The Curious Cat management blog carnival is published 3 times a month with hand picked recent management blog posts. I also collect management improvement articles for the Curious Cat Management Articles site; you can subscribe via RSS for new article additions.

• Maximize Test Coverage Efficiency And Minimize the Number of Tests Needed by John Hunter – “The steeper the slope the more efficient your test plan is. If you repeat the same tests of pairs and triples and… while not taking advantage of the chance to test, untested pairs and triples you will have to create and run far more test than if you intelligently create a test plan.”
• Listen to Your Community, But Don’t Let Them Tell You What to Do by Jeff Atwood – “Community feedback is great, but it should never be used as a crutch, a substitute for thinking deeply about what you’re building and why. Always try to identify what the underlying needs are, and come up with a sensible roadmap.”
• You must balance the principle of ‘build to takt’ with the principle of ‘heijunka,’ and the principle of ‘respect for people.’ by Jeff Liker – “By keeping some planned inventory, and using it in the right way, you can achieve a more leveled schedule, heijunka, which in the early TPS models was the foundation of TPS. Building to takt, pull, balancing the workload, and protecting the jobs of team members is not possible without heijunka.”
• Toyota University Lean Video – This video shows one of the lean training simulations developed by the experts at Toyota. As you can see, the game uses toy car manufacturing (what a surprise!) to illustrate pull production.
• The Apple Voice by Zach Holman – “Mechanically, The Apple Voice is characterized by short, declarative sentences that are informally and personally delivered to you with a hint of smugness.

  Our most amazing iPhone yet. 10,000 songs in your pocket. We think you’ll like it.

• The End of a Job as We Know It by Josh Bersin – “Have you created enough flexibility in the organization to empower people to develop expertise and bring it to your customers? Do you encourage continuous learning and learning from mistakes? Do you reward expertise and functional depth?”
• 6 Ways to Improve Problem Solving in Your Company by Jeff Hajek – “Change is extremely hard. And many new processes take time to work out all the bugs. There is a high risk period of time right after a change is made where the challenges of the new processes combined with the comfort of the old draw people backwards. Follow-up is crucial to keep teams from backsliding.”
• SaaS: Change starts easy and then gets really hard Jason Fried – This is why change gets really hard as a SaaS [Software as a Service] product matures. Existing customer expectations are some of the strongest forces pushing back at a company with new ideas.”
• Pull Consulting: Immediate Management Consulting As You Need It by John Hunter – “If you have any questions on a particular topic you would like answered today or if you want to arrange coaching on specific topics over a period of time or help planning a project or someone to bounce your ideas off give this consulting as you need it model a try.”

In agile software development tasks are documented as user stories. Then the level of effort for those stores can be estimated by assigning each story points. The velocity that can be produced in a period (called a sprint, for us 2 weeks) can be estimated. Thus you can predict what can be delivered in the next sprint (which can help business managers make priority decisions).

I have found estimation to be worthwhile. In doing so, we accept there is a great amount of variation but points give a hint to scale. They can help prioritize (if you have 5 things you want but 1 is much harder you may well drop that to the bottom). I have always accepted a great amount of variation in the velocity, worry about the variation I don’t find worthwhile. I do think trying to act as though the velocity is precise can lead to problems. At the same time having a measure of velocity, even accepting understanding variation was present, was useful.

Over time reducing variation (probably largely through better estimation and perhaps a few better tools, reduced technical debt, better documentation, testing…) is helpful and laudable. We made improvement but still lots of variation existed. The biggest help in reducing the measured velocity was breaking down large stories to more manageable sizes. The challenge of estimating user stories, I suspect, has some fairly high variation (even with good system improvements that can help reduce variation).

Large stories just can hide huge variation in what is really required once getting into implementing it.

The way we did estimation (discussing in a sprint planning meeting) did take some time (but not a huge amount). It was agreed by those involved that the time spent was worthwhile. Sometimes we did slip and spend too much time on this, that was an area we had to pay attention to. The discussions were educational and helped provide guidance on how to approach the story. The value of discussions around estimations was probably the biggest surprise I have had in implementing any agile ideas. The value of those discussion was much higher than I imagined (I basically anticipated them just as non-value added time to get the result of an estimate, but they were a source of learning and consensus building).

Related: Assigning Story Points to Bug Fixes – Mistake Proofing the Deployment of Software Code – Checklists in Software Development

These thoughts were prompted by: Story Points Considered Harmful – Or why the future of estimation is really in our past…

As with all techniques this one comes with a disclaimer: you may not see the same effects that I report in this post. That’s fine. If that is the case please share the data you have with me and I’m happy to look at it.
My aim with this post is to demystify the estimation in Agile projects. The fact is: the data we have available (see above) does not allow us to accept any of the claims by Mike Cohn regarding the use of Story Points as a valid/useful estimation technique, therefore you are better off using a much simpler technique! Let me know if you find an even simpler one!

Oh, and by the way: stop wasting time trying to estimate a never ending Backlog. There’s no evidence that that will help you predict the future any better than just counting the number of stories “Done”!

This long post has good points in it. And I may be missing some of what is being said. But I find story point estimation to be worthwhile.

I can imagine assuming all stories are the same size works decently well. That goes along with the notion that we found which was the importance of keeping stories small. When we got into some trouble it was with stories that should have been further broken down into several stories (so we focused on doing that). Sometimes that required a spike to understand what the issues were.

I think it works well to have stories that are “too big” sitting on the backlog, but as they are approaching being worked on then take a look at them, define them a bit better and make sure they are not too big.

We wouldn’t waste much time at all on estimating a huge story. Just note that is a huge story and it needs to be looked at when/if we get close to doing it. If it was critical/required we might spend 10 minutes getting a few highlights for what key points (If we did x any y it would be way easier, lets see if that is ok. Maybe z would make this work fairly easily we can spike that and see…).

America’s Dirty War Against Manufacturing

That sentiment should be familiar to students of Deming (it is one of Deming’s 7 deadly diseases). It is sad that this bad management practices, short-term thinking, continues to do harm several decades later. Hopefully we can do better in the next few decades.

The excessive health care costs in the USA, another of Deming’s 7 deadly diseases, has continued to get worse every year since he classified it as one. The damage that the failed health care system in the USA does to the USA is enormous.

Related: Manufacturing Skills Gap or Management Skills Gap? – Manufacturing in the USA, and Why Organizations Often Don’t – Big Failed Three, Meet the Enlightened Eight

I think the potential for consulting as you need it is great. I actually was looking into creating an application to support the ability to provide this service with someone else; but we just had too many other things going on. I have now made myself available for consulting you pull as you need it through MinuteBox. You can get consulting when you need it for as little time as you need.

So if you are trying to apply the ideas I discuss on this blog and run into issues you would like to get some help with connect with me and you can get some immediate coaching on whatever you are struggling with. I am offering a special rate of $1.99 a minute, for now. The graphic on the right of this post (any post on this blog, actually) will show if I am available right now (as does johnhunter.com). If so, you can connect and get started. If not, you can leave a message and we can arrange a time.

I am featured on MinuteBox with this cool graphic, isn’t it nice

John Hunter feature on Minute Box homepage

One advantage of this model is that those of you following this blog have a good idea of what topics you would like to delve into more deeply with me. If you have any questions on a particular topic you would like answered today or arranging coaching on specific topics over a period of time or help planning a project or someone to bounce your ideas off give this consulting as you need it model a try.

For those of you management consultants reading this blog (I know there are many) you can create your own Minute Box account easily and provide this service also. And even if you are not a consultant if you have advice worth sharing (and I know there are many of you also) you can also set up an account.

Related: John Hunter’s professional life timeline – John Hunter online – John Hunter LinkedIn profile – Top Leadership blogs – Top Management and Leadership blogs – Top Management blog

The Curious Cat Management blog carnival highlights recent management blog posts 3 times each month. The posts generally focus on the areas I have focused on in the Curious Cat Management Guide since 1996 (Deming, evidence based management, lean manufacturing, agile software development, systems thinking…)

• The Key Questions for a Minimum Viable Product Project by Anthony Panozzo – “What are you trying to learn with this particular MVP?
  What data are you collecting about your experiment?
  What determines the success or failure of the experiment?” [bold added - John]
• Less Process, More Discipline by Charlie Martin – “Without it, you lose everything agile methods promise. The key to agile methods is this: You may have less process, but you must have more discipline.”


Sunset over Andaman, Khao Lak, Thailand. By John Hunter

• Evaluating Executive Performance by Art Smalley – “One interesting thing that I will note that was considered in Toyota in Japan by the HR department when evaluating executives was how their previous departments fared after they had left. If the department continued to improve then this was generally a good sign.”
• The evolution of design to amplify flow by John Hagel – “If we want to remain successful and reap the enormous rewards that can be generated from flows, we must continually seek to refine the designs of the systems that we spend time in to ensure that they are ever more effective in sustaining and amplifying flows.”
• Beyond Just Words – What Apple Could Do by Kevin Meyer – “How about immediately hiring and sending an Apple observer into every plant, perhaps every line in every plant, full time… Difficult? Sure. Ethical business often is.”
• Changing the game by Gabriel Weinberg – “For example, one tactic is to look at customer acquisition channels too small for your competitors to care about. I did reddit ads when they first came out and since there was no one there you could get a huge ROI. The saturation point was so small that for any major competitor it is a complete waste of time (now that Reddit is bigger, that may have changed).”
• We are Being Ruined by the Best Efforts of People Who are Doing the Wrong Thing by John Hunter – “Best efforts can often cause damage to the organization when people give their best efforts but are not guided by knowledge of what is useful and what is harmful.”

Related: Curious Cat Investing, Economics and Personal Finance Carnival

Deming’s Second Theorem: “We are being ruined by best efforts.”

What did Dr. Deming mean by this?

Another quote by Dr. Deming might give you a clue? “Best efforts will not substitute for knowledge.”

Irwin, the porcupine at the Animal Rescue League Wildlife Center has to work a little harder for his breakfast in this clip. The wildlife center likes to provide animals in captivity puzzles and challenges to keep them interested in their environment so they stuck his breakfast to the bottom of the mug.

Thankfully the baby porcupine in the video doesn’t ruin anything and instead just gives us an enjoyable video. He does spends a great deal of energy putting forth his best efforts, but without a theory Best efforts can often cause damage to the organization when people give their best efforts but are not guided by knowledge of what is useful and what is harmful.

Another Deming Quote: “We are being ruined by the best efforts of people who are doing the wrong thing.” Please share your comments on how organizations are ruined by best efforts.

And I will wrap up the post with another quote from Dr. Deming: “We want best efforts guided by theory.”

Related: quotes by W. Edwards Deming – Deming on being Destroyed by Best Efforts – Righter Incentivization

I am joining the ASQ Influential Voices project for 2012. The effort started last year when ASQ chose a few people to participate in a group effort to share their thoughts on various topics in quality improvement. I have been asked to join for 2012, along with a couple lean bloggers (Mark Graban and Tim McMahon) and others. Each month the ASQ executive director will post on a topic and I, and the other influential voices participants, will share out thoughts on that topic.

My history with ASQ extends back into my childhood. My father, William Hunter, was the founding chair of the ASQ Statistics division. They now administer the Hunter Award, which recognizes substantial contributions to statistical consulting, education for practitioners, and integration of statistics with other disciplines as well as demonstrated excellence in communication and implementing innovative applied statistical methods.

I joined with a group of people to lead the Public Sector Quality Improvement Network shortly after it was formed. The network aimed to help those in the public sector use quality management principles to improve performance. That group of people was one of the most impressive I have worked with; including Tom Mosgaller, Michael Williamson, Barry Crook, Nathan Strong and others. We decided to join with ASQ: that effort has become the ASQ Government Division. Another outgrowth of those efforts was my Public Sector Continuous Improvement Site, which I continue to run.

The Public Sector Network also connects back to my father; Tom Mosgaller and Michael Williamson worked on the quality efforts in the Madison, Wisconsin (at the City of Madison and the University of Wisconsin – Madison). Michael worked in for Joe Sensenbrenner, and then brought the new management ideas to his roles with university. My father approached the mayor, Joe Sensenbrenner, about applying management improvement ideas at the city. The mayor agreed and my father documented that effort in Dr. Deming’s classic, Out of the Crisis as the first government application of Deming’s management principles. See pages 245-247 of Out of the Crisis and also Joe Sensenbrenner’s classic article in the Harvard Business Review: Quality Comes to City Hall. Peter Scholtes was also part of that initial project at the First Street Garage in Madison, Wisconsin.

Terry Holmes (president of the local labor union), Joe Turner (division foreman) and Bill Hunter (consultant), working on the First Street Garage project. They went and presented to executives at Ford (where Dr. Deming was working) on the cooperation between union and management in the City of Madison project.

You can read a bit more about the work in Madison in George Box’s (an ASQ fellow) article – William Hunter: An Innovator and Catalyst for Quality Improvement. And also in: Doing More With Less in the Public Sector: A Progress Report from Madison, Wisconsin by William G. Hunter, Jan O’Neill, and Carol Wallen and Quality in the Community: One City’s Experience by George Box, Laurel Joiner, Sue Rohan and Joseph Sensenbrenner (1989). These documents are all made available by the Center for Quality and Productivity Improvement at the University of Wisconsin – Madison that was founded by George Box and my father.

When I think of Madison, I think of how a few influential voices created a climate where quality flourished. George Box started things rolling when he moved to Madison to found the Statistics Department. My father followed him from Princeton to become the first graduate of the PhD program. Brian Joiner soon followed (drawn by Box). Peter Scholtes moved over to Joiner Associates (from the city) to pursue quality improvement full time and when on wrote the Team Handbook (with others at Joiner Associates) and then the Leader’s Handbook (that I consider the best management book there is, biased as I am) after he started his own firm.

What I see in this pattern is the profound impact one influential voice can have. George Box chose to go to Madison. His presence drew many others and together that group focused a bunch of great people on quality improvement. A system was created in which positive reinforcing loops supported and encouraged the advancement of quality ideas.

I am making guesses, from my memory about many of these people, I may be assigning influence incorrectly in this post (even if I mix up a few of the details I think the overall point is still valid).

It is my opinion that people like Joe Sensenbrenner, Peter Scholtes, Tom Mosgaller (who in addition to his work with the City of Madison and the government division at ASQ, went on to serve as ASQ President), Michael Williamson, Maury Cotter, Barb Hummel, David Couper, Sue Rohan, Mary Zimmerman would have done great things no matter what. But it was the climate created by one influential voice (George Box) and then built upon by others that lead them to running with Deming based management ideas. They built on what each other did, they learned from each other, the supported each other. And as a result great things happened.

Me in my father's office, I think I was trying to create a spaghetti diagram photo by Bill Hunter

That strong community then attracted others, many through Joiner Associate (Heero Hacquboard, John Dowd) and others through the work at the University with George Box and William Hunter (Soren Bisgard, Bill Hill, Conrad Fung, Ian Hau) and some I am not sure whether Joiner Associates or the University were the major draw (Lynda Finn, Kevin Little). And then those that shared similar ideas in the community (for example, Kent Lesandrini) were able to connect to this network of like minded people. Each of them added to the dynamic in Madison and together they created a community where the management ideas were nurtured and flourished. Allowing each of them to accomplish much more than they every could have alone. They also each were able to learn from the others and build and grow their own knowledge and abilities though this collection of people.

The impact a few influential voices can have is powerful. Much of systems thinking and statistical thinking come naturally to me. The profound impact on people’s lives is something I realized as people came up to me and expressed how much a a difference my father made in their lives. That combination of forces drove me to make management improvement my focus and do things like create this blog to try and have a small measure of the impact my father did. This is a great challenge. Hopefully the ASQ Influential Voice will help create an impact.

If the ASQ Influential Voices Group can approach a small portion of the success the group in Madison achieved I think it will be a great success. The internet allows the potential for a even greater success. But Madison really was a special situation, I am skeptical it can be repeated. But achieving some of what was achieved in Madison would be wonderful.

I didn’t intend to get into all that about Madison when I started writing this, it just happened. I have thought about it over the years as I have marveled at what a collection of management expertise and practice was built in Madison.

While I receive an honorarium from ASQ for my participation in the Influential Voices project, the thoughts and opinions expressed on my blog are my own.

In2In offers some great opportunities for those interested in management improvement. Their conference is excellent. They also offer various conference calls with speakers knowledgeable about Deming and Ackoff’s ideas. These normally take the form of conference call presentations (similar to a podcast) followed by some question and answers. The consistently get remarkable people like, Gerald Suarez, and earlier: Peter Scholtes and Brian Joiner.

Gerald Suarez is kicking off the new InThinking Network monthly webinar series. I worked for Gerald at the White House Military Office. He is one of the best presenters and most knowledgeable experts on Deming and Ackoff’s ideas working today.

Gerald Suarez will present on February 9th on the topic of “Better Thinking About Leadership.” This is a great opportunity and there is no cost to participate. If you participate from outside the USA you can connect via Skype (from the USA you will be given a toll-free number to connect with – or Skpye, if you wish). If you can’t join the call, audio downloads will be available at some later date. Register here. If you can’t make the live event, I strongly recommend listening to the audio download once it is made available.

The format of these sessions is a 90-minute session, each month – from February through November. They are held the second Thursday of the month, from 11:30 AM to 1 PM Pacific Time.

Future sessions that we have to look forward to include:

• Paul Hollingworth will present in March: An Introduction to Systems Thinking
• Graham Rawlinson, in May to explore “Thinking About Thinking”
• Gipsie Ranney, in September: “Cause(s) of Concern,” a session designed to present and advance the understanding of common causes and special causes of variation.

Gerald is currently a professor on the faculty of the University of Maryland’s Robert H. Smith business school and works as a consultant and keynote speaker. Look for him to share his expertise in leadership, which includes 8 years of service in the White House under Presidents Clinton and Bush, as the Director of Presidential Quality — the first such post in the institution’s history.

Related: Transformation and Redesign at the White House Communications Agency – Managing Fear – The aim of leadership is not merely to find and record failures of men

The Curious Cat management blog carnival is published 3 times a month with hand picked recent management blog posts. I also collect select management improvement articles and blog posts in the Curious Cat management article library. The annual management blog roundup event covered #151 – #154, so this is #155.

• We Don’t Know quote by David York, via Mike Wroblewski-
  We don’t know what the problems are…..that’s why we make them visible.
  We don’t know what the root causes of the problems are….that’s why we ask 5 Whys?
  We don’t know what the evidence is….that’s why we collect data.
  We don’t know what is actually happening….that’s why we observe.
  We don’t know what solutions will succeed….that’s why we experiment.
• Why do we pay sales commissions? by Dan Ostlund, Fog Creek Software – “For us, it’s been a great success, and at least from that perspective it might be time we punch the Theory X, commissions-based sales culture right in the nose. Real redemption might lie in removing the source of the derangement and treating sales people like we treat programmers and other workers that we implicitly trust.”


Axes in Nigeria by William Hunter

• The C-Suite Double Standard by Dan Markovitz – “I started noticing what I call the C-suite double standard: leaders and executives who are ferocious about improving manufacturing processes and eliminating waste, but who passively accept waste in their office operations and individual work.”
• Standard Work Is Like Food – Taste before Seasoning by Mark Hamel – “No doubt, we have heard the Taichii Ohno quote, “Where there is no standard, there can be no kaizen.” Standard work implies that there must be adherence. Without it, it’s more like a standard wish…as fickle as the wind. We can’t sustain improvements and we have little foundation for the next.”
• How to trick yourself into thinking you’re doing lean (and trick others at the same time) by Jamie Flinchbaugh – “Don’t believe you are doing lean just because you’re filling out a template or following an agenda. It’s the thinking that counts.”
• Defying Time: Dr. W. Edwards Deming by John Persico – “the more difficult part of our consulting at PMI was not in teaching statistics or process analysis but in helping to change management attitudes from the old thinking of meeting goals and quotas to the new thinking that went beyond goals and quotas to never ending improvement and innovation.”
• Google: “A place where it simply isn’t efficient to act like an asshole.” by Bob Sutton – ” If you watch how people interact there — receptionists and executives, young engineers and senior executives, and people from less prestigious versus more prestigious parts of the company — the more powerful people treat the less powerful people with an unusually large amount of respect, even deference, and the less powerful people don’t cower or kiss-up nearly as much as I see in most places.”
• The Antithesis of Lean by Bill Waddell – “So I have to question just how a company – the fact that the company in question is Toyota notwithstanding – claim to be lean and focused on customer value and send 34 people into a resort town to take film of cars in snow that create no value at all for its customers?”
• Taking What You Don’t Deserve, CEO Style by John Hunter – “Whatever nice words they use to try and give an illusion that they respect those they work with (or their stockholders, suppliers, customers, communities…) doesn’t change their disrespectful actions.”

Total health expenditures in the USA in 2010 reached $2.6 trillion, $8,402 per person or 17.9% percent of GDP. All these are all time highs. Every year, for decades, health care costs have taken a larger and larger portion of the economic value created in the USA.

In 2009 the USA Spent Record $2.5 Trillion, $8,086 per person 17.6% of GDP on Medical Care.

USA health care spending grew 3.9% in 2010 following an increase of 3.8% in 2009. While those are the two slowest rates of growth in the 51 year history of the National Health Expenditure Accounts, they still outpaced both inflation and GDP growth. So yet again the health system expenses are taking a bigger portion of overall spending. This has been going on so long that the USA spends double what many other rich countries do on healthcare with no better results.

As a result of failing to address this issue for decades the problem is huge and will likely take decades to bring back just to a level where the burden on those in the USA, due to their broken health care system, is equal to the burden of other rich countries. Over 2 decades ago the failure in the health care system reached epidemic proportions but little has been done to deal with the systemic failures. Dr. Deming pointed to excessive health care cost, back then, as one of 7 deadly diseases facing American business. The fact that every year costs have increased more than GDP growth and outcome measures are no better than other rich countries shows the performance has been very poor. The disease is doing even more harm today.

Some good things have been done over the years, most notably by Don Berwick while at the Institute for Healthcare Improvement. He was effectively thrown out of office by the politicians recently. The same politicians that have through decades of such foolish acts contributed more than any other group to the broken health care system that burdens the USA today. In the last 10 years a significant amount of good work has also been done in “lean healthcare”: applying lean thinking to healthcare. But it is similar to the quote that a “bad system will beat a good person.” With all the bad systemic issues the efforts, good as they are, in lean healthcare are mainly improving around the edges. Of course, “around the edges” of a $2.6 Trillion dollar system can still be extremely valuable and important.

Related: USA Heath Care System Needs Reform – USA Spends Record $2.3 trillion ($7,681 Per Person) on Health Care in 2008 – Systemic Health Care Failure: Small Business Coverage – Measuring the Health of Nations – How to improve the health care system performance – Management Improvement in Healthcare – USA Spent $2.2 Trillion, 16.2% of GDP, on Health Care in 2007

Failing to deal with the obviously broken system for decades puts the USA in a very difficult situation now. The aging baby boomers are likely to make decreasing health care spending much more difficult than it would have been 20 or 30 years ago. And the cost of paying exorbitant prices that the broken health care system imposes increases every year for American business.

Spending data

• Hospital spending increased 4.9% to $814.0 billion in 2010 (in 2009 growth was 6.4%). Average annual growth in hospital spending between 2007 and 2010 was 5.5 %. From 2003 to 2006 spending increased an average of 7.4% per year.
• Spending on physician and clinical services increased 2.5 % in 2010 to $515.5 billion (3.3% growth in 2009).
• Spending for other professional services, which includes providers of services such as physical therapy, chiropractic medicine, and mental health, decelerated slightly in 2010, increasing 3.6% to $68.4 billion after growth of 3.8% in 2009.
• Spending for dental services increased 2.3% in 2010 to $104.8 billion (up 0.1% in 2009). Out-of-pocket spending for dental services accounts for over 40% of dental spending.
• Spending for other health, residential,
  and personal care services grew 5.3 percent in 2010 to $128.5 billion, a deceleration from growth
  of 7.7 percent in 2009. This category includes expenditures for medical services delivered in
  non-traditional settings (such as schools or community centers), ambulance providers, and
  residential mental health and substance abuse facilities.
• Spending growth for freestanding home health care services increasing 6.2% to $70.2 billion following growth of 7.5% in 2009.
• Spending for freestanding nursing care facilities and continuing care retirement communities increased 3.2% in 2010 to $143.1 billion (increased 4.5% in 2009).
• Retail prescription drug spending grew 1.2% to $259.1 billion in 2010 (5.1% growth in 2009). The decrease in the rate of increasing costs was driven by slower growth in the volume of drugs consumed, a continued increase in the use of generic medications, loss of patent protection for certain brand name drugs, fewer new drug introductions, and a substantial increase in Medicaid prescription drug rebates.
• Spending for durable medical equipment, which includes items such as eyeglasses, contacts and hearing aids, increased 7.3% to $37.7 billion in 2010.
• Spending for other non-durable medical products, such as over-the-counter medicines, reached $44.8 billion, an increase of 2.6% in 2010.

Who are writing the checks to pay for these huge costs?

The federal government financed 29% of total health spending in 2010, a substantial increase from its share of 23% in 2007. Meanwhile, the shares of the total health care bill financed by state and local governments (16%), private businesses (21%), and households (28%) declined during the same time period.

• Medicare spending grew 5.0% in 2010 to $524.6 billion (on top of 7.0% growth in 2009).
• Total Medicaid spending grew 7.2% in 2010 to $401.4 billion (on top of 8.9% growth in 2009). Federal Medicaid expenditures increased 8.9%, while state Medicaid expenditures grew 3.9%. Basically, the reason state expenditures “only” grew by 3.9% is $41 billion is aid from the federal government (as part of the attempts to recover from the credit crisis [another crisis greatly enhanced federal by the politicians making very bad policy decisions]).
• Growth in total spending for private health insurance premiums increased to 2.4% after gains of 2.6% in 2009, continuing a deceleration in the rate of growth that began in 2003. The decrease in the rate of growth reflects a decline in private health insurance enrollment, increases in cost sharing, and a shift by some consumers to plans with lower premiums (those reductions in benefits obviously more than overcome by increases in the costs of the benefits that remained).
• Out-of-Pocket: Out-of-pocket spending grew 1.8% in 2010. Faster growth in 2010 partially reflects higher cost-sharing requirements for some employers, consumers’ switching to plans with lower premiums and higher deductibles and/or copayments, and the continued loss of health insurance coverage.

Read more on the National Health Expenditure Data report.

Good consultants and blogs engaged in Deming and lean based healthcare improvement: Mark Graban’s Lean Blog, Associates in Process Improvement, Lee Fried – Daily Kaizen, Paul Levy’s Not Running a Hospital and this blog’s health care related posts.

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