Status Quo in Healthcare

Status Quo in Healthcare

How can we really make change to the United States healthcare system? Dave Chase, in his book The Opioid Crisis Wake-Up Call argues that changes to the system need to come from private businesses, because private businesses are responsible for the health insurance coverage for over 50% of American’s. If business don’t take action and demand changes, Chase argues, then the system will not have enough strength to push against the status quo of rising costs and stagnant productivity within healthcare.

 

A quote from Chase about changing the American healthcare system reveals something larger about public opinion and the status quo in American public policy in general. Chase writes, “This book focuses on non-legislative strategies since the politics of health care are fraught with pitfalls. As we know, the best way to perpetuate the status quo is to politicize a topic – and nothing is easier to politicize than health care.”

 

I think Chase is correct about politicization and the status quo in the United States. Our country has deeply internalized ideas of liberal and conservative and wedded those ideas to the Democratic and Republican parties. This means that if an idea is taken up by a party, if it is politicized and adopted by a party, then it instantly becomes an identity marker, and people who might not have had a strong reason to care about an issue, suddenly find it to be a maker of who they are and what groups they belong to. Politicizing an issue in this system virtually guarantees gridlock, preventing any legislative action on the issue.

 

Private businesses, however, can make changes without relying on a 50% majority vote (or 2/3rds majority vote in congress). Throughout the book Chase presents economic and moral arguments for businesses to take the nation’s opioid crisis seriously, and uses it as a wake-up call to show businesses how our healthcare system is failing individuals, and ultimately failing the companies that hire those individuals and provide for much of the healthcare that individuals receive (or fail to receive). Public action is hard, so in many arenas, private action is the best chance for making the changes we want to see in the world.
Health Care Supply

Health Care Supply

Dave Chase makes an argument in his book The Opioid Crisis Wake-Up Call that healthcare has a substantial supply side drive, not just a demand side drive. This argument doesn’t align with standard pictures of healthcare, the idea that people seek care when they are sick, and don’t use care when they are well. Its troubling, but evidence does support the idea that the healthcare market is in some very important ways a supply driven market, meaning that as supply and capacity increases, demand also increases.

 

I’m not completely sure I understand this idea, but it is important for us to acknowledge and think about, especially if we live in growing cities, gentrifying regions of the country, and areas of the United States that have real opportunities for reinvention. When looking to the future of healthcare in the United States, Chase includes many elements from Bruce Katz and Jeremy Nowak’s book The New Localism and thinks there is an important role for new models of city and local government to play in shaping local healthcare ecosystems. He is also heavily influenced by Jim Clifton’s book The Coming Jobs War and the importance that local communities invest in sectors that are likely to be highly productive in the future. Chase writes,

 

“Sooner rather than later, we can expect other developments along the same 3.0 spectrum [More info on Economic Development 3.0 here]. Cities will incorporate true health needs into mater planning and review building permit applications with a deep understanding that health care is a supply-driven market. The more supply there is, the more demand will increase, with little regard for value and community well-being. Approving more health care build-out virtually guarantees a massive burden on local citizens.”

 

It is important that we think about what it is in healthcare that actually provides value. If simply adding more healthcare capacity will lead to greater demand and utilization, then we need to take steps to ensure that an uptick in services is actually accompanied by improvements in health. When communities are redeveloping and growing, they should be focused on upstream social determinants of health rather than just hospitals and healthcare service buildings. Designing communities that will have ample green space for outdoor activity, that will control noise, and will have well lit parks and outdoor areas will help build healthy communities. Plopping a hospital in a space that doesn’t include these elements might give people a place to go when they are stressed, overweight, and injured by debris in the streets, but it will not help people actually live healthier, it will capitalize on a broken environment that fails to support health.

 

I think that is part of the idea that Chase argues for. We should maintain the healthcare capacity and services which actually improve health, and we should be weary of systems that provide healthcare but fail to demonstrate real health improvements for citizens and communities.
Fiduciary Healthcare Responsibilities

More on Fiduciary Healthcare Responsibilities

Yesterday I wrote a little bit about the fiduciary healthcare responsibilities that employers hold given that companies invest our healthcare dollars in plans and structures that can be quite costly. In his book The Opioid Crisis Wake-Up Call, Dave Chase writes, “Given the wide cost differentials, CFOs and CEOs are failing in their fiduciary responsibility if they do not move to modern health care delivery models that are proven to save money while maintaining or improving health outcomes and patient satisfaction.”

 

Chase’s book is all about current structures and systems for healthcare coverage, delivery, and access that are within the control of employers. Healthcare is a complex field, and for years, employers have not had a hands-on role in shaping and creating the models they work through to provide health insurance to their employees. Chase argues that the result has been increasing costs without pressure on providers or insurers to make sure that the quality of care matched the costs.

 

Innovative and truly caring companies have shifted the status quo and shown that quality healthcare can be affordable. They have shown that preventative medicine can be supported and promoted by thoughtful employers, saving healthcare dollars and improving employee health in the long-term. Companies that ignore these models will effectively be wasting healthcare dollars and hindering the health of their workforce. This exposes companies to liability for not fulfilling their fiduciary healthcare responsibility.

 

When we talk about health policy and improving the healthcare system in the United States, we usually talk about government policy, about hospital charges, and about minimum standards for insurance and rising insurance premiums. Chase thinks we need to spend more time talking about our employers, and about what they can do to help improve the system, without requiring laws to be passed or companies to make policies that go against their own best interest. Employers have a lot of leverage if they take their fiduciary healthcare responsibility seriously.
Fiduciary Healthcare Responsibility

Fiduciary Healthcare Responsibility

For many Americans, their job provides them with some type of retirement savings account. Historic legal action, laws, and regulations require that companies who offer retirement savings vehicles responsibly manage the money they invest on behalf of their employees. The investment options that employers chose must perform at a reasonable level. A company can’t push all of its employees to invest back in the company (as Enron did in the 1990’s) and a company can’t just take employees retirement savings accounts and put them in a low return savings account at a bank – the return to the employee in interest would be so small that it would be meaningless. Employers fiduciary duty requires that they offer legitimate retirement savings options that are in the best interests of their employees and will likely achieve a reasonable level of return on the investment. We understand this fiduciary responsibility for employers when it comes to our retirement savings, and now, some leaders are starting to look closely at the fiduciary healthcare responsibility of employers in the same way.

 

In his book The Opioid Crisis Wake-Up Call, Dave Chase explains his concerns regarding wage stagnation in the United States. He shows that real hourly wages in the United States, across all education groups, has fallen since 2007 (the book was published in 2019 making the time period of falling wages 12 years). At the same time that wages have fallen or stagnated, healthcare costs and expenditures have soared. With out of pocket spending rising, employer contributions to health plans going up, and patient premiums also getting more costly, Chase argues that the lost wage increases for American’s have been channeled into an under-performing healthcare system.

 

This is where the fiduciary healthcare responsibility of our employers becomes an important issue. Our employers are offering us (for about 50-65% of Americans) health insurance at the expense of higher wages. The money used for purchasing the plans offered to us and helping us access care, can be thought of like a retirement savings account. It is our money, and the company has a responsibility to ensure it is used in our best interest and that the products and services purchased with our money are safe, effective, and likely to provide us with a reasonable return on our investment. The healthcare dollars spent by our employers for health insurance today does not measure up.

 

Chase predicts a series of lawsuits targeting the fiduciary healthcare responsibility of employers in the near future. Lawsuits could target ever rising expenditures for diminishing or stagnant healthcare quality. They could address limits in services that hinder health outcomes for individuals. Companies could be on the hook for failing to do background checks on brokers or failing to shop for the best insurance plan for their employers. All of these issues are addressed by Chase in his book, and he believes that if employers took their fiduciary healthcare responsibility seriously, they could be a major asset in changing the future direction and costs of healthcare in the United States.
Buying Insurance

We Don’t Buy Insurance for Ourselves

Why do we buy insurance of any kind? Is it really for ourselves and our own benefit, or is there something else going on with insurance decisions? According to Venture Capitalist Chris Brookfield, as quoted in Dave Chase’s book The Opioid Crisis Wake-Up Call, there is something beyond our own self interest at play when we decide to buy insurance.

 

Brookfield is quoted as writing, “Persuading individuals to buy insurance is kind of backwards. I saw this in India all the time. Individuals do not value their own risks – their relatives and neighbors do.” 

 

Buying insurance is actually more about our loved ones and our responsibility to our community than it is about ourselves. It is about protecting the financial standing of our relatives and those who would help us if we were down as much as it is about protecting our own financial standing. The standard story tells us that insurance shifts risk from ourselves to a group of individuals, but as Brookfield continues in the book, it really shifts risks from our immediate known allies, into a broader group of people that we don’t necessarily know.

 

If I don’t have health insurance or auto insurance and die in a terrible car crash, I am not the one who will bear the costs of the accident. My loved ones and other people in the community involved with the crash (other drivers or the owners of any private property that was damaged) are the ones who will face the costs. On their own it would be hard to manage the costs, but pooled together, the costs and the risk could be shared. In a situation where my death occurs, it is other people who derive the value of the insurance.

 

I’m sure there are some insurance products that are pretty solidly just about the individual buying the isurance, but it doesn’t seem to always be that way. Buying insurance seems to be an act of signaling, as Robin Hanson discusses in his book The Elephant in the Brain. Buying insurance isn’t all about sharing risk, it is also about showing others how much you care about them and about showing the community how responsible you are.
Scaling Local Networks

Scaling Local Networks

Dave Chase presents an interesting idea about local networks in his book The Opioid Crisis Wake-Up Call. Local networks, Chase explains, grew from the small groups and tribes that humans evolved within. The systems and structures that allowed for cooperation in small groups, have evolved into complex structures of institutions like government, insurance risk pools, and social media. Chase focuses on the health insurance side of these local networks, and considers whether scaling local networks is really the best thing for today’s societies.

 

Chase writes, “When local networks are scaled up, you add hierarchy, says Brookfield [Venture Capitalist Chris Brookfield], and this creates opportunity for theft and redirection.”

 

The idea from Brookfield that Chase is getting at is the idea that many of our systems were formed in small groups and tight communities where social accountability and trust were easy. Everyone knew each other, the community had many close ties and interactions, and it was not hard to keep track of personal debts and obligations. As societies grew, and as our cities, nations, and global structures became more complex, we brought along the same structures of the systems that served our evolutionary tribal ancestors well.

 

However, as complexity grew within those structures, the pitfalls of scaling local networks became apparent. There are too many transactions, too many opportunities for theft and fraud, and too few people who have real oversight and understanding of how the systems work. This allows for abuse of the system and for people to get away with cheating.

 

In healthcare it might look like increasing premiums year-over-year, without a clear explanation as to why premiums are increasing. It might look like unnecessary healthcare expenditures, unnecessary healthcare procedures performed and billed by providers, and opaque systems of approving or denying medical claims. No one knows anyone anymore, no one is accountable, and no one has a clear accounting of debts and obligations. Some outright fraud occurs, a lot of abuse of the system occurs, and even more common, a lot of fudging things and pushing boundaries takes place. Our healthcare insurance system is built on a structure and idea that doesn’t fit the complex high scale realities of the world we live in today.
Scale versus replication

Replication Versus Scale

I used to work for a healthcare tech company based out of San Francisco, and the word scale was almost a mantra. Whenever we did anything, from a small policy to the introduction of a new product or service, the question was always, will this scale? It is an important and crucial question for a growing organization. Before anything was introduced, we always considered the future, whether the new process would work if we had more customers, more covered lives, more emails, and more work. If the amount of effort, oversight, and individual contribution was too high, then we new we were not looking at something that would scale. We needed processes where the amount of additional work would be negligible as we grew, that was the key to scale.

 

For many organizations, however, scale isn’t necessarily the most important goal. Instead, the focus is on replication, to grow and expand in new spaces, new markets, and new products. Replication is something different than scale. While scale sought to reproduce the same outcome, the same process, and the same expectations in all settings, replication takes a slightly different approach to the same end goal. We still want the same successful outcome, but the goal doesn’t include having mirrored consistency in approach with diminishing marginal effort for each new customer. Replication is adaptable to changing local conditions.

 

Dave Chase describes it like this in his book The Opioid Crisis Wake-Up Call, “Replication varies from application to application; scalability seeks to apply the same things everywhere. This distinction is a subtle but absolutely critical success factor.”

 

In retail, social media, and chain restaurants, scale is crucial. You want every coffee you order at Starbucks to be the same, regardless of whether you are at the first Starbucks in Pike Place, or a brand new Starbucks in a Las Vegas suburb. You want your eggplant Parmesan at Olive Garden to be the same today and next month, and social media companies want everyone to have the same account set-up and access settings so that it is easier to manage all the companies, individuals, and organizations that create accounts. Scale makes things consistent, reduces administrative burden, and keeps costs down.

 

Replication is more adaptable from region to region, setting to setting, and industry to industry. The goal might be very similar, say to reduce healthcare costs, but the organizations and spaces might vary dramatically, say from nursing homes to companies offering remote medical second opinions. What Chase argues is that many healthcare organizations shouldn’t get too caught up on scale, and should focus more on replication. Hospitals can learn from nursing homes and replicate the approaches they take to improve patient adherence to medication regimens, knowing that there is some overlap and some divergence in their patient populations. Health plans can replicate patient education models that hospitals find successful, even though the patient education from the health plan will take place in a different form and space.

 

Scale dictates what should be done to create exact copies of a process with diminishing marginal costs, but replication is necessary when dealing with multiple confounding variables in dynamic and ever changing spaces. Scale might be needed for economic success at national and multinational levels, but replication provides the flexibility and creativity needed for success when a cookie-cutter model can’t be followed.
Innovation Openness

Innovation Openness

When you learn something new, when you have a new insight into the world, when you figure out how to do something that you couldn’t do before, do you share that insight or do you try to keep it to yourself? If you are a big business, you probably try to keep that to yourself. If you are a young entrepreneur, you probably share aspects of your break through, while hiding the special secrete sauce that makes it work. And in any other aspect of life, you probably blast your insight out to the world on social media for all to see and hear. Innovation openness is something that we are becoming pretty comfortable with in our personal lives, and it is starting to creep into parts of our business lives as well.

 

Being open with information helps spur innovation because it gives more people insight and access to what is really taking place. Your perspective is always going to be limited. You can only know and experience so much, but by being open and sharing what you have learned, others will be able to take your ideas further and help develop truly new and innovative approaches by building on what you have already done. If they too share their new insights, then entire fields and industries can take massive leaps forward. As Dave Chase writes in his book The Opioid Crisis Wake-Up Call, “Openness is proving itself in an array of settings. The beer market is mature and has been dominated in the U.S. by a couple behemoths, yet craft brewers recently have grabbed over 20 percent of been spending. How? Craft brewers are radically open with each other regarding how to succeed, recognizing that their real competition is the mega brewers, not each other.”

 

How you think about your competition will probably influence how open you are with your data and insights. If you really don’t want your sibling to know how you put those cool wood panels on the wall, you might not be as open about the process as you would be if you really wanted to brag to your friends about how you were able to get them up. Similarly, if you are in a business where your insight gives you a valuable competitive edge, you won’t want to share what you have learned. However, sometimes this secrecy becomes part of the status quo, and more and more data and information is locked down, with processes, contracts, and everything else being hidden from as many people as possible. This is what is happened in healthcare, and Chase considers the ramifications of this attitude.

 

“One of the failings of the wildly under-performing status quo health care system is how poorly insights and breakthroughs get disseminated. Research shows that it takes 17 years for effective breakthroughs to become mainstream.”

 

Healthcare is costly and few people are fans of their insurance plans or hospitals. To change the continual cost growth in healthcare, innovators will have to find new ways to approach challenges and problems that have existed in the industry for years. The more open companies can be about successful approaches, the better it will be for all of society. Keeping insights hidden and failing to discuss insights will perpetuate the stagnation we currently see in so much of the healthcare system.
Self-Insured Health Plans

Self-Insured Health Plans

“A self-insured health plan,” writes Dave Chase in The Opioid Crisis Wake-Up Call, “is established when an employer sets aside some of its funds to pay for employees’ medical expenses. Employees then contribute to the plan rather than pay traditional premiums.”

 

In the United States, it is not uncommon for large employers to chose to be self-insured rather than to offer health insurance provided directly through an insurance carrier such as Cigna or Anthem. Chase explains that self-insured plans shift risk from the insurance carrier to the employer, with the benefit of reduced administrative costs and changed financial incentives. Large carriers are often still contracted with in a self-insured system for some administration and bill paying functions. In a traditional relationship, as Chase explains, employees pay premiums and “if the premiums exceed the medical expenses, the carrier wins.” Self-insuring eliminates this aspect of health insurance, reducing the total amount that employees should need to contribute by eliminating a profit motive for the carrier.

 

Chase highlights another benefit of choosing to self-insure, lower taxes and fewer regulations to abide by. In the United States, each state has an insurance commission that sets its own standards and requirements for insurance (auto, home, medical, etc…). The benefit according to Chase is that, “the Employee Retirement Income Security Act of 1974 [ERISA] states that a private, self-insured health plan is administered in accordance with its [ERISA’s] terms and federal rules. So, these plans aren’t subject to conflicting state health insurance regulations or benefit mandates.”

 

This is an important point that I have been thinking about in Nevada. My state requires that health insurance cover ABA treatment for children with Autism until they turn 21. However, not all of the plans that Nevadan’s have through their employers actually cover ABA treatment and some only cover ABA treatment until a child is 7 years old. While selling insurance across state lines (as in buying an insurance plan sold in California and according to California statutes and regulations) is not legal, offering a plan from a self-insured employer based in another state is legal. Some employers in Nevada are very large, are self-insured, and have headquarters based outside the state. These plans are not subject to the changing health insurance demands of every state since they are regulated by ERISA. So many Nevadans, despite state law, do not have coverage for their child’s ABA therapy.

 

It is important to note that self-insuring can reduce costs for employers, give them more control over the plan they design for employees, and can offer tax advantages along with easier implementation by reducing regulations and applicable laws. Employers should move in this direction to create better health plans that give them better access to their own data and needs. At the same time, we should recognize that these types of plans can be hard to regulate and present challenges to patients, employees, and lawmakers who want to see specific changes or policies. Employers should strongly consider self-insuring to get away from the profit motive of health insurance carriers, but should recognize that avoiding individual state health insurance requirements by self-insuring could lead to a backlash against self-insured health plans.
Misdiagnosis

Misdiagnosis

Healthcare spending has been increasing, but it is easy to see that we have a finite set of healthcare resources available to everyone. We only have so many hospitals, there are only so many doctors available, and our healthcare plans are all tied together so if one person uses a high amount of healthcare, everyone paying into the health plan will see their costs rise. This is one of the reasons why it is so important to make sure we are getting the best care possible with our healthcare dollars, why it is so important that we ensure that everyone gets the right treatment at the right time.

 

As Dave Chase writes in The Opioid Crisis Wake-Up Call, “A senior executive at a Fortune 10 company wisely told me that misdiagnosis is the biggest healthcare error; everything that follows both harms the patient and costs you.” 

 

If we don’t get the diagnosis piece right for patients, then they get the wrong care. They take medications that don’t help them, undergo procedures that don’t address the correct issue, and eventually return for more evaluation and diagnostic testing. The patient can be harmed by drug side-effects, by surgeries that were never needed, and by exposure to radiation from diagnostic imaging.

 

Getting the diagnosis wrong also wastes a huge amount of our finite healthcare resources. Each new appointment to try to get the diagnosis right, to do more testing and screening, or to try a new procedure leads to increased costs for the individual and everyone else. Doctor’s offices have to fit in more appointments, patients have to fill more prescriptions to try new medications, and operating rooms are booked for the wrong procedures. Individuals and patients are delayed and have to pay more for their services.

 

It is important that we focus on making sure we get the correct diagnosis at the beginning. I’m not a physician, and I haven’t spent years connected to the healthcare system to tell you exactly where the breakdown is in finding the right diagnosis, but the costs of patient health and healthcare resources make it clear that we should invest in diagnostic capabilities. We don’t need to spot every little thing in the patient’s body, but we do need good enough diagnostics and enough knowledge and understanding to get the right diagnosis the first time, for the good of our bank accounts, and more importantly for the good of our collective health.