In 1962, economist Selma Mushkin discussed the additions to our economy by investments in health. She discussed the effect of a reduction in the death rate on the rate of economic growth from advances in healthcare. Fast forward to today. The United States spends more than any other developed country on healthcare, however life expectancy at birth is 2 to 3 years lower. Any other investments that we make, we look at the dividend paid or the final yield and wonder are we better off than where we began. Why don’t we look at our investments in healthcare?
Healthcare further complicates itself as a business. There is a third party in most of the transactions and contracts. The third party in this transaction is your health insurance. They negotiate rates with the employer, or more often tell the employer what they’ll pay. Then the insurance company will negotiate rates with the health care organization that has the supply.
Being able to change insurance companies every year, means that insurance companies see no high value investments in your health. In their eyes, they may see an investment they make in your long term health could mean that their competitor will receive the dividend. As patients regularly change payers, any individual third party payer has less incentive to commit to any expensive, high value treatment, as the result may mean their competition will reap the reward. I don’t blame them for this. Often Medicaid programs and sometimes small insurers will say that short term budget constraints keep them from paying for high value therapies.
Hospital costs are up, healthcare administration costs are up, diagnostic costs are up, pharmaceutical costs are up, and insurance companies have less incentive to control long term costs and make you healthy. Some people have even said this was a large driver of the opioid crisis. For example, third party payers would pay for an opioid prescription in lieu of physical therapy for an injured patient, because the negotiated rate on the 30 day supply of an opioid was much cheaper than 6 weeks of physical therapy, though PT may have been the answer. We’ve seen multiple pieces of legislation across the country addressing this very issue.
So, the question I get asked the most about is “Is single payer the right strategy for our country?”. People have very strong views about healthcare. I recall working in the Governor’s office when the Affordable Care Act was passed. We had people calling in droves to the switch board telling us to keep our government hands out of their Medicare. They didn’t understand that Medicare is government healthcare and the Governor had little control over it. The bottom line is, no matter what the democrats tend to trot out, I see neither an economic model, nor a political environment where that will work. Further, we have gone down this road for so long, I can’t imagine the federal government destroying entire companies to replace them with a federalized healthcare system similar to European models.
The next step in healthcare reforms will be focusing on value based healthcare and perhaps eventually capitation in health plans. Third party payers are going to do everything possible to limit their share of the risk involved in healthcare. The best advice anyone can get from this is to take care of his or her own health. Its the only way you can guarantee some modicum of lower healthcare costs in the near future.