Fix Healthcare First!

October 25, 2018

Written by Andrew Dietrich

Healthcare is the politically charged topic du jour. With the midterm elections around the corner, we might be inching closer towards Medicare for all (HR 676) or a GOP plan (HR 1628). The following discusses why both bills need to fail. For full transparency, I am supportive of legislation that provides health insurance for every US resident because it will remove barriers that prevent people from seeking the care they need. In addition, good health is inextricably tied to prosperity. Unfortunately, the US Healthcare system is incredibly complex. That complexity has us, consumers, terribly confused. This is an attempt to unravel the confusion and spell out why either option should only be implemented after a complete overhaul of the US medical provider system; and not the other way around.

For most of us, our political alliance acts as a proxy for issues or candidates that we don’t know much about or are confused by the nuances. Let's be honest, we don’t have the time to follow every issue or every opinion. We have lives to live. However, in this case, I’m afraid that HR 676 or the GOP backed bill might fall into the category of, “If Senator ABC is for it then so am I”. If that’s the case, it is a shame because a quick review of the bills and a basic understanding of the US healthcare system will clear through the hype and misunderstanding. Whether you disagree with me or not, this topic is very important because of the economic impact on the US if either bill pushes forward; and as I said before, I hope both fail because neither addresses the rising cost of care. The nuance here is that both bills propose a health insurance overhaul. Neither bill effectively addresses the origins of the rising cost in healthcare… our care provider system. A simile… both bills are like my desire to buy a 1962 Ferrari 250 GTO (Recently sold for $48.4M) and since I didn’t win Mega Millions my only other alternative to own the Ferrari is to strut over to the bank and demand that they buy it for me (I’d negotiate that I’d be willing to pay a $10 copay). Both bills are doing just that… addressing our inability to buy an expensive item or service. Wouldn’t we be better off if we fixed our tremendously wasteful Ferrari (I mean healthcare system) first? Today, the increasing costs of our healthcare system will remain in full effect if our Legislative Branch of Government passes a bill that only addresses providing health insurance for everyone - which they are actively trying to do. So please, take the 5 minutes to read this post. A post that intentionally avoids the political BS and instead focuses on why our healthcare delivery system must be fixed before we fix the insurance system aka Medicare For All or the GOP plan.

What is HR 676 (Medicare for All)? Medicare for All is a bill introduced in 2017. The bill would provide free medically necessary health care (Medical, Dental, Vision, Mental Health, and Preventative care) for “all individuals residing in the US”. The plan will negotiate pharmaceutical prices from a position of strength thus helping to lower the cost of drugs. Patients have the freedom to choose their own doctor. Insurance companies remain linked to the Medicare for All because this Federal program would use the Insurance networks. Through that relationship, this bill sets forth methods to pay healthcare providers. The bill is funded by a:

1. New 5% tax increase on the income of top earners
2. New progressive income tax
3. New taxes on unearned income
4. New taxes on stock and bond transactions
5. Transfers from Medicare, Medicaid, and CHIP.

What is HR 1628 (the GOP Healthcare Bill)?A bill introduced in 2017 that is en route to the Senate after passing in the House of Representatives. In its current form it has two major sub-groupings… “Energy and Commerce” and “Ways and Means”. This is a complex bill that mostly makes numerous tweaks to Medicaid, Medicare, ACA, but addresses some key issues like improving care of, ”Maternity, newborn,... mental health or substance use disorders”. 1628 allows consumers access to insurance across State lines, pushing ownership/ funding of many provisions to the State level, The ACA Cadillac Tax again is kicked down the road to 2026, it defunds clinics like Planned Parenthood for 1 year, and it includes many provisions that have nothing to do with the cost, affordability or paying for healthcare... These include provisions related to Lottery winners, repeal of consumer taxes, and repeals the 10% tax on indoor tanning (Snooki is excited).

Who are the players? There exists much confusion about the Healthcare system. As an example on Healthcare-now.com a family on an ACA bronze plan talks about how their premiums increased to $30,000. While that is terrible to hear, premiums are an insurance term NOT a healthcare term. You pay a premium when you insure your car and you pay a premium with your medical insurance. Rising premiums are the byproduct of tremendous waste in our healthcare system (As an example: With a lack of true price controls in healthcare residents in every city and town across the US could pay between $218 - $2000 for a CT scan eventhough there is no quality difference). Remember, neither bill adequately addresses the delivery of healthcare (Where the costs originate from). Neither bill provides savings targets or quality improvements - which is far short of what the US needs to reduce the healthcare costs. Another example of confusion, a candidate in support of HR 676, running for Congress in Orange County, CA, recently defended Medicare for All by saying, “We’re questioning whether we can rely on major players, like health insurance companies, to continue to be reliable partners in delivering health care." Let's be very clear… insurers don’t deliver healthcare. And finally, Money Magazine published, “Why your healthcare costs are out of control, in one graph”. The chart shows the tremendous increases in deductibles and copays - again, this is insurance jargon that doesn’t describe why healthcare costs are out of control. Healthcare costs are incurred the moment you see a doctor, are admitted into a hospital, check into Urgent care, have your annual check-up, but not when you select a high deductible health plan during your annual open enrollment (By the way, your company sponsored open enrollment is probably happening now - your benefits professional asked me to remind you). With this context, it is important to understand the key players outside of the Federal Government who have a big stake in this bill.

1. Big Insurers have a lot to gain from the passage of Medicare for All. These would be the BUCAHs (The Blues, United, Cigna, Aetna, Humana). These organizations have actively funded many candidates running in midterm elections. According to Harris Polls, only 19% of customers believe that insurers put the interest of the customer over profits - take a look at their earnings reports (Cigna up 65%, UHG is up $2.9B in the second quarter, etc). The BUCAHs will do quite well under Medicare For All.
2. Employers: According to Kaiser Family Foundation, about half of the US population receives their health insurance through their employers. This is big money. As an example, GE was spending $3B annually on health care. Most employers average spend about $10,000 per member. If your company has 1,000 members than it likely pays approximately $10M per year on healthcare for its employees. Most (not all) of this expense would shift to Medicare for All except Supplemental coverage. This would turn into an economic shot in the arm for businesses because I suspect that most would use the reduction in expenses to pay off debt or make new investments rather than funnel back to their employees. This would unleash innovation and long term growth in salaries as companies loose health benefits as a way to attract and retain talent.
3. Politicians: Healthcare has been politicized for decades. In the left corner, you have the politicians that in 2010 pushed through the Patient Protection and Affordable Care Act that eliminated the pre-existing condition hurdles but was designed to make sure everyone is covered with health insurance. In the right corner, sighting social security, ACA, VA Medical System, and other large Government programs are politicians who are fearful of socializing medical care payments because healthcare is 17.9% of US GDP. I am forced to quote Edmund Burke, “Those who don't know history are destined to repeat it” when thinking back to Christmas Eve of 2009 when the House chose to end the filibuster and vote for ACA thus ushering in the most partisan age of US politics that I can remember. Do we want to revisit this all over again without fixing the core problem? I haven’t heard anything from either party that leads me to believe that politicians are truly interested in helping the patient. I say “patient” because as I said before, healthcare costs start after you first visit the doctor. If you complain about your premiums, then you must start at or even before the point of care. By the time insurance is involved it is too late.
4. Tax payers: Medicare for All will largely be taxpayer funded. Since the cost of our healthcare has increased at over 2x the rate of inflation for a very long time with no changes in sight the greatest risk for Medicare for All is the nation’s ability to continue to fund it as medical costs continue to increase faster than inflation. I support the ability to better negotiate the price of our pharmaceuticals, but that won’t offer enough savings nor will those measures “fix” healthcare. Neither bill offers “Improvement targets” or “Proof points” or “Guarantees”. We won’t see these because neither bill is designed to reverse the US Healthcare cost curve, as a result, the risk of annual increases on the cost of healthcare falls on the shoulders of the taxpayer.
5. Patients: This bill is not focused on improving the delivery of medical care in the US. You will pay for this bill through higher taxes, you will remain an afterthought in the care continuum, and by the nature of entering the hospital, your chances will increase that you will get sicker by contracting a HAC (Hospital Acquired Condition).
6. Doctors: According to the Advisory Board, 49% of doctors report feeling burned-out and 63% say they have negative feelings about the future of their medical profession. According to the New England Journal of Medicine, by 2020 we will be facing a shortage of 91,500 doctors here in the US. NEJM continues by stating, “...the predicted shortage of doctors will leave many Americans without any, or with insufficient, care.” Both bills will add further pressure to this care provider problem.

Our Real Problems: I haven’t said this yet, so it is worth stating now... we have great hospitals and doctors that are doing some incredible and innovative work in this country - examples of this are the advancements in immunotherapy and its impact on breast cancer or the insights that pharmacogenetics tells us about the efficacy of the drugs we take. Unfortunately, we operate under the Fee For Service model... a model that incentive-izes tests and procedures that aren’t always necessary. Fee for service works in some industries, but the US Healthcare system operates outside of a free-market system - a system that would keep Fee for Service in check. The result of this model is significant waste, poor quality outcomes, costs that rise significantly faster than CPI, a disengaged consumer, an industry that has circumnavigated the natural price and quality controls provided by a free market system (Would we have a $600 epipen if we had a truly free market?) . Fee for service is why our US Healthcare system is ranked last in quality outcomes amongst all other developed nations. 

Why the cost and quality of the care we receive isn’t the focus of either of these bills is shameful. As an example, when I think of infant mortality problems, the Country of Rwanda comes to mind with it’s poverty, civil unrest, lack of technology and resources. In that context, how is it possible that among developed countries, with all of our technology, our access to care, our social programs does the US own the worst infant mortality rate among developed countries? A mortality rate that is higher than many of the poorest countries in Africa. This is our poster child. By making quality improvements and changing our system from Fee For Service to one that focuses on quality outcomes we will find greater prosperity. 

Few consumers understand the US Healthcare system until it hits us in the pocket - like a $26,000 premium for a family of four. We’ve been screaming about this for years so it is not surprising politicians are trying to act on it. We’ve been saying that we can’t afford the premiums and the deductible, but what we are really asking for is more efficient, less expensive, and higher quality healthcare services. Care that puts us at the center of the care continuum, whether that focuses on reducing health risks early on in life through genomics or wellness, focus on quality outcomes, drive efficiencies in the system, and unleash the power of the American consumer and American technological innovation in the same way that Amazon changed retail, or Uber changed taxicabs, or Apple changed how we communicate, or SpaceX recycles rockets. These changes are do-able and can be funded by the efficiencies, care avoidance (For unnecessary care derived in a fee for service model), and increases in quality. A 15% savings (I actually think more savings could be found) would generate $495B annually (That is equivalent or more than the GDP of over 180 Countries).

Two Improvement Targets: Since neither bill fixes healthcare, it is incumbent on you the reader to start asking for healthcare provider system to be fixed. That is what you want. Asking for Insurance to be fixed by stumping for Medicare for All only shifts the costs of a broken care provider system onto the shoulders of the US Consumer. Only when the care provider system is fixed can we begin thinking about the reform of how we pay for the system. To that end, two improvement targets that would reshape US Healthcare provider system for good:

Improvement targets #1: +15% savings on the $3.3T we spend annually 

How?  

• Shift to a quality centric system instead of a Fee For Service model across all providers to shift focus on necessary procedures and tests that eliminate readmissions or focus on that which is practical. 
• Drive efficiency in capital expenditures of hospitals… do we really have enough demand for four multi-million dollar Proton Beam therapy centers in the Washington DC area when radiosurgery or IMRT costs far less?
• Share with us the cost of the procedure or the drug and what I, the patient, will pay out of pocket. This information would unleash the power of the US Consumer to shop for care and utilize clinically viable options. How about the MRI that you get at the hospital for $1200 vs the MRI at a neighborhood clinic for $500. Since there is no discernible difference between either facility the question I have is, “Wouldn’t that savings change shopping behaviors for the good?”
• We need to embrace B2C technologies like the Retail industry does. Retail embraced the internet and actively began to learn about each of their thousands of customers. In doing so they were able to promote and market to each individual customer the way that the customer wanted it no matter what time of day or where the customer was. US Healthcare is like the annual Sears Wishbook. We need broad adoption of telehealth, predictive analytics, behavior change, fully integrated electronic medical records, and we need to unleash the power of American ingenuity on healthcare. And we need the experience to be as easy and intuitive as shopping on Amazon.

Improvement Target #2: Increase our National Medical Outcomes to above the 11 country average or at least comparable to Germany, Sweden, Switzerland, Norway, etc.

How?

• Our current system is a “Sick Care System” that is reactive and fraught with readmission, mistakes, hospital acquired conditions, imaging errors. Instead, we need to focus on healthcare prevention to reduce the health risks that drives 80% of the costs
• Increase the focus on patient-centric team-based primary care (OBGYN, pediatrics, geriatrics) to lower downstream costs.
• Increase public health education that focus on the conditions that drive the most cost: Back Pain, High Blood Pressure, Cholesterol, Diabetes, Obesity.
• Increase public health education that focus on well-being (Financial, Nutritional, Behavioral, and physical). Doing so will lower the health risks and will keep people out of the hospital
• Decrease the payer compliance that doctors have since those workloads take away from the 1:1 interactions with patients
• Provide a truly integrated medical record system where your primary care physician can see the notes of your dentist or ophthalmologist, or specialist, your lab work, your blood work, your anesthesiologist.

Conclusion

8 years ago ACA became law. This law was primarily designed to offer insurance for all and as we’ve seen in the news the cost of care continues to increase. The two new bills will face the same outcome as ACA - higher medical costs. As a country we need to address the actual cost and quality of our care before we can address how we pay for that care. By doing so, we will lower our annual costs by hundreds of billions of dollars annually, we will be a healthier nation, and that higher degree of health directly translates to greater prosperity. Once our healthcare delivery/provider system is fixed then I agree… let's offer a comprehensive insurance program for all residents. By then, it will a far less drain on taxpayers and the economy because we have fixed the genesis of out-of-control medical costs.