Bill Gates TED Talk: Healthcare Devastating Education

Teacher Unions Biggest Foe: Fixable Health Benefits

Hardly a day goes by without hearing about a teacher strike. Inevitably, a primary point of contention is health benefits. Collectively, the school boards and teacher unions are sticking a few more fingers in the dike. If they popped their heads above the dike, they’d realize that a healthcare tsunami is swamping their goals.

In the meantime, high quality schools and programs are being washed away. The collateral damage ranges from larger class sizes to fewer arts programs. None of these casualties are good for kids or the nation’s future. Fortunately, there is a better way but let’s first understand the magnitude of the problem. [Update: The great news is we found a bunch of school districts in the Pittsburgh area where teacher unions and management got together. Read about their tremendous success here. They were also highlighted in my TEDx talk embedded below.]

Bill Gates TED Talk: How State Budgets are Breaking US Schools

Bill Gates gave a TED talk entitled "How state budgets are breaking US schools" (video embedded below) on the macro view of the impact of state budgeting (a primary source of school funding). He had a few choice slides that I’ve included here. Gates looks at data from California, but it’s not a problem unique to California. Only $3 million has been set aside for retiree benefits whereas $62 billion (with a "b") has been promised – far worse than the car companies.

It’s bad today but will only get worse over time. If we don’t solve education funding on a sustainable basis, we’re only putting a Band-Aid on a growing, gaping wound.

You may have noticed how we lurch from one education-funding crisis to another. In states such as Massachusetts, they passed legislation to pay teachers more. Guess what? Teachers didn’t take home one more dime. Every new dollar allocated to teacher salaries got eaten up by healthcare costs.

Gates pointed out how it will get worse and the dreams we have to improve schools will be impossible.

The GAO did projections that run out to 2060 and show how healthcare will steadily strangle other budgets. As devastating as that impact looks, we don’t have to look to the future to see the impact. The slide below shows the impact of how healthcare has starved other spending at the state level.

Healthcare strangling state budgets

If you look at the items that have been cut, they drive health outcomes more than clinical care. As Winston Churchill said, “Healthy citizens are the greatest asset any country can have.” For the first time in our country’s history, lifespan has flattened. Just as bad, the quality of life has badly suffered. Ten years ago, I can’t remember seeing one of those mobility scooters and now they are everywhere.

A Local Case Study

Kevin O’Sullivan is a principal (non-CPA partner) in a national accounting firm who recently completed a tenure as a school board member in a suburb of Philadelphia. His financial analysis of the school budget in a letter to the editor came in handy in the figures I’ll share below. However, one doesn’t have to be an accountant to see the impact on one’s taxes. In the 15 years since he moved to his community, his property taxes have doubled. Every dollar of increase has gone to theoretically fund education. In reality, it has all gone to feed healthcare’s waste (follow link to see examples of what could be funded with healthcare’s waste).

If our lifespans had increased 50-100% during that time period, we might accept that trade-off. Obviously that hasn’t happened. Worse, during this time period, we’ve seen more and more school programs cut back. Because property taxes can’t be raised more than 2% per year, healthcare is also eating away at other municipal priorities such as infrastructure. The following is an excerpt from the school board member's letter to the editor:

Let’s extrapolate the expense drivers in the budget. If salaries go up 2 percent per year, at $750,000, and healthcare goes up 15 percent each year, call it $1.5 million we are looking at an increase of $2.25 million per year, every year. If we can only raise taxes $1.1 million, we need to cut $1.15 million each year. The takeaway here is that healthcare expenses alone are going up faster than we can raise taxes.

This is not opinion. It is fact.

In 2009, the premium for a family plan was $13,200. This year, it will cost $28,000. That is a 112 percent increase over five years. It has taken up $4 million more in expense on our budget. This $4 million obligation now threatens even the continuation of existing programs for our students, and hampers the ability to invest in new programs. We are paying more taxes and getting fewer services. This is not sustainable.

Teacher Unions Must Step Around to the Other Side of the Table

“The definition of insanity is doing the same thing over and over again and expecting different results.” – Albert Einstein

Anyone with a primary school education can see healthcare’s hyperinflation “tax” is devastating education while simultaneous starving our retirement savings. The old models of school boards and teacher unions duking it out have failed. Both parties share a common interest in wanting the best education for our kids while fairly compensating our beloved teachers. Nothing jeopardizes school funding and teacher salaries more than healthcare costs so the school boards and teacher unions should join in common cause to do a reset on the healthcare status quo in their communities. They have buying power with a district typically paying ~$20,000 per staff member for health benefits (factoring in dependents) — more in some districts as the example above illustrates. On their own, that is some buying power, but it is feasible to join forces with other large employers in a community in both the public and private sector to have even more power.

Fortunately, healthcare is solvable if one takes a fresh look. All of the structural models necessary to fix healthcare have already been invented, deployed, proven and modestly scaled. Unfortunately, few have brought them together into one place. When they are brought together, the results are breathtaking. The idea behind the open source Health Rosetta project is that healthcare isn’t as indecipherable as Egyptian hieroglyphics. I have written about particular components of the solution in the past. The Marcus Welby/Steve Jobs Solution to the Medicaid-driven State & County Budget Crisis explained how a primary care renaissancenis foundational to fixing the US healthcare system. In another piece, high cost items are tackled with radical simplicity – DIY Health Reform Reduces Surgery Costs 50-90%.

As I do more study on how organizations (unions, corporations, etc.) are taking matters into their own hands, I learn of more and more great examples producing results. For example, I recently learned of an organization with 5,000 employees that has taken some of the steps outlined above. As a result, they are paying less than 50% per capita on health benefits while getting strong outcomes. It has allowed the company to out-perform their peers. In an industry where there is typically 60% employee turnover, they have turnover in the low teens. By avoiding much of the waste prevalent in healthcare, they are able to pay for any employee’s college education. Further, they will also pay for their dependent’s college education (if in their state). On top of that, the profitability of the business has turned the CEO/founder into a tremendous local philanthropist who funds pre-K education in an inner-city neighborhood in his community.

In Mesquite, Texas, the city and school district collaborated to tackle healthcare costs and broke the national trend of healthcare tax. As anyone who has honestly looked at healthcare knows, there is more than enough money floating around to fund healthcare (and education) but only if it isn't badly misdirected. 

The point is regular Americans who aren’t so-called “experts” in healthcare have figured out a way to do it. It makes one wonder why the so-called experts aren't leading this change. A former benefits head who oversaw benefits for organizations with over 1 million employees made his opinion clear in Cracking Health Costs -- i.e., too many entrusted to steward healthcare spending are under-performing with an epic cost to the future well-being of their constituents. The following are steps forward-looking union leaders and school boards will take:

1. Outside of the normal labor negotiation process, gather a meeting of union leaders and management to take an honest look at the past impact of healthcare costs and the projections. The negative impact on teachers and students will sharpen the focus.
2. Agree on shared goals outside of the labor negotiation cycle — the aforementioned DIY health reform examples can take place anytime. They don’t have to be put in place only during open enrollment.
3. Share case studies where action has been taken and gotten results and contrast that with scenarios like Detroit where healthcare costs played a central role in their bankruptcy. Without these steps, union members recognize they’d get no virtually no raises the rest of their career due to healthcare if the status quo is preserved.
4. Understand and apply proven models. The buying power of most school districts is sufficient to have some clout.
5. Communicate ongoing progress to union members and the community to maintain momentum.

If union and school board leaders don’t take these steps, it’s imperative that PTAs push to get the issue addressed. They can convene meetings to educate their membership and then compel their teachers’ union and school board to tackle this issue. Even if you don’t have kids, it’s critical for communities to rethink how high healthcare costs can impair the economic development of their community. During my lifetime healthcare costs have increased 274x while all other consumer goods and services have increased 8x without demonstrably better outcomes for the population as a whole. It’s too important to be left to the so-called experts.

Naturally, it’s predictable that those profiting from the waste will want to preserve the status quo by bamboozling those who paying the price. Healthcare is an easy topic to obfuscate and politicians from both parties have demonstrated how easy it is to demonize the other party on healthcare topics. It behooves forward-looking citizens who want the best for their family and community to be immune to these predictable tactics. Whether you consider yourself a Conservative or a Progressive, the real foes are the “Preservatives” determined to preserve the status quo that is stealing our future.

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This article also appeared in Forbes.

Dave Chase is the Managing Director of the Quad Aim Fund, Executive Producer of The Big Heist (the first fiercely non-partisan satirical film to address healthcare), co-founder of the Health Rosetta Institute (a LEED-like organization for healthcare) and author of the forthcoming book, “CEO's Guide to Restoring the American Dream - How to deliver world class healthcare to your employees at half the cost.” His recent TED talk was entitled "Healthcare stole the American Dream -- here's how we take it back."

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