What President Obama and Democrats delivered through the ACA, though appearing noble in its intent, revealed itself as evasive, presumptive, and doomed from the very start. A program that worked far better for America’s poor than its middle class – and really should have been called Medicaid Plus.
Whether you liked Barack Obama or not is irrelevant – the ACA simply didn’t work.
The Republicans and President Trump now bring the AHCA – a cringe worthy solution to be sure. It’s hardly believable that they had seven long years of finger-pointing, bitching, strategizing, and studying; and the best they could deliver is a plan that quite obviously favors the rich.
Whether you like Donald Trump or not is irrelevant. As our President, he has an obligation to, especially in times of crisis, step up and lead our country responsibly.
The reason that neither party’s plan has been or will be effective is in the failure to identify and rectify the structural problems of today’s healthcare system. To do so, would in fact require political leaders to effect massive change in the very nature of health payer coverage, promote the rise of consumer free-market forces, as well as digest the natural industry contraction that would follow from such.
We don’t have a healthcare coverage problem – we have a health services and drugaffordability problem.
Costs may be the talk for healthcare companies, but prices are the reality for present and future health consumers.
According to David Goldhill, CEO of the Game Show Network, and author of the widely-praised, Malcolm Gladwell-forwarded Catastrophic Care, the average American worker with direct and indirect costs, puts nearly $1.2 million into health care over their lifetime. Accounting for normal inflation, that amount rises to nearly $2 million. This is the single largest expense they will ever take on.
[TO LISTEN TO STEVE’S AMAZING PODCAST INTERVIEW WITH CEO DAVID GOLDHILL, CLICK HERE. Otherwise, please read on…]
This happens chiefly because our healthcare system is price regulated. Its continued existence is predicated on hiding from consumers the high amounts they are actually paying over time for health care. This includes direct payments for care coverage, medications, care services, deductibles, co-pays, taxes for Medicare + Medicaid, and would-be wage increases – offset from employer-sponsored care.
The reason our past and present solutions have failed is because healthcare reform should NOT be about solving for affordable coverage. That said, there are three major issues that need to be resolved in order to move health reform into a stronger, more sustainable future:
- Changing the structure of healthcare insurance
- Pre-funding health-savings accounts to stimulate consumerism, and
- Adding more responsibility to health consumers and patients.
It must be about injecting free-market forces and consumerism into the health system. This will help drive down pricing towards affordable healthcare services and drugs, catalyzing greater patient activation and responsibility, while increasing quality and efficiency.
Let’s start fixing…
FIX #1: Health insurance must change in its structure and nature, so that it no longer functions as the payer for nearly all healthcare products, services, and medications.
What we have seen in healthcare, in terms of rising costs and pricing, is a rational response to the incentives provided by customers. What we have failed to understand is that patients like ourselves ARE NOT the customers of healthcare service and drug companies.
The customers of healthcare are the health payers – the commercial insurers, as well as the government payers such as Medicare and Medicaid. They don’t just pay the checks – they determine what services we can and can’t have – and how each will be charged. Health care is a market which is largely price-regulated. Even self-insured companies often base payments (reference payments) from Medicare price-regulated product, service, and drug reimbursement levels.
This also means that unlike most every other consumer-based industry in the U.S., business competition based on quality and pricing cannot exist to serve the ultimate needs of the consumer. Single-payer healthcare will still not solve our healthcare crisis, as we are still keeping the government as the customer.
Stop and consider this. As the largest consumer industry sector in the U.S., health care is largely excluded from competing to serve the value and pricing needs of the consumers that continue to support it. How backwards is that?
Meanwhile, the supporting consumers are actually the human chattel who catalyze this interaction and exchange of monies; and so it has been for the last five decades. Now that our health system model is breaking down, those same consumers are expected to continually pay far more than most can afford.
Now let’s talk about the structure and purpose of health insurance.
In every other industry, insurance is set up as a safety net, covering for unplanned catastrophic loss. Healthcare coverage by its nature, covers nearly all healthcare services, products, and drugs. But health insurance is not actually about covering risk of loss, but in covering the certainty that almost every single one of us will at some point in our lives, need expensive care and medications.
It would be the equivalent of us having to buy fire insurance for our $250,000 home. However, instead of paying a tiny portion and sharing that risk with others, we pay $750,000 – essentially over-insuring our loss because we know it will happen – and that it will happen to other homes we are being made responsible to cover.
We certainly need to keep health insurance. However, this coverage would now be a nationalized safety net – covering only care deemed to be ‘catastrophic’.
Yes, that term and scope will need to be defined, and there will be arguments. Perhaps it could be treatment-based (ie. Cancer care with bundled services/meds) or it may be care and/or medications that eclipse a set dollar amount.
Meanwhile, the risk for delivering these drugs and services with quality, safety, and lower cost would and should be shifted to the drug and healthcare companies. So value-based care will, and must continue to replace fee-for-service, in this capacity.
Separately, we must remember that the core purpose of any for-profit business, even those in health care, is to make profit. This allows the business to exist, grow, employ individuals, and thrive. A business’ purpose is not to make its products and services, nor to make them affordable to all consumers and customers. Its products and services are simply part of what helps it to satisfy its profit purpose.
Conversely, the core purpose of the customer and consumer is to purchase and use product and services respectively. It is not their responsibility to keep any business in business, or to prop up an entire industry such as health payers. Nor is it the responsibility of the government to keep a system unjustly enriched, while consumers suffer under a system that cannot be effectively priced-controlled for the mass affordability.
This leads us into Issue #2.
FIX #2: Yearly pre-funding of health savings accounts for every single individual in the United States.
Estimates are that the average American citizen (man, woman, infant and child) accounts for about $12,000 per year in healthcare expenses paid out. So why not give every single one of them this tax-free money, on a per-paid yearly basis, and let them spend it in a consumeristic fashion on all care deemed non-catastrophic.
So a family of five, not on any government assistance would effectively receive $60,000 per year. However, those on Medicare, Medicaid and other public programs would receive their last year’s out of pocket costs, for care and coverage, not to exceed $12,000 per person.
Primary care, sick visits, lab tests, medications, and various emergency services. Consumers and patients are free to use the yearly pre-payment as they deem. They are free to use their money, or their children’s money as they see fit (*more on this later) – and if they don’t use it, the money simple rolls over from year to year.
So what happens to drug companies, medical supply companies, hospitals and health systems? Will they go out of business?
No, they will start becoming more efficient. They will lose employees, gain greater productivity, and use more technology to improve quality and see larger amounts of patients (*more on this later). Perhaps more M&As as well – as healthcare industries will not only need to have costs drop, but for purposes of competitive advantage as in other free markets, they will pass on lower, more affordable pricing to consumers.
Maybe consumers will also start shifting their primary care to direct primary care practices at $50 per month per patient – and only go to health systems for specialty care. We will certainly see increased growth of telehealth services and walk-in clinics. Drug companies may finally start engaging directly with consumers – and perhaps even start reducing prices, in exchange for dedicated long-term customer use.
What will this mean for employer-covered care? Costs will go down, and it could certainly be inferred that employee wages should naturally rise. Moreover, that hiring and new jobs would increase as well.
There will be significant job loss and salary cuts in the healthcare sector. No denying that its underlying industries will suffer the effects of economic digestion. However, one must ask where these companies were when patients were losing their homes and savings due to medical debt?
Remember…we are now in a national crisis with an unsustainable system that takes up nearly 20% of our GDP. Many people in this country have less than $5,000 to their entire name in savings. So yes – payers, providers and drug companies will all need to contribute and pay their share. This is not meant to be punishing – but that such economic digestion is necessary to keep our health system private and sustainable long-term.
To that end, our political leaders must be able to grow a spine. To recognize that they have an obligation and a potential for carving a path in this time of crisis. This obligation and set of decisions must go past party-based, shorter-term constituency favors.
That means not propping up the payer industry, just because our healthcare system has always had this structure in place; or because payers contribute tremendously to both political parties; and yes – these changes must certainly be phased in over time.
When you look at many of the greatest political leaders and their decisions in our history, these individuals were accountable and stood for far more than then their own egos and party’s personal needs. We remember the men who, at their own personal safety and lives, signed the Declaration of Independence. President Truman and the Atom Bomb, buying the Louisiana Territory, passing the Civil Rights Act, allowing Women the right to vote, and even George Washington’s personal limitation to only two presidential terms.
Great leadership often is effected and remembered, during times of crisis. Those in office must remember their charge, and understand their place in times of our country’s need for future generational stability and socio-economic health.
FIX #3: Increasing the responsibility of health consumers and patients
Consumers and patients must play a major role in fixing our healthcare system. The high rate of chronic disease and the costs inherent haven’t come by accident – but often from longstanding poor choices in diet, exercise, lifestyle, and lack of proper healthcare management.
As in many times of our country’s greatest need, Americans should be expected to step up and preserve our country. For far too long, our culture has been one of taking and ‘what’s in it for me?’ It’s time to balance those scales and drive inspired, responsible behavioral in this time of need.
So we will have a safety net for catastrophic care, and pre-paid health savings accounts, many of which will often carry unused funds that will accumulate over years. What we are left with are consumer & patient responsibility and responsible behavior.
Now, we hit upon those two asterisked items above.
*Greater Patient Volume: Like any consumer product or service industry, price is often a competed upon variable. That has not yet been discussed, nor has happened as healthcare companies gear up for today’s shift to value-based care. However, when these companies are competing for future consumer funds per non-catastrophic care services and drugs, pricing will be a major factor.
Companies must keep up profitability, and will need to reduce cost while also driving greater volumes of consumers to become patients, and patients to become active patients. Thus, more people must become ‘activated’ in their patient care.
Technologies such as telehealth, telemedicine, A.I., population health, risk management, care management, consumer & patient engagement and care communications, and predictive analytics are just some of the necessary technologies needed to adapt to greater patient volume capture and care.
*Mandated Services: We know that chronic disease is the biggest driver of health costs in the U.S. We also know that many individuals are not knowingly carrying chronic disease, are living in pre-chronic conditions, or have known chronic disease and choose to not engage in care and lifestyle changes.
The pre-funded health savings accounts will come with requirements. First everyone will receive regular checkups. Detection of pre-chronic or chronic diseases will be a first-line need. Upon detection, monies will also be expected toward treatment and lifestyle change.
If such care was deemed to be at a catastrophic level, perhaps some of all of that care would fall under the safety net coverage. If patients chose to not engage in necessary care for their condition, there would be penalties – and most likely financial, relating to their future yearly payments.
Injecting consumerism also allows drug and healthcare services companies to engage in pricing, based upon activation factors. Perhaps if you are an ‘activated’ patient, you may receive a 10% reduction on services. If you adhere and communicate with regard to your medication use, perhaps you get a discount from your drug company.
Much of chronic disease is caused by diet, exercise, and weight. While we know fast food, snack, and soda companies aren’t in the business of health, and we cannot make them illegal – we can create incentives and perhaps financial disincentives toward choosing a lifestyle that is ‘unbalanced’ with these choices. More to come…
Using money, especially when applying loss aversion can be an excellent motivator that nearly all socioeconomic classes clearly understand. Naturally, condition and lifestyle education will play a significant role. However, the message will be upfront that Americans are not getting a free ride. Rather, they are learning what it is to be assisted on learning personal healthcare responsibility.
From World War I and II, to times of racial and gender fairness, America has stepped up to plate, and made the tough decisions. Once again, our leadership and is being called upon to arrive at a decision that will effectively address the need to effect longstanding change and sustainability. The changes I suggest may seem radical, but only because of the growth in severity of this crisis; and that the prior attempts to fix it, have fallen so far short.
Healthcare reform is a set of tactics and strategies that should have been dealt with, perhaps when we began to see Medicare grow past its budget many decades ago. Risking unpopularity, our leaders continued to kick the can down the road, as spineless leaders traded off job security, pats on the back, and corporate campaign funding for doing that which would come as natural to great leaders from other eras.
DR. STEVE AMBROSE is a consulting expert in consumer and patient engagement. He is available also for talks to healthcare and health business audiences.
His interviews with senior leaders in the health provider, payer, medical device, pharma, digital health, health policy, and HIT industries are always highly engaging.