The Boomer parents of Millennials may have complained about their kids leaving messes around the house, however, Boomers are leaving an exponentially bigger mess for their kids. Millennials will see their future stolen if the healthcare cost beast that Boomers have largely ignored isn’t slayed.

Healthcare’s hyperinflation-driving fortress has been impenetrable to forces trying to disrupt it over the last couple decades. Whether through regulatory capture to protect the status quo or self-inflicted mistakes (e.g., HMO “gatekeeper” and denial of care debacle), healthcare has been remarkably resilient to forces that have driven change in virtually every other sector.


The gig is up

At long last, the gig is up and the fix is in (the good kind of “fix”). It’s coming from the edges and is largely unnoticed by incumbents who haven’t delivered any productivity gains in over 20 years (unless you measure productivity by getting out bigger bills). Ask any VC who they study to get an eye into the future and they’ll give you a clear answer: Study the millennials.

I’m optimistic that we’ll look back at this point in time as pivotal thanks to the biggest generation in history—the millennials. They will drive the fix to the blunders made by Boomers (their parents) that have made healthcare the greatest and most immediate threat to America (e.g., devastated household incomes, retirement nest eggs, and education budgets).

U.S. Labor Force by Generation, 1995-2015


Millennials are the biggest share of workforce

If you only read one book about healthcare, read David Goldhill’s Catastrophic Care: Why Everything We Think We Know About Health Care is Wrong. He also wrote an excellent piece in the Atlantic, “How American Health Care Killed My Father,” that touches on similar issues. By day, Goldhill is the CEO of a media company. Previously, he was the CFO of large media organizations. He brings his financial acumen to the healthcare challenge.

If Goldhill didn’t break it down with well-sourced figures, his conclusions would be unbelievable. Who could imagine that one out of every two dollars in their career would go to an underperforming healthcare system? And that is the conservative projection of growth.

Healthcare paymentsThe current trajectory will have millennials spend an unbelievable two-thirds of their income on a healthcare system designed as a perfect polar opposite to what millennials want and value. This is how Goldhill describes it (“Becky” is his fictitious millennial):

“Now also remember that $1.9 million was based on an assumption that health costs were somehow tamed below Becky’s income growth. In recent years, per capita health costs have actually increased 2% to 3% faster than income. If health costs grow merely equal to Becky’s income, Becky is looking at an additional $1.3 million in expenses over her lifetime—almost $3.2 million in total. In that scenario, Becky will contribute one out of every two cents she earns to our health care system. Does that possibility sound crazy? The growth rate is less than new government projections for the upcoming decade; the Center for Medicare and Medicaid Services (CMS) estimates health costs growing at 2% more than our gross domestic project, which means 5%. In the absurd possibility that the 5% growth rate continued, Becky would be spending roughly two-thirds of her true lifetime income (including all benefits) on health care.”

While we spend well over 80% of health-related spending on the sick care system, it only drives 20% of health outcomes. The impact of that disconnect is being felt already.

Healthcare Industry Taxonomy for the Population Health Era (Source: The Future of Healthcare Today, Cascadia Capital)


Millennials to the rescue

Millennials have driven society-wide change in many areas. Millennials ignored newspapers both as a source of news but also as the de facto place to buy/sell items. Undermining the bread and butter of the newspaper business model (classified ads) made the newspapers a demonstrably worse product since classifieds drove roughly half of newspaper profits. The profits previously supported reporting that has gone by the wayside over the last 10 years. Cutting delivery on some days has further accelerated their decline. Of course, millennials’ technology adoption drove the early success of smartphones, social media, and services such as Uber that are now pervasive across all generations.

The parallel to newspaper classified within health systems are profit centers such as cardiac catheterization labs. The so-called “cath labs” are nicknamed “cash labs” as they are also centers of over-use. Spinal and orthopedic procedures are also well known to be greatly overdone as studies such as the Starbucks/Virginia Mason found (i.e., 90% of spinal procedures didn’t help at all despite great expense and medical risk). Benefits expert, Brian Klepper, estimated that fully 2% of the entire U.S. economy (not just healthcare) is wasted on non-evidence-based musculoskeletal procedures that add no value.

High-quality Transparent Medical Networks are in alignment with millennial values of transparency and fairness and have solved healthcare’s most vexing problem—pricing failure.

“Let food by thy medicine” – Hippocrates

On the health front, millennials are the least healthy cohort of 20- and 30-somethings in the last 100 years thanks to what their Boomer parents fed them—what Michael Pollan calls “food-like substances“. This is causing millennials to engage more broadly in the healthcare system much earlier than previous generations. Millennials have personally felt the consequences of bad health choices. It’s payback of sorts when you see millennials punishing Big Food and Soda with dramatically lower earnings. The Christian Science Monitor did a broader analysis of how widespread the millennial impact is on the food industry.

Financial services is another example of where millennials are steering away from incumbents. While it may seem easy for incumbents to ignore “annoying” millennials, they are a canary in a coal mine as this TechCrunch article states:

“I want a bank where absolutely everything can happen through my phone, and if I need help, I can ask a banker about something instantly through the click of a button. I want a concentrated set of services designed just for me, and not a menu with more than fifty options for services that aren’t even relevant for me.”

“Yes, millennials are annoying customers, but here is the irony: everyone wants these features . Consumers want to be able to manage their finances from their phones and tablets while limiting their visits to bank branches and bank tellers. Plus, everyone hates bank fees, particularly their complexity and lack of transparency.”

“The difference today is that millennials are willing to shop elsewhere, because we are simply not going to accept that these are the only products on the market. We are willing to try new startups and their innovations, since they speak our consumer language while the traditional banks do not.”

KQED’s Chrissy Farr analyzed the impact millennials are already having in healthcare including how they are avoiding the ill-designed norms in dealing with healthcare providers to select doctors aligned with their preferences.

“Almost all of the millennials I spoke with said they had high expectations for their primary care and were willing to ‘doctor shop’ until they felt satisfied. Most saw value in same-day appointments, online scheduling, and access to their medical record, as well as the option to text or email the doctor between visits.”

“A 2012 survey from Harris Poll, a market research firm, found a disparity between the desire for online health services and the availability of those services. Among those surveyed, 52 percent of baby boomers said they were ‘very satisfied’ with their healthcare experience, compared to 48 percent of Gen Xers and just 35 percent of millennials.”

“The vast majority of people who use ZocDoc are under the age of 40. Many patients who use ZocDoc hold a similar view as Ali Boldish. Three out of four returning patients will choose the same doctor, company spokeswoman Amy Juaristi said, adding that many of the doctors who have signed up to ZocDoc offer texts and email communication as well as weekend and evening appointments to appeal to busy young professionals.”


Millennials: The Ben Franklin Generation

“An ounce of prevention is worth a pound of cure.” – Ben Franklin

Adam Hanft is a well-known brand strategist who wrote “The Stunning Evolution of Millennials: They’ve Become the Ben Franklin Generation,” referring to the financial industry but could have also been speaking about healthcare:

“Their faith in technology is understandable. Algorithms don’t act in their own self-interest.  Algorithms weren’t responsible for dreaming up sub-prime loans and nearly bringing down the financial system . Millennials didn’t trust authority and conventional sources of wisdom before the melt-down. Imagine now. Wealthpoint argues that Millennials: ‘…have been nickel-and-dimed through a wide variety of services, and they value simple, transparent, low-cost services.'”

“I love that a generation identified with the eroticism of immediacy is choosing slow and steady as an investment theme. It makes them, truly, the Ben Franklin generation, in even more ways than just how they relate to money; they value craft, authenticity, strong values. Ironically, they are far more prudent and sensible than their predecessors.”

“They don’t want to beat the system; the success of Wealthfront and others say that the Ben Franklins want a fair system they can be part of, and that can benefit everyone in it.”

“The giants of financial service haven’t seen the telluric shifts that travel, media, entertainment, and home thermostats have. They will. Depending on who you are, the Ben Franklin generation is composed of 80 million Benedict Arnolds.”

Renowned cardiologist Bernard Lown invented the defibrillator, but also was a voice for restraint that was largely ignored by his fellow cardiologists while in practice. The motto of the Lown Institute could be Ben Franklin’s quote, “Nothing is more fatal to health than an over care of it.” The tactics cardiologists used to cow previous generations to undergo inappropriate care that Dr. Lown described won’t be readily accepted by Ben Franklin-esque millennials. Appalling stories, such as the 52-year-old woman having to have her heart replaced after straining a muscle in her chest due to a new workout, go viral thanks to millennials. Unfortunately, this kind of overtreatment having hugely negative consequences isn’t isolated.

Just as algorithms didn’t create the sub-prime crisis, the huge overtreatment crisis that the Lown Institute, Consumer Reports, and others are highlighting wasn’t created by algorithms. Algorithms such as Google’s further the predisposition to trust an algorithm when they seem to undermine Google’s near-term revenue. For 100 years, the old adage of the ad industry was “I know we waste half of your ads dollars. The problem is we don’t know which half.” Google and others put the end to that. Incumbents: Beware the algorithm.


Millennials won’t accept miserable benefits

Current health plans are so bad, some millennials would rather clean their toilet than understand their health plan. Most employers are pouring more than enough money to fully fund a great health plan and a comfortable retirement. The reality of this is hitting millennials’ parents as most Boomers are finding their health benefits costing more and delivering less while they have woefully underfunded retirement accounts. Millennials won’t accept this appalling benefits status quo, particularly when it’s not hard to find a model Health Rosetta benefits plan that some employers are using to get a far better value proposition.

Here’s how one millennial (Birke Baehr) put it when people comment that some healthy food is more expensive than junk food: “You can pay your farmer, or you can pay your doctor.”

I chose Rosen Hotels as one of the seven most game-changing organizations for 2016 as they recognize that health is about more than access to clinical care. After all, clinical care only accounts for 20% of health outcomes. Rosen recognizes that addressing the full spectrum of health not only means addressing access to clinical care, but also underwriting their employees and employees’ children’s college education. Harris Rosen goes a step further by reallocating money that most companies are squandering on healthcare to fund education in their local community. This has resulted in graduation rates growing from 45% to nearly 100%, not to mention a 67% reduction in crime due, in part, to the after school programs he has supported.

The good news for employers is that an enlightened approach can benefit their business. This echoes environmental issues where Walmart has shown how reinventing their approach is saving them billions. Likewise, companies ranging from a small manufacturer like Enovation Controls to a medium-sized hotelier (Rosen) to Michelin are benefiting both their employees and bottom-line through a reinvented approach.

Sadly, too many employers and unions are making the same mistake as teacher unions by being on the wrong side of the negotiating table. Collectively, the teacher unions and school boards are sticking fingers in the dike. Yet, if they popped their heads above the dike, they would realize that a healthcare tsunami is headed their way. The massive wave of millennials dominating the workforce is a perfect excuse for reinvention.

Today, millennials are the biggest portion of the workforce. In 10 years, millennials will be 75% of the workforce. At companies such as Ernst & Young, millennials are already 60% of their workforce. The time has come for benefits consultants to fulfill their promise and guide their clients to develop a new benefits program optimized for millennials. As they have before, millennials can drive a benefits approach built for this millennium unlike the underperforming benefits strategy optimized for the last millennium.


Smart employers target millennials with new benefits options

One of the approaches smart employers take to shift their workforce to a higher-performing benefits package is to create a new benefit offering that is the desired model. At the same time, they don’t take away the old, underperforming status quo health benefits package. What they do is effectively make that “Tier 2” where employees will continue to see the same “get less, pay more” story every year. The new benefits package is “Tier 1” and it becomes the default benefits package for new employees. Since it’s designed in a way that is aligned with millennials’ desires, they focus on that demographic.

As has been shown with the Internet, food, smartphones, and social media, most people want the same thing millennials want. Like many generations before them, they are simply the early adopters.


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