Black Jet Theory – Volume 2020-5 – Is the Health Care System Broken? Part I
May 29, 2020 by Marshall Snipes
Recently, a friend related a story about her drug prescriptions. She was prescribed a diabetes drug that cost $25 per month. Her copay was $10. Subsequently, her doctor prescribed a new drug, to replace the $25 drug. The cost of the new drug was $1,800 per month but her $10 copay stayed the same, no skin off her back. The old drug worked just fine. She was happy to switch drugs because her doctor recommended the change and thought it would be better. That just doesn’t make sense, but we put up with it anyway. How could that be? Who really pays that difference? How could we have a health care system that allows that to happen?
My curiosity had already been piqued when in 2016, I had a Black Jet Moment. I had just finished a three-year term as the Chair of the Board of Directors of Integris Health, the largest health care organization in Oklahoma, when I realized that our current health care system was not sustainable. The way we finance and deliver health care just didn’t make sense. I simply applied common sense and an attempt to think critically to come to that conclusion. A few years earlier I had read Stan Hupfeld’s book “Political Malpractice”. Stan’s book, written in 2012, was an eyeopener. The book, in great detail, points out many of the problems with our current health care system that continue to exist today.
As Stan pointed out, the problems are many. We have a system where: the financial incentives drive up the cost of health care with no real impact on quality, demand is unfettered because the person consuming health care resources is not the person paying for the bulk of those resources, overtreatment occurs at the end of life (“one-half of all our lifetime health expenditures will be spent in the last six months of our lives”[1]), overhead costs are unusually high because of the reimbursement system, and so on.
My experiences and Stan’s book caused me to dig deeper and led me to a disturbing reality. The old way of financing and delivering health care had to change. A simple application of the Black Jet Theory. As I found out the hard way, the “institutionalization” of the health care system made it very hard, if not impossible, for the political approach to reform to be successful. Short of a national crisis that provides the environment to reset health care, an unlikely proposition, I was not encouraged. There were too many sacred cows, and too much money at stake. What were those facts that lead me to believe the current system is unsustainable?
According to the National Health Care Expenditures report of the Center for Medicare and Medicaid Services (“CMS”), National Health Care Expenditures for 2018 were 17.7% of GDP and 3.6 trillion dollars or $11,172 per person.[2] And those expenditures are expected (pre-virus) to rise above 20% of GDP by 2028 and 4.0 trillion dollars by 2020.[3] The impact of COVID19 is expected to accelerate the percentage of GDP to 20% this year, eight years ahead of schedule.[4] Health care spending as a percentage of GDP in the United States is the highest of any of the top 37 industrialized countries in the world (the “OECD” countries) by a large margin.[5] Of the 37 OECD countries, the United States ranks around 30th in most health outcomes.[6] We presumably have the best doctors, the best hospitals and the most advanced innovation in the world, yet we have unacceptable outcomes. How can that be? The short answer is that the system is broken both in how we finance health care and how we deliver health care services.
In 2016, I wrote the following to describe those questions that need to be addressed to fix the system.[7]
“First, we have to agree as a society whether healthcare is a right or a privilege.” For some in our system it is a right (the poor under the Affordable Care Act) and for others it’s a privilege (those who pay for the privilege). This hybrid approach continues to drive cost upward. The answer to this fundamental question has a profound impact on both the cost of health care and the process by which we deliver services.
“Second, we have to agree as a society whether we want a single payer system, a free market system or the current hybrid system that exists today … if we don’t make the choice between the two alternatives, then by default we chose to limp along with our current system. Tinkering around the edges of “reform” will cause costs to continue to rise with no benefit to the patient”
“Third, we have to address the trends that are driving the upward spiral of the cost of health care. There are many studies that have varying results determining those trends. But most of the studies believe that only 10-15% of one’s health status is determined by the health care they receive. The single biggest factor in one’s health status is the choices one makes. We know that the population is living longer. We know the “end of life decisions” being made are costly with no real medical benefit (the patient still dies and too often suffers along the way). We know the fee-for-service model inflates utilization. And most importantly, we know that when you have a system where the person making the decision to consume health care resources is not the person who pays for that decision, costs will continue to rise.”
What has happened since 2016, when I wrote those words?
First, more and more people seem to believe that health care is a “right”, if you believe what we are being told. Health care has become so expensive through higher deductibles and co-pays financed either by employer sponsored plans or through the health care exchanges, that affordability or lack thereof drives people to believe they are entitled. The alarming number of people recently added to the unemployment rolls further advocates for entitlement.
Second, efforts to reform health care have been thwarted. The Republican sponsored “Repeal and Replace” legislation amending the Affordable Care Act failed for political reasons. Like many other “reform” ideas, it tinkered around the edges and didn’t address the fundamental issues. I do not believe “Repeal and Replace” would have made much of a difference anyway.
Third, we have not addressed many of the concerns that drive cost and quality. Almost all measures of health status are at unacceptable levels. Concepts to include social determinants in health plans have been slow to develop. And, most importantly the industry has not moved away from “fee for service” to “fee for value” to any great degree, one of those financial incentives that is mis-aligned.
“Until we are willing to determine if health care is a “right”, until we determine who is better to allocate our health care resources, the government or the free market, and until we have the political courage to address the sensitive issues impacting the trends that increase costs, health care will continue to consume more and more of our economy.[8] Unfortunately, with the same results.
Could COVID19 be the national crisis that provides the momentum to reset health care? And if so, what does a reset mean? Otherwise, there doesn’t seem to be an appetite to fix what ails us, just yet. In future articles, I will discuss: (1) whether or not our current system can be fixed, (2) how to change the way health care is financed, and (3) how to change the way health care is delivered. Don’t take my word for it, think for yourself.
[1] “Political Malpractice: How the Politicians Made a Mess of Health Reform” by Stan Hupfeld 2012
[2] “National Health Expenditures and Selected Economic Indicators, Levels and Annual Percent Change: Calendar Years 2012-2028”. www.CMS.gov
[3] Ibid.
[4] “The Potential Effects of Coronavirus on National Health Expenditures” by Sherry Glied, PhD and Helen Levy, PhD published by the Journal of the American Medical Association (JAMA) online April 27, 2020
[5] www.stats.oecd.org
[6] Ibid.
[7] “What is the Problem? Health Care in Perspective Volume 2 Number 1, January, 2016 published by the New Horizon Health Care Council
[8] Ibid.