A New Strategy for Jobs and Economic Development: Make Portland #1 in the Nation at Controlling Health Care Costs
Voters should always be prepared to take anything politicians say about economic development with a grain of salt. Some common economic development strategies are based, not on evidence, but on hopes, prayers and myths.
For example, I’m a big sports fan – but economists will tell you that using public money to build sports stadiums isn’t an economic development strategy (although I am very proud that the New York Times is now calling Portland America's #1 soccer city). Sports teams generally don’t bring new money into an area; they just rearrange money that’s already there. People spend money on sports that they’d otherwise spend on some other form of entertainment. The kind of businesses you really want to develop are businesses that sell goods or services to people in other places, and bring the money back home. Intel, Nike, Wieden & Kennedy and Precision Castparts are high-profile examples in the Portland metro area. (By the way, although Intel’s factory is out in Hillsboro, a large number of its employees live in Portland.)
Cutting taxes is another popular strategy – but has a rather severe flaw. Businesses like the tax breaks; but they also like to have good local schools, and safe streets … things that are paid for by taxes. Interestingly, among the nation’s big states, high-tax New York and California, for example, continue to have higher per capita incomes than low-tax Texas.
One strategy that does make sense, and that Portland has been pursuing for some years, is to position itself as a hub of ‘green’ industry. It’s a sensible idea, and we’ve had some success, but it’s not a cure-all. For one thing, the Republicans in Congress are currently preventing the Federal government from adopting seriously green-friendly policies, which, in the short term, limits the amount of investment we see in renewable energy and other ‘green’ strategies.
I have long thought that, since rising health care costs are such a burden to American companies, the city or state that managed to get a handle on health care costs would have a huge economic advantage over the rest of the country. But I didn’t see how, exactly, one could do that. There are some places, like Grand Junction, Colorado, that have unusually low health-care costs, but that wasn’t because of any government policy; the leaders of the health industry in Grand Junction sat down together and committed themselves to practicing medicine in a more cost-effective-way.
Just a few months ago, however, I read an article about something the casino workers’ union in Atlantic City was doing – and I got really excited.
The casino workers’ union was self-insured, and suffering from rising health care costs. They called in some bright consultants and asked them for ideas. The bright consultants told them that if they checked, they’d find that a lot of their costs were driven by a relatively small number of their workers. To some extent, the consultants said, that was unavoidable: Some people just have expensive chronic conditions. But they said some of those expenses could be avoided if they could get these high-cost people to take better care of themselves: take their medication, get a little exercise, make it to scheduled doctors’ appointments, change their diet.
So the casino workers’ union tried an experiment. They started their own little clinic, which they asked their high-cost workers to start going to, free of charge. The clinic had a couple of primary care physicians, a couple of nurses, and eight health care ‘coaches’ – not medical professionals, but people who served, basically, as effective nags, staying on top of people to get them to take better care of themselves.
The results were amazing. The workers’ health improved; the union’s health care costs went down. As the New Yorker author Atul Gawande wrote:
Fernandopulle [the bright consultant the union hired] carefully tracks the statistics of those twelve hundred patients. After twelve months in the program, he found, their emergency-room visits and hospital admissions were reduced by more than forty per cent. Surgical procedures were down by a quarter. The patients were also markedly healthier. Among five hundred and three patients with high blood pressure, only two were in poor control. Patients with high cholesterol had, on average, a fifty-point drop in their levels. A stunning sixty-three per cent of smokers with heart and lung disease quit smoking. In surveys, service and quality ratings were high.
I read that article, and I thought: You could take that strategy in the City of Portland and run with it. You could have the city start a clinic like that, for its own workers. The city could ask the County and the school districts to join in; maybe you’d start a network of clinics. You could bring private employers and their employees into the clinic network. Each employer, public or private, would help pay the cost of running these clinics.
Most companies know health care costs are killing them, but unless you’re an awfully big company it doesn’t make sense for you to build your own little clinic, and even big companies don’t usually run into as smart a consultant as Rushika Fernandopulle. But if the city said to Portland’s businesses, “this is what we’re doing. We think it’ll save us money. We bet it can save you money. Do you want in?”, I bet that over time, we’d get a lot of businesses into our network. And they would save money on health care costs. It’s important to note that this strategy is not a substitute for, but a complement to, ‘regular’ health insurance and health care – but it’s a complement that reduces the amount you spend on ‘regular’ health care. The self-insured employers, like the City of Portland, would save money directly; employers with traditional insurance would see their ‘experience ratings’ improve, and be able to drive a better bargain with the insurers.
(Full disclosure here: Insurance-regulation wonks will note that experience ratings matter most for employers with more than 50 employees. We might need a change in state law to make this strategy more valuable to small employers.)
As a result of having lower health care costs, employers could pay their workers more and sell their products for less. And then, when we try to recruit new companies, we could tell them: you’re not just coming to the most beautiful city in America – you’re coming to a city that’s #1 in America at helping employers control health care costs, not by shifting those costs to workers, but by actually improving workers’ health.
I should mention that there’s a group of Oregon health insurers and health providers that is trying something somewhat similar right now – a pilot project involving a few thousand patients, where the insurers are paying doctors an extra ‘case management fee’ to try to keep their highest-cost patients out of acute care. I wish them luck, and think we should watch the pilot carefully. But remember, the insurers and providers, however well-intentioned, are all in the business of making money off health care. Even if this model does generate savings, who will benefit – the patients and employers, or the insurers? I’d want to wait and see.
By contrast, one of the most exciting things about the Atlantic City casino workers’ model was that the union and its members took charge of their own destiny, by inventing something new, outside the traditional model. That sounds very Portland to me.
Working to reduce health care costs can’t be our only economic development strategy, any more than being “sustainable” should be our only strategy. We’ll be talking about other strategies in the course of the campaign (for example – strengthening our schools needs to be another important part of our strategy), but the issue of health care costs is one that tends to get neglected, and I think it’s high time we paid it the attention it deserves.