CEOs Cite Health Care Costs as Biggest Headache

December 12, 2006
For a fourth consecutive year, American chief executives say rising health care costs are the greatest financial pressure facing their business, according to an annual survey published by the Business Roundtable.

Though annual double-digit percentage increases have slipped to the high single digits in the past two years, the report, which was published Tuesday, December 12, notes that health care costs continue to grow more than twice as fast as inflation.

Fifty-one percent of the CEOs responding to the Business Roundtable’s CEO Economic Outlook Survey cited health care costs as their greatest cost pressure—more than three times the next most-cited concern, energy prices. Sixteen percent of CEOs said energy prices were their greatest cost pressure, down from 27 percent in 2005.

“I think one of the things the 51 percent are saying is that [health care costs have] not gotten better and we have to do something about it,” says Harold McGraw III, chairman of Business Roundtable and chairman, president and CEO of the McGraw-Hill Cos.

McGraw said during a press conference announcing the report that health savings accounts have “not gotten as good a hearing in Congress as it needs to” and that more responsibility for health care needs to be put on the consumer.

Like other business leaders, McGraw voiced his opposition to Democratic proposals for the federal government to negotiate Medicare prescription drug prices directly with manufacturers. 

McGraw says the implementation of health care information technology should be a high priority since it has bipartisan support in Congress as well as the backing of employers. Health IT would take $156 billion in waste out of the $2 trillion health care economy, McGraw says.

“We’ve got to do some of the things that are doable right now that both Republicans and Democrats agree on,” he says.

CEOs also cited material or commodity prices, litigation costs, labor and pensions as other cost pressures.

The Business Roundtable is an association of 160 member companies representing 10 million employees and $4.5 trillion in annual revenue. The Washington, D.C.-based organization said 124 of its members responded to its survey.

The survey is a quarterly report, but questions about cost pressures appear annually.

The economy remains strong, according to the report, but has slipped somewhat in the past quarter because of a softening in the housing market, leading to concerns about a cut in consumer spending,

“2007 looks like a slower growth year but a year of growth nonetheless,” McGraw says.

Jeremy Smerd