Decoding Health Care

Part 9: A Recap

Depressing. That was the assessment of my recent posts on the pharmaceutical industry from a friend and colleague, a practicing endocrinologist (and my sister-in-law). Not exactly what I was aiming for. As I have said repeatedly, I do not believe that US healthcare is hopelessly broken. But in order to address the shortcomings of the US health care system, I felt the need to define these shortcomings and give them some historical context. I may have gone overboard. So as an act of contrition, in today’s post I will recap what I have discussed but with a focus on what we can do to make things better. But the solutions will require moderation in the quest for profit as well as thoughtful political action.

1.       Employer Sponsored Health Insurance: Although employer sponsored health insurance was borne of the complex post WWII labor market, it is impossible to imagine a world without it today. If you have ever been out of a job and lost your health benefit, or if you are nearing Medicare age and are holding on just to keep your health insurance, you know what I mean. And for most people it really works pretty well. A lot of the things people dislike are driven by the cost challenges. If we fix the cost problem many of the issues go away.

So, I vote to keep it. We need more cost transparency so employers can be better shoppers. And the employers need to improve their HR health IQ and advocate more effectively for the health benefits that matter most to their employees. Although 2/3 of working age Americans get employer sponsored health care, that leaves a bunch of people without coverage. And this group is tough because they work in low paying jobs or are self-employed. The Affordable Care Act attempted to mandate employer coverage, but employers with less than 50 employees were exempt as were part time employees. But the ACA also gave us the solution to this access challenge. We will address this below.

2.       Medicare: Medicare has stood the test of time, and like employer sponsored health insurance it is impossible to imagine a world without it. But it’s complicated and certainly isn’t free. The biggest problem facing Medicare is its financial stability. Both part A and part B are already in financial trouble.

So I vote to keep it. But Medicare needs to evolve. A health care system in which traditional Medicare is subsidized by commercial health insurance and dependent on ever-increasing tax dollars is not sustainable. Medicare Advantage has proven a popular and inclusive approach for Medicare beneficiaries. There is every reason to believe MA will continue to grow. So why don’t we just develop a fair way to pay the MA plans and put in guard rails that prevent bad behavior like crazy narrow networks. But this probably isn’t enough. To keep Medicare solvent we will need to increase the age at which people become eligible for Medicare benefits.

3.       Medicaid and the exchange plans: Unlike Medicare, Medicaid has had a turbulent life. This is largely because the states call the shots. California and New York are not the same as Texas (duh). But Medicaid has been an important safety net, and one of the great failings in US health care has been limiting Medicaid expansion. The Medicaid program needs to change so that expansion can happen. It will take federal action (just as during the pandemic) but at the risk of sounding moralistic it’s just the right thing to do. If we succeed, we can cut the uninsured in the US to less than 8% of the population (it’s about 10% now). Of these 1/3 are immigrants (documented or undocumented) and they represent a special problem. But most of the others aren’t insured because insurance costs too much. The exchanges were meant to solve this problem, and we have not used them to their full potential. The exchanges need to be expanded with enhanced government subsidies so that the exchange plans are actually affordable. And the individual mandate, another failed component of the ACA, needs to be revisited.

Having read all of this you are probably thinking that although we may have improved access to health care spending is sure to increase. But we haven’t discussed how to manage cost yet. How do we do that?

4.       Hospitals: As the old saying goes, we can’t live with them and we can’t live without them. So let’s make a few changes. We have had enough hospital mergers. They really don’t provide benefit to patients and really drive up costs. The Department of Justice can do this without any new laws. No more non-profit status OR some measurable way to articulate the community value that you are providing as a non-profit. No more charge master. And no more percent of billed charges. Let’s try reference pricing. Maryland has been experimenting with this for a number of years (https://www.cms.gov/priorities/innovation/innovation-models/maryland-all-payer-model). My friends in Maryland tell me it works pretty well. Let’s take what they have learned and expand on it. If we succeed, we can do with a lot fewer hospital administrators and can cut the administrative burden by quite a bit. This should reduce the cost burden on employer sponsored health insurance.

5.       Health insurance companies: Although nobody seems to like them, we need them to make the whole thing work. But they need supervision. There are some quick fixes that can be implemented rapidly without changing laws. Artificial intelligence can rapidly solve a lot of the big administrative challenges like contracting and utilization management.  The other stuff is more complicated. Both horizontal and vertical integration needs to be restricted. Insurance companies should not employ doctors. Again, the DOJ can end this. Contracting and payment can be streamlined using reference-based pricing. And all the details of how insurance companies do this will require government supervision. Although health care is one of the most regulated industries, one might argue that the current regulations are ineffectual. I am thinking more in line of how the banking industry is regulated (admittedly not perfect) or nuclear energy is regulated. Or maybe even how the public utilities are regulated. And let’s put some real doctors in the C suite.

6.       Pharmaceutical industry: There is clearly a tight rope to walk here. The US has more access to breakthrough drugs than anywhere else in the world.  But we pay way too much for what we get. Fortunately, the legislation around generics and biosimilars gives us a road map. There are three key elements. The first is paying a price commensurate with the value of the therapeutic agent; in other words, time to adopt health technology assessment (HTA). Second, in order to allow rapid market entry of new treatments, a conditional payment model that allows a fair price until the true value of the new treatment is defined needs to be developed. We will discuss this more in an upcoming post on the FDA. And finally, we need to eliminate the middlemen, the PBM’s. Mark Cuban has shown us a path. All of these can significantly impact the consumer cost while maintaining incentives for the pharmaceutical industry to bring us new treatments.  But pharma won’t make as much money. And stop the marketing and direct-to-consumer advertising.

7.       Physicians: Since my last post that discussed physician compensation, several folks (physicians and other colleagues) have bravely stepped forward and told me that they are still my friends. Whew. My proposals here are more modest. Limits on physician entrepreneurship need to be put in place. No more physician owned surgicenters. And we should eliminate the buy and bill model in oncology. We also need to evolve to a model that rewards doctors for delivering good care to a population of patients, i.e. value based models. We will discuss this in one of my upcoming posts.

These goals will not be easy to accomplish but all are common sense and POSSIBLE. It is certain that everyone will get a haircut, but that is OK. As I learned at Aetna, nobody should walk away from the negotiating table totally happy. The other important point here is that the changes in the payment system that improve access and those in the delivery system that reduce cost do not require a dismantling of US health care. That brings us to Medicare for all.

In order to discuss Medicare for all, we need to turn to the words of one of the most vocal supporters of this proposed program, Bernie Sanders (https://berniesanders.com/issues/medicare-for-all/). Briefly Medicare for all is a comprehensive, government run national health insurance available to everyone. The benefits are comprehensive and include what is conventionally covered by health insurance but also expanded benefits like vision, dental, and long-term care. There will be no premiums, deductibles, utilization management or networks. There will be no insurance companies because the program will be exclusively administered by the federal government. Employer sponsored health insurance, Medicare, and Medicaid will all cease to exist. The program will be funded by taxes. One big tax will be on  employers: they will pay either 75% of the amount they are paying now in the private system or a 7.5% payroll tax. The rest of the money will come from your personal taxes. And savings will be realized by eliminating administrative waste, but more importantly by using the might of the US government to negotiate prices on everything from hospital costs and physician fees to the cost of pharmaceuticals. This proposed program is not unlike what many other countries currently have in place. The idea is to provide universal health care, administratively simple, at a lower price point. What’s not to like?

There have been many economic analyses performed on the proposal. The general consensus is that it will cost a lot of money, that administrative expense will be reduced, and that for the program to really save money a fee schedule similar to that currently employed by Medicare must be put in place. In addition, the government will need to succeed in price negotiations. Very optimistic. In my opinion it won’t work for several reasons:

1.       The price tag is certain to be bigger than expected. Medicare has never negotiated prices for many of the goods and services on the wish list. So you can almost certainly expect higher taxes.

2.       Hospitals and physicians will not accept the huge pay cut imposed by the government. As we have discussed, Medicare pays only about 85% of the cost of delivering care; costs are shifted to commercial health insurance. This pay cut is almost certainly going to create manpower and facility shortages. Those hardest hit will be rural health care providers and facilities.

3.       The government has never paid a claim. Remember, Medicare pays its bills through Medicare Administrative Contractors which are usually affiliated with commercial insurance companies. This is not a trivial exercise. Administrative snafus are certain to occur.

4.       People will hate it. In many countries, because of cost challenges, services are functionally rationed. Americans will hate having to wait for a knee replacement. And in many countries, there are medications and services that just are not available. No is not a word Americans want to hear when it comes to health care. And if your doctor quits because they aren’t paid enough you will not be happy. Remember “if you like your doctor, you can keep them”?

5.       The impacts on pharmaceutical innovation will be profound. Even if you believe that pharmaceutical companies make too much money (and I do), the type of savings required will profoundly restrict how we as Americans benefit from therapeutic breakthroughs.

The bottom line for me is that Medicare for all is proposing to completely abandon a system (though flawed) to provide health benefits to an additional 5% of the US population (sadly, I see no world where this provides medical coverage to immigrants), with an uncertain ability to reduce costs. And this would come at the price of unprecedented disruption as well as risk to how we have become accustomed to receiving care. I would maintain that there are ways to achieve this end without cataclysm. Most people, including me, have a hard time trusting that the government can actually pull this off.

There are, of course, several other proposals (“Medicare for all who want it”) that propose an enhanced role of the government in providing health care. Each should be judged on its own merit. But to my eye, many of these involve subtle changes akin to those I have already proposed. And those who favor the more comprehensive Medicare for all programs are largely driven by utter hatred of the insurance industry and pharmaceutical manufacturers who “care more about profit than patients”. This is not a good place to start a discussion about how to improve health care short of apocalypse.

Time to shift gears. We have spent our time talking about how we pay for care. Let’s talk about topics that impact how we deliver and receive care. Some of these involve patients peripherally, and some directly. So I would like to discuss the FDA. And I would also like to discuss clinical trials and real-world evidence. And I plan to discuss end of life care. The number of potential topics is vast. These subjects will often involve cancer care, an area in which I have some expertise. If you have any ideas, please share them with me. Your feedback has been most appreciated. I hope there will be fewer depressed readers as we move away from payment and address these other issues.

In closing, I would like to thank those wise souls who have been editors and sounding boards for this effort, my friends and colleagues Dr. Louis Jacques, Dr. Ira Klein, and Ron Barkley. Most importantly I want to thank and recognize my wife Dr. Regina Resta who has made this work (as well as just about everything else I do) better.