Cure sometimes, heal often, comfort always.15th Century Health Care Aphorism
The other day my father called me and said, “You’re never going to believe this!” I’m easily surprised, so it was a shock to me that my stoic father, who seemed to be unfazed by anything, would be outraged. “Guess how much your Aunt paid for a single night of staying in the hospital?”
If your first response, like mine, was, “Do you mean the list price or how much she actually owed?”, then you’re probably really into American healthcare and all of its pricing trials and tribulations. This week’s read: “The Price We Pay: What Broke American Health Care and How to Fix It” by Marty Makary, MD, is going to provide you with a lot of great anecdotes and easily cite-able data, but it’s not going to radically change your viewpoint or understanding of the situation. The good doctor, an incredible writer and deep thinker, provides a sweeping narrative about the broad strokes of what is wrong with American healthcare. I will focus most here on his prescriptions for success and why I think they are flawed or sound, plus share my take on what’s to be done.
By the way, the answer to my father’s question was $17,000 (list price). Given my past experiences with inpatient bills for childbirth, I thought my Aunt got the deal of a century.
Solution #1: Create the Tesla of Healthcare
Dr. Makary poses the reader a question: “Do you like buying a car?” For most people the answer is clearly no. Salesmen are impossible to haggle with, want to slip you into some car on the lot that you don’t want, and change the terms at the last minute. As someone who has gotten into it in the middle of a showroom floor, I can attest that the experience is awful.
By contrast, go and buy a Tesla (no, not the stock, it’s too expensive now anyway). Teslas cannot be bought in a showroom. They don’t have salespeople harassing customers and independent dealers selling service warranties. Instead, an online portal allows potential Tesla owners to customize cars and have them delivered directly to their homes. The showrooms are just that: showrooms. Places to test drive cars and fall in love with the brand.
To Dr. Makary, this model is clearly working for Tesla and should be replicated by the healthcare industry. He cites as a model company Iora Health, a Direct Primary Care (DPC) regional Medicare Advantage-focused insurer. As he relates:
Iora’s founder and CEO, Dr. Rushika Fernandopulle, a Harvard-trained primary care doctor, didn’t like what he was seeing in the health care industry: the assembly line method of seeing complex patients, rushing them through the exam rooms, ordering large swaths of tests, then chasing down insurance companies for payment… At the core of the model is time. Iora carves out a lot of time for each patient… They coordinate care and strive to achieve the best health outcomes.
I want to be absolutely clear: I believe this is the correct model of health care. Not only does it belie the shift in narrative (changing from “insuring downsides” to “providing care”), study after study shows the increasing importance of considering Social Determinants of Health (SDOH) in creating a healthy population. Therefore, the entire picture should and must be taken into account in any future vision of primary care.
“Your zip code can affect you more than your genetic code. For example, for people living in the Chicago Loop, life expectancy is about 83 years. On the other hand,those living 3 train stops south of downtown, in Washington Park,have a life expectancy of only 69 years. The gap in life expectancy between these two neighborhoods is larger than the life expectancy gap between the U.S. and Honduras.” – Healthbox, Root Causes of Health ReportTweet
However, the industry has not yet proven that DPC will result in better, more efficient care across all populations. Companies like Iora Health have started by selling Medicare Advantage plans which, much like Tesla, cater to wealthy individuals with choice and time on their hands. DPC has been challenged in rolling out to lower-income populations and the 150 million Americans who get insurance through their employers, although companies like Wal-Mart and CVS/Aetna are starting to show promise in reinventing primary care.
Solution #2: Price Transparency
The second solution Dr. Makary puts forth is transparency. As Justice Louis Brandeis famously remarked, sunlight is in fact the best disinfectant. And on this again, I agree with Dr. Makary. He highlights a company named Healthcare Bluebook that aims to bring exactly this level of insight to the everyday patient experience. It’s also worth highlighting, in my opinion, some of the great state and local efforts like New Hampshire Health Cost.
I wrote about this topic in relation to a personal experience in a previous post entitled “Price Transparency: Healthcare’s Silver Bullet?” Briefly restating my counter-argument to Makary here: yes, transparency will absolutely help consumers comparison shop when there is an elective procedure that needs to happen eventually and there is time on the patient’s side (e.g., childbirth, knee/hip replacement). But as I learned firsthand, when there is an emergency and/or emotions are involved (e.g., ER visit, cancer, pediatric anything), sometimes price is not the problem. The lack of time combined with the indirection of a provider -> hospital -> insurance -> patient loop means that choices are not actually being made with rationality in mind. In this case, price transparency would do very little toward creating an Econ 101 competitive market with maximum consumer/producer surplus. The Atlantic said it better than I could, when describing a $94,000 prostate operation to prolong a terminal cancer patient’s life by two weeks:
The problem with these straightforward economic calculations is that they involve real human beings who have friends and relatives. That 94-year-old cancer patient, after all, may have loving children or grandchildren at the bedside; hardly anybody is willing to let Grandpa die just to save money for the overall health-care system.T.R. Reid, “How We Spend $3,400,000,000,000”
Solution #3: Eliminate the Kickbacks and Middlemen
This is a bit of a catch-all, so I want to get a few specific players lumped in here. Dr. Makary (as many doctors do) feels that insurance brokers, pharmaceutical benefit managers (PBMs), and wellness consultants (among others), provide very little (or no) added value to patients and payers while at the same time massively inflating the cost of healthcare.
Let me start with the last one first: wellness. As Dr. Makary puts it:
America’s love affair with workplace “wellness” is costly and dangerous… We all should eat sensibly, exercise, stop smoking, moderate our alcohol consumption, drop excess weight… That’s not what I’m talk about. Today’s wellness movement is a $6 billion industry run amok… There’s an army of companies and consultants who can’t wait to get their hands on American workers.
Most of the author’s proof to back this up relies on a survey study done by Tufts Medical Center that evaluated over 2,000 wellness programs and concluded evidence for any positive impact was limited and inconsistent. And while this is compelling, I was not persuaded by the rest of his “anecdata”. For instance, he recalls berating a wellness consultant for promoting a low-fat diet, touting the controversial book Good Calories, Bad Calories as the bible for how every diet should be. To me, this smacks of arrogance, as recent work by researchers (shown in the incredible documentary Game Changers) is showing evidence that a high-fat, animal-based diet may actually be contraindicated by the fossil record and our evolved anatomy. Perhaps money being spent on the wellness industry is fueling research and evaluation of different diets, even if they come to conclusions Dr. Makary disagrees with. Plus, I would make the argument that the wellness industry (especially the burgeoning Wearables category) will be vital to a consumer-driven health care system that goes beyond the four walls of the traditional hospital.
Now how about insurance brokers and PBMs? How do these middlemen inflate the cost of healthcare? Well, as the argument goes, middlemen seek to enrich themselves by having their clients select the most expensive options, collecting high fees, and calling themselves “Value-Added” without actually adding any value. In fact, this is the exact same criticism that the Trump administration leveled at PBMs (and then later withdrew).
According to the National Health Expenditures Account (NHEA) Table 04, the 2018 Net Cost of Health Insurance was $258.5 billion (7.6% of NHEA). This is no small amount. By contrast, retail sales of pharmaceuticals totaled $335 billion for the year. Unfortunately, we don’t know how much of that subset is fees/rebates going from the premiums paid to insurers back down to “value-added middlemen”. Without this knowledge, it’s unclear what the true cost – or true benefit – of all of these middlemen is, no matter how morally repugnant their job may be.
By the way, many have argued that we should just remove that line item from the NHEA entirely with nationalized medicine! That’s a valid argument, but not in line with Dr. Makary’s calls for price transparency reform and direct primary care which only are needed in competitive, privatized systems. For privatized systems, the answer is probably “smarter regulation”. But beware, even the best-intentioned regulation like limiting profits creates its own problems.
Thad’s Solution: Yes, And… Focus!
I have talked at length in this review about all of the things that Dr. Makary has laid out and where I agree or disagree with them. But what if I were king for a day? Don’t oppose, propose!
So here it is: combine direct primary care, price transparency and kickback/middleman regulation to create a privatized system where high-cost populations can be more efficiently. Target Americans 55 and older who spend $1.9T on healthcare every year (56% of all health spend for 29% of the U.S. population). Aggressively manage diabetes, kidney disease, and other cost sinkholes. Use taxation sticks and carrots to actually drive behavioral change.
My only problem really with Dr. Makary’s solutions are that they are too broad-brush in their application. Remember the “Willie Sutton Rule”: look where the money is.
Sidenote: we could easily make this bipartisan: Medicare-for-All-who-want-it and the abolition of federal debt. Given that federal health entitlements account for 29.4% of the U.S. Budget, it turns out that better caring for our nation’s most vulnerable is actually sound fiscal policy. Who knew.
Living Outside the Beltway. On the next installment, I am going to talk about “Beyond Peace”, Richard Nixon’s final book before he died. Given the impeachment saga in Washington and the upcoming Iowa caucuses, I thought a politics-themed review was in order!
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 Not to be the party pooper, but Tesla still has barely turned a profit. In addition, the Model 3 retails at $39,990 with zero customization or packages, more than 10% higher than the average full-size sedan competitor.
 I don’t think Justice Brandeis ever had bleach.
 Although I will say I find Dr. Makary’s argument a little suspect because he himself admits that price transparency wouldn’t help in End of Life care. Specifically, he calls out that his Improving Wisely project helped predict overtreatment based on the proportion of oncology patients in a physician’s care dying while on chemotherapy and/or radiation. If 10% or 20% were dying on chemo or radiation, that’s probably normal, but 80% to 100% might suggest poor discretion on the part of the oncologist. According to the National Cancer Institute, the initial treatment of cancers in 2018 was $46.6B nationwide (1.37% of U.S. NHEA).
 “Net cost of health insurance is calculated as the difference between CY incurred premiums earned and benefits paid for private health insurance. This includes administrative costs, and in some cases, additions to reserves, rate credits and dividends, premium taxes, and plan profits or losses. Also included in this category is the difference between premiums earned and benefits paid for the private health insurance companies that insure the enrollees of the following programs: Medicare, Medicaid, Children’s Health Insurance Program, and workers’ compensation (health portion only).”