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 Silicon Valley 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 longterm cost incentive in
providing universal access to care? While the system provides
for our wellbeing, 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.
| 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. |
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.
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 812% per year over the past
5 years, compared with an economy growing at 4% or less.
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
Silicon Valley 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.
| Average wage in the bioscience cluster in 2004: $65,775.
National average wage, private sector: $39,000. |
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 Silicon Valley companies face.
The Business Cluster Perspective
Hospitals, clinics, medical practices, insurers, biotech and
pharmaceutical companies, and medical device companies are
among the major business interests in the health care field.
Silicon Valley'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.
Silicon Valley 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.
The Consumer
| According to the Centers for Medicare & Medicaid Services,
households expended 32% of the dollars for health care in
the US in 2003. Privatesector employers represented 26%,
and the government paid 39%. |
While a plurality of health care expenses continue to be borne
by government, the trend in spending is toward greater consumer
costs and away from employer costs. There are several
components to this equation: increased employee participation
in their premiums, larger copays, and a new "consumerism"
represented by trends such as high deductible
plans with health savings accounts.
| Insured Children, 018 Years |
 |
Ideally this trend would also reflect a growing number of individuals
having insurance coverage; unfortunately, it is not.
Rates of uninsured adults continue to rise in the US.
However, our coverage rate in Santa Clara County is 88.3%
overall (by all sources)6, and there are some very positive developments
in Silicon Valley that may reverse the tide. Santa
Clara County is home to one of the earliest and most aggressive
local efforts to get all children insured. It has had tremendous
success enrolling eligible kids into existing state and federally
funded programs, as well as directly insuring others.
Several other counties in the state have followed suit, and our
state government has looked at the possibility of expanding
the program statewide.
A comparison region to Silicon Valley, Boston, is at the center
of the statewide program initiated in Massachusetts to extend
health insurance to all residents.
Encouraging Trends
The interest of the medical community in adopting
evidence-based medicine is increasing, which bodes well for
achieving better outcomes. This body of practice emphasizes
clinically validated best practices and protocols, an area that
has been somewhat neglected in the past. These practices are
as simple as regularizing inventory control procedures for
drugs, or more complicated, such as adopting four effective
practices to prevent ventilator acquired pneumonia (VAP).
While not every aspect of evidencebased medicine will be
adopted by all practitioners (or institutions), there is great
promise for increased effectiveness and decreased avoidable
errors, which have very dear human and fiscal costs.
How Uninsured Are Covered Under the
Massachusetts Health Care Reform Plan |
 |
While it appears that Americans on the whole are becoming
less healthy, the resurgence of wellness programs discussed in
last year's Projections continues. As data continues to point
towards greater proportions of obesity and other risk factors
for complex chronic illnesses (diabetes, heart disease, etc.),
prevention has never been more important. California's demographics
are a challenge in terms of obesity, which is becoming
more prevalent among Latinos, a group which is traditionally
hard to reach with lifestyle change programs.
Emphasis on exercise and nutrition through the K12 education
system is one effective means of reaching vulnerable populations.
Current budget constraints make these programs difficult
to begin and sustain, but Santa Clara County is trying
to reach all 5th graders with a uniform program.
Some very large corporations and government employers in
Silicon Valley are selfinsured, which entails either negotiating
with providers and/or directly paying employee expenses.
This provides some latitude in dealing with providers, as well
as more direct returns on wellness programs.
