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Healthcare Industry Insights

Almost everyone these days is talking about the high cost of healthcare, and has a favorite idea or two about how to fix it. In Washington, this is leading to discussions about new ways to provide health insurance with a push toward universal coverage as the answer for ending the problem of the uninsured -- which at last count was 46 million US citizens, or 18% of the population under the age of 65. In the following article, author Carey Kriz looks at the question of health insurance and whether we really understand the situation that we as a country have created. More importantly, he offers his thoughts about what will be required to correct the problem. As always, we’re asking for your input.Thanks for all your comments on Carey Kriz’s first posting, A Disappearing Species, and we look forward to hearing from you again. The stakes on this next debate are high for all of us.A Bridge is Fallingby Carey KrizWhen I met Andrea on the plane she seemed like every other mid 30’s woman I knew. She had a young family -- two children I think, a husband, and a home that was the result of a 10+ year marriage. She was generally what I call “ordinary” (which I mean as a great compliment), and came packaged with a ton of spunk and effusive charm. She was just another example of a nice person you randomly meet in life, or at least that is what I first thought.But after about 5 minutes into my conversation I realized that something was going wrong and that it was potentially dramatic. Andrea, you see, was a one year breast cancer survivor with a husband who was about to lose his job. For anyone that has a “prior condition” you can read that as a impending disaster; and Andrea was smart enough to know it. Here’s why. Assume a worst case scenario that in three years Andrea experiences a recurrence of her cancer -- and this time it comes with a spread to distant locations like the brain or her bones. Cancers often have some predictability to them, with migration to the bone being one of the more common for breast CA. But if Andrea’s cancer decided to return and her future COBRA policy (i.e. the optional extension to her current plan) had expired, she would be paying for every penny of her next cancer treatments, including surgery, the high costs of medication, and any rehabilitation she would require. Andrea and her nuclear family would soon be bankrupt. How did we create this mess of an insurance system that seems to go against the humanity that formed the foundation of healthcare and medicine over the ages? History is definitely not the predictor on this one. The modern medical practice is the result of an evolutionary heritage that dates from the practices of the ancient Greeks, and with a mission to provide compassionate healing to those that needed it most. Even our hospitals, which many people today experience as complex and often times impersonal silos of medical sciences, were originally chartered to help the poor with a history that centered on giving. Healthcare and medicine represented the highest art form and calling -- and were held on a pedestal above any of our other human endeavors. But something shifted this noble evolutionary tree down a dark and sometimes nasty path in the 20th century. By the end of the 20th century, and more often than is good for our health, we (you and me as patients) began to see our health systems as impersonal billing machines, with our doctors only slightly better and generally unable to give us more than the standard five minute office visit. Forget the dying family practice physician I spoke about in my A Disappearing Species blog. This new physician, restricted by system rules and costs, barely has the time to see us.So what caused this change in the health model away from compassion to billing? The answers are simple: reimbursements, coverage and what we incorrectly call insurance. By the middle of the 20th century we started to turn medicine into a big business and provided it with a perverse set of operating principles and objectives (including by the Blue Cross/Blue Shield and Medicare/Medicaid movements) with little to no foresight on what this would do to our future kids and grandkids (which, by the way and fast forwarding, are you and me today). And this is where I will probably lose you: the insurance industry is not the source of the current problem. While it may be hard to believe, your average health insurance company (excluding Medicare, which I will detail in its own later discussion) is simply acting the way we have told them to act; they did not invent the concept of health systems, nor are they the bad guys hiding behind every bad actor in healthcare. In our attempt to put structure around the way we manage healthcare delivery, and our noble but ultimately misguided attempts to ensure proper health coverage for all, we have built a system of flawed incentives in which almost no one is focused on the real objective -- how to keep each of us healthy and how to be efficient and fair in the delivery of health services within a community. The key variables in the equation that we defined are costs, and to a lesser degree outcomes, but not generally the long-term health of the individual. Our Greek forefathers must be turning in their graves given the new twist in the knob we have made to their system of health delivery. Even simple changes and minor wrong moves, it appears, can destroy great intentions. Before we look at ways of fixing this problem, let’s start with a few facts. Health insurance companies are generally the financial managers for employers. Their ability to make money is based on how well they manage the increasingly scarce company funds of their customers (i.e., employers) in an often confusing and unclear world. Does this new drug work? Is that physician’s recommendation correct? Simply put, when you spend money on a doctor visit or hospital it comes out of the coffers of your boss and this means a loss of profits for your employer. And if these costs go up to high, your employer gets upset with their insurance plans (and may fire their insurance provider). So how do they -- i.e. the U.S. industry consumers of health products and services -- react when the costs of healthcare increase and start impacting their bottom lines and eventual life/death in a global economy? Simple, they put pressure on the insurance companies to reduce costs, which turns into things like pre-existing exclusions, maximum coverage limitations, and out of network doctors. These insurance companies that many of us have learned to dislike are simply acting as financial managers for their clients. They are by no means the sole trouble maker and ultimately represent, I argue, the biggest hope we have today to get order and consistency in the marketplace. The paradox and something that I bet none of you will agree with me on: Health insurers are the best “good guys” we have. The concepts of oversight they have pioneered are necessary, and the ability to negotiate pricing are essential. The net is that our noble attempt to build a system of healthcare in the original Blue Cross plans has turned into the proverbial first renegade cell of a cancer. Just like smoking can kill you, and introduce a host of long-term diseases that impact your quality of life, our attempts to define a system of health parity was ultimately misguided and resulted in a huge imbalance in downstream incentives and actions. We have created a system with remarkable advantages and the potential to create an efficient delivery model, but we have saddled it with the burden of costs and productivity driven by employers and their need to be competitive in a global economy. So yes, we screwed up. So how do you fix this problem? Here are a couple of ideas that I have as potential solutions. Build a Medical Marketplace -- One of the great things about capitalism is that you have the ability to select from choices within a market and alternatives based on competition. We have absolutely none of that going on within healthcare today, with the whole notion of market defined within the walls of what the insurance plans cover (or worse what states will allow) and the medical community condones. We need to have the ability to select from alternatives, with valid, trusted and unbiased information on what those various alternatives mean. Maybe the doctor you provided me is crummy, and I want to find a better one based on real data points? In an open market I should have that option and know where to get the needed background information. Remove the State Barriers -- Another of the core structural problems with healthcare is the result of one of the founding tenets of the U.S., namely states rights. Following the lead of state independence, each member of the U.S. union has enacted laws related to the medical practice that are on the surface designed to protect the rights of patients, but more often are simply layers of bureaucracy that add costs and introduce incredible inefficiencies to the system. Why should there be a requirement for each state to credential and license every health professional? Is this done more to protect the local economy or to protect the patient? As someone that has been involved at this level in a provider group I can tell you that the answer is definitely not the latter. So while we may complain about protective trade barriers between countries, we are building it within our states and how we restrict and limit healthcare access across lines. State control of healthcare for us as consumers is a really bad idea. Collect Accurate Information and Use It -- The mantra of today is simple: get an electronic patient record and build a lifetime base of data for each patient. This is absolutely essential moving forward, and something I am trying to help accelerate with my own professional interests. But there is something missing -- and this next collection of data points may be harder to get, and will more often be met by resistance from a number of entrenched camps. If we ever hope to create a market driven system of healthcare we will need easy to understand and complete outcome data on our health providers, their recommended treatments and their costs/benefits -- along with an almost unlimited number of data points on the human body. Examples of how messed up this part of the system are as widespread and pervasive as the air that we breathe. If you need any pointers on the truth I suggest a simple browse through the “Dartmouth Atlas of Health Care”, which contains enough scary facts and figures for a lifetime of health reality checks. Build-it-and-they-will-come is an understatement for what we have in the modern health economy. So let’s return to Andrea, and a future cancer that she could get and how she can manage it. Along with providing her a cure, how can we fix the down the road problems Andrea may have on coverage and costs? I hope that the partisan U.S. politics can become human and mature on this one issue and at least recognize that the systems of healthcare reimbursement are wrong. And I also hope that all of us begin to appreciate that the evil empire is not the health insurance company and their onerous rules on exclusion. Through a series of noble intentions, and actions we started more than five decades ago, we caused the problem. But it would be a sorry statement on our country and its leadership if Andrea and her family go into bankruptcy because we failed to correct this structural mess we started. In August of 2007 a bridge fell in Minnesota on Interstate 35W that forced a relook at the “health” of the U.S. bridge system, with the observation that we had a country-wide maintenance nightmare on our hands. I argue that we have the exact same problem in healthcare, but unfortunately the examples of bridges falling in healthcare are more often found in cases like Andrea, alone and without any public indignation or vocal champions. Sad to say, we tend to die individually and in isolation without the glaring media that a falling bridge in Minnesota gets. Finally, I hope that we can get this fixed long before people like Andrea need the help. Because more than being Republican or Democrat we are humans and ultimately patients -- and it’s funny how clear your thinking can become, and the politics ends, when you or one of your loved ones gets sick. Is anyone in Washington really listening? Look forward to hearing from you.

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5 Comments.


  1. I couldn’t agree more with the assessment of the private pay insurance mess today. In addition, the number of uninsured that use our ER’s as a source of primary healthcare and the tax that litigation places on us all with unnecessary tests and procedures just to keep from being sued must be part of any solution. Finally, our current dilemma is an example of unintended consequences to good intentions, and no good deed goes unpunished. A free market without lawyers might just work.

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  2. Carey makes an interesting point in this chapter. Health Insurers exist as a reflection of how we organize and finance healthcare not as the result of some conspiracy. Three points are worth making here.First, our society consumes healthcare like it is a social good, but pays for it like it is an economic good. We have a right to any care that we think has any benefit to us without regard to cost, but we only want to pay for the care we need and certainly don’t want to pay for the care of others that is the consequences of bad judgment we would never make ourselves. Unfortunately, most of us will pay in far more than we ever use so that a few of us can use far more than we ever pay. Some recent research shows that the most expensive 1% of insured Americans spends 30% of all the cost paid by employers for care at over $100,000 per person per year and the least expensive 70% of all employees consume less than 12% of the total budget. We hope we won’t wind up the in the top 1% but we all pay in case we do. Insurance will always be a part of healthcare. None of us is willing to blindly pay into a fund that is likely to be used for the benefit of others without strings attached so we, through our insurance programs public or private, will always ask if we are getting our monies worth. Short term that means oversight by insurers as to quality and cost.Second, the current healthcare system is fragmented and lacks transparency. Those who seek care have no way of knowing if they are paying too much or getting good quality. Last year Thomson Reuters reported that the same MRI scan of the brain in the city of Atlanta might cost an insurer as little as $500 or as much as $3000. Same test, same city. That spread can only exist in the absence of information. And that is after insurance companies have supposedly set prices in the market.Third, information technology will shift much of this oversight from the intermediaries like insurers to interested patients. Some of us will want to make the call ourselves on what care we get, where, and by whom we get it. Other will chose to delegate that back to intermediaries, like their insurance company. But we will have the ability to know and the knowledge to say no.

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  3. Those are three pretty good ideas to help with the real problem of health care in this country. I am encouraged to see the President and the new administration tackle this issue head on. Unfortunately, the package that we may receive will probably not be exactly the way we want it but we will get health care done this year.

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  4. Many medical professionals are discussing ways to cut spending and save money within the health care industry itself. In an interview with Dr. Eva Mor, she claims that, The administration of the existing health delivery system is bloated with waste and unnecessary cost. If information was shared by all providers of health services and all insurers by using computerized systems to store all medical records, it would cut costs and reduce errors that would save and improve lives.What we need in a health system is uniformity in pricing for procedures and services and modalities of provision of testing and procedures for diagnosis and treatment. By providing coverage to the uninsured, which initially will cost the taxpayer, it eventually will save us hundreds of millions of dollars.”" http://www.ourblook.com/component/option,com_sectionex/Itemid,200076/id,8/view,category/#catid107She is not alone in her belief either. There is a need to save dollars on procedural costs in order to balance the entire industry.”

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  5. This post is really worthy to read..thanks for sharing the this news with us..i appreciate your work..this information is very much useful to me.

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  6. You make an interesting point about building the medical marketplace. As our understanding of alternative forms of medicine grow,we find that they are not only cheaper but often better than conservative medicine. However none of these are covered under insurance which is a loss for both patients and insurers

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