expertise, which higher education brings to the table, could positively affect the outcomes in three key areas: cost, prevention, and innovation.


The primary methods of cost containment in health care are to: reduce services, shift costs to employees, get creative with bulk purchasing, and pay for performance. Colleges and universities already have some experience with regional solutions to health care challenges, such as the University Health Systems Consortium. In addition, several states are moving towards performance pay models in higher education. This experience needs to be brought to bear as the debate moves forward.

There is another element to the health care cost debate that is unique to the education field and should pique their interest. History tells us that as health care costs at the state level go up (primarily Medicaid costs), state support for higher education goes down. If health care reform is successful at the federal level, and state-funded health care costs are reduced, it is reasonable to expect greater flexibility for states to invest in higher education.


For every dollar invested in disease prevention or health and wellness programs, employers save an estimated $5.81 in reduced medical costs and decreased absenteeism. This is a two-fold issue for higher education. First, as a major employer, the industry should be offering these programs to employees so they can reap the benefits of these cost savings. Second, higher education has a built-in platform in their student bodies to spread the message about prevention, health and wellness. Because 7 out of 10 high school graduates go on to post-secondary education, this is where our nation's young adult population can learn the important health education lessons that will stand them in good stead for the rest of their lives. Efforts in the K-12 education system are already underway. Higher education can be a leader in this area by educating their student body, which can have a dramatic effect on long-term health and wellness of the nation.


Higher education has long been a driver of research, development and innovation in the U.S. economy. That power must be used on this public policy agenda, not only for the good of the higher education enterprise, but for the good of the nation. Health care costs are slaughtering this country. 17 percent of American GDP is spent on health care compared to only 9.7 percent in Canada and 10.7 percent in Germany. Since 1999, health insurance premiums have increased 120 percent, compared to 44 percent for general inflation and 29 percent for wages.

Higher education can be - and in many places around the country are - part of the innovative teams that are redesigning and implementing improved care delivery systems. For example, the Pittsburgh Regional Healthcare Initiative has brought together 40 hospitals (including the University of Pittsburgh Medical Centers), four major insurers, over 30 health care purchasers, dozens of corporate and civic leaders, and Pennsylvania's attorney general in an effort to create a system that efficiently delivers flawless care to patients. The stimulus package recently passed by Congress makes a massive new federal investment in the development of a national health IT system. Higher education should be out front with this opportunity - describing for the rest of us the best ways to allow innovation in health care to flourish and how to replicate those innovations nationwide.

Despite our optimism about potential contributions from the higher education community, there is awareness that higher education is reactionary. Traditionally, this community has shown remarkable adeptness at lobbying their own Members of Congress for their individual interests. However, engaging in the health care debate will require proactive coordination and organization. If higher education joined forces with other employers or organized to speak with one voice, the impact and reach would be profound.

The nation needs a more cost-effective, productive higher education system in order for its people to continue to enjoy a quality of life that is ever dependent on educational and skill attainment. This week, President Obama called on every American to attend at least one year of college or other post-secondary education, rightly noting that an ever growing segment of our population must be college educated in order to maintain our global competitiveness. In order to meet the President's call to increase the number of college educated workers by 2020, the U.S. will need to increase the current rate of college graduation from 39 percent to at least 55 percent. Costs will be a major impediment to many students, which reinforces the need to rein in the biggest cost: health care.

America's colleges and universities need to take advantage of current opportunities to manage their health care costs. Health care is presenting itself as the key opportunity. No other decisions this year will be more important for higher education than their commitment to participating actively in the health care debate. The question is whether higher education can meet that challenge.

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