I am scared. Really scared. I live and breathe the health care delivery and finance model in the U.S. every day, and I believe we are circling the drain. Although this analogy can apply to many areas of our system, there is one cycle I am referring to specifically.
Most providers (hospitals, doctors, pharmaceutical manufacturers) are in business for one reason and one reason only — to make money. And while they may fall back on the philanthropic or social aspects of what they do, that does not speak to their why. I know this because every action supports this. I was at an industry function recently in San Diego, and there happened to be a friend of another attendee in town who was a pharmaceutical rep. I casually asked him how he feels about the rising and astronomically high costs of many drugs. He said "Do you want my company to continue to fund the research and development into new life saving drugs that we come up with each year?" A common scapegoat. I said of course I do. But I happen to know that your company spends almost twice as much on marketing the drugs than they do on R&D, "So how about they cut back on marketing alone?" I said. What's interesting is they amortize their R&D over every country they sell their drugs in, about 44, according to my research. But the marketing to consumers can only be done in two countries: the U.S. and New Zealand. No other country allows it. So to say there is no room to dramatically reduce costs without even touching the R&D budget is a huge misnomer.
So how does this breed a death spiral? Well, it's one example of the sky high costs in our health care system. And, as my well regarded friend David Chase pointed out in another article, there is a perverse relationship in health care between cost and quality — higher cost generally equates to lower quality. So, the quality of our health care system is worsening with increasing costs (as a side comparison, how can we EVER expect health insurance to be high quality and low cost when the very thing it pays for is the opposite?) and we expect health insurance and the government to pay for it.
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Here is the cycle that has been occurring for years. Low quality and/or high cost health care forces the providers to demand more money from the private insurance companies (the government just does what it wants and generally underpays for care, forcing the providers to ask even more from private insurance). If the carriers do not relent, and try to remove them from their network, the public outcry against the carrier is swift and severe and employers blame and drop that carrier. So now the insurance carriers pay higher fees for the insureds to use that provider. (Thanks to provisions in the Patient Protection and Affordable Care Act, insurers benefit from higher health care costs, as well). So the carrier raises their premiums.
In response, both individuals and employers decrease the benefit (generally by increasing out-of-pocket exposure). Over time, the out-of-pockets have climbed into the thousands of dollars per person. The average worker cannot afford it. So, they delay care until the issue becomes a more urgent need. This results in them having to get care, and generally at a much higher cost and in a lower quality setting, dramatically increasing the cost associated with treatment. Now the patient is left with thousands of dollars in medical bills they cannot afford. Eventually, the hospital writes off the balance as bad debt (you can't get blood from a stone). So when the carrier looks at what to charge the carrier in reimbursements next year, they look at this increasing debt they are writing off each year, and demand higher reimbursements from the carrier, which causes them to increase premiums, employers and individuals to reduce benefits, bad debts to increase and so on and so on.
We need to reverse this. I do not believe a single payer system is the answer. While I do think it has the potential for some significant short-term cost savings, I also believe it will further worsen the quality of health care in our country (hard to imagine it getting worse) and reduce access to care. Right now, we have an access to care crisis but it is largely driven around cost, not availability of care. But the promise of a single payer system implies low or no out-of-pockets costs, which is part of what fueled the spike in utilization when HMOs first became popular.
"But wait", you may say, "Low out-of-pockets spur higher utilization and high out-of-pockets spur delay in care and rising bad debt of providers." So, what's the answer? I think it is a combination of intelligent out-of-pockets combined with a much needed dose of transparency. If patients were incentivized to find the highest value providers, and the metrics behind value (the intersection of cost and quality) were readily available and consistent and easy to compare, much like we compare airline tickets or hotels, the system would right itself. I want providers and drug manufacturers to be profitable. However, I want them to be profitable because they provide a high quality, low cost service and are continually incentivized to better the care they provide and increase efficiencies. Right now, all their incentives encourage the exact opposite.
We are all in this together, America. Employers, patients, employees, even providers. Let's change this system. I know we can do it! As JFK said, "not because it is easy, but because it is hard." And most importantly, because it is worth it.
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