Forbes: It’s ironic that at the very moment that Obamacare is poised to spend nearly $2 trillion to expand traditional insurance coverage to about 30 million uninsured, new synergies between genomics companies and providers, advanced diagnostics for remotely monitoring patient treatment and detecting serious illness at earlier stages, and a wave of mobile health apps are unraveling old assumptions about how care should be delivered and financed.
Top-down controls on health-care spending and bureaucratic panels embedded in Obamacare will inevitably clash with the emerging bottom-up, patient- and consumer-focused market for personalized health solutions at affordable prices. If anything, science and smartphones will lead us to devolve more responsibility and discretion to individual patients and physicians for producing better health outcomes—making government guidelines (however well-meaning) for how care is delivered and who must deliver it outdated before the ink is even dry.
Everyone wants better
health. But the impact of health insurance and health care in
maintaining health is not clear, at least not in our current hospital and labor-intensive health-care system – where interventions occur only after someone becomes sick. (Indeed, an
overview of the literature shows no evidence that health insurance benefits the non-elderly.) Prevention is a distant second order priority, and certainly not well reimbursed.
While recognizing that our current system is deeply dysfunctional, Obamacare’s architects doubled-down on previous government interventions: adjusting payment rates (especially for Medicare providers), adding new insurance subsidies and regulations, and tweaking the delivery system (through Accountable Care Organizations) with new, bureaucratized pay for performance formulas. The scale may be more ambitious but, in one or another variation, we’ve tried many of these approaches before and the results of current experiments are are not terribly encouraging. As one provider put it, there’s “an awful lot of sticks and not a lot of carrots” in the current approaches.
It not surprising that Washington wants more control and standardization in health care pricing and delivery. But while industrial policy – regulated delivery systems at regulated prices – has fallen out of favor in most other sectors of the U.S. economy (like trucking, airlines, and telecommunications), in health care it remains stubbornly resilient.
Why? Washington’s view of health care remains deeply entrenched in mid-century assumptions about health and illness. Health care via industrial policy makes sense if illness is an Act of God to which all are equally vulnerable and a known quantity of health care can be delivered to everyone at a fixed price. If these assumptions are true, the largest payer – the government – can set the rules of the road, from which all (or almost all) benefit.
That was a reasonable picture of medicine well into the 20th century, as the table below shows, when infectious diseases dominated U.S. deaths. But by 1950, heart disease and cancer had displaced infections as the nation’s most potent killers. (“Diseases of early infancy” was still the fourth-leading cause of death in 1950. By 2010, they had dropped off the table entirely.)
Changes in Causes of Death (number of deaths per 100,000)
Source: http://www.dailymail.co.uk/news/article-2168836/Cause-death-American-100-years.html
Today, more than 75% of all U.S. health-care costs are due to chronic conditions (like heart disease) with a strong behavioral component – i.e., smoking, diet, exercise, etc. A sedentary life revolving around high calorie food may be many things, but it’s not an Act of God.
The picture gets even more complex when you break down life expectancy by geographic and racial factors – as Harvard researchers did in 2006. They found not one America, but eight, divided by lines that don’t map neatly to income or race. Asians in the U.S., it turns out, live longer than any other cohort, and have for the last few decades. The second longest-lived group were Midwestern whites with lower than average income. Overall, Harvard researchers noted that the “gap between the highest and lowest life expectancies for race-county combinations in the United States is over 35 years.”
The mix of genetics, income, education, and culture implied by the “Eight Americas” is dizzying. How to raise life expectancy for the group with the poorest life expectancy (urban black males) is, indeed, a worthy topic of public policy discussion—but is it one that should be dominated by health insurance or health care? And what ethnic-cultural-genetic life expectancy mélange should we adopt for our national standard?
Optimistically, Obamacare tasks doctors, especially primary-care physicians, with creating “medical homes” for patients, hopefully addressing the variation in health outcomes and reducing costs associated with managing serious chronic illnesses.
But is that a realistic assumption: Asking physicians to do more, with more patients in their already overcrowded offices? Mixing together healthy patients (who will demand more preventive care because it’s free) with chronically ill patients who need complex behavioral interventions delivered by a team of physicians and related caregivers? Is that a recipe for efficiency or confusion and overspending?
Add to this the fact that many “pay for performance” and best practices promoted under the ACA will inevitably focus on rewarding and grading providers on medical-process metrics— dispensing generic drugs to patients after a heart attack, for instance.
On the whole, this isn’t a bad thing where the drugs work well—but it will likely discourage creative thinking and development of non-medical, non-traditional provider strategies for improving health, because they don’t fit neatly into current reimbursement models. And a generic-first strategy will do little for the disease areas where existing treatments only work well for a fraction of the population – and thus much more medical innovation is needed.
Source: Brian B. Spear, Margo Heath-Chiozzi, and Jeffery Huff, “Clinical Applications of Pharmacogenetics, Trends in Molecular Medicine (May 2001)
Obamacare has no shortage of noble aspirations, but it could’ve used a much stronger dose of humility. Government programs work well (for the most part) when standardization and scale are the most salient values. Build enough Sherman tanks to beat the Nazis. Dig enough sewers to beat cholera. Mandate childhood vaccinations before any child sets foot in a school.
They are much less likely to be successful when individual preferences, culture, geography and genetics make it difficult to prescribe one correct intervention to prevent expensive complications much later. Even the FDA recognized this in its latest user-fee re-authorization—moving away from blanket determinations of “safety” and “efficacy” standards for drug approval and towards adopting a flexible “risk and benefit” analysis that will necessarily vary by disease state, intended population, and a patient’s personal tolerance for risk.
Even our most basic measurements of health are becoming more nuanced. Take, for instance, a recent article in the L.A. Times pointing out that Body Mass Index scores—largely used to measure U.S. obesity rates and predict future health risk—may, for some people, lead to the wrong recommendations. Over large populations, BMI may be a good predictor of health outcomes. But “as a measure of personal health, a wealth of recent research has underscored that the BMI can be a pretty poor predictor.”
The Times notes that recent studies suggest that for some people higher BMIs may have some health benefits; and that when some lean people develop diseases, like diabetes or cardiovascular disease, they’re more likely to die than if they had higher BMI scores. Basically, “weight status and metabolic health are imperfectly correlated,” with about 10.5% of obese adults “metabolically healthy” and 8% of normal weight adults “metabolically unhealthy.”
In short, our understanding of health and disease is becoming ever more complicated and personalized, raising enormous challenges for regulators who want to set bright lines for what insurers must cover or what services doctors should and shouldn’t provide.
Government doesn’t do nuance well. The Soviet Union was good at building guns and rockets, but terrible at supplying consumer goods, like toilet paper. Markets, by contrast, are very good at customized solutions. Provided that there is a large enough market, for-profit companies will help doctors and consumers develop personalized health programs including exercise, diet, and drug regimens tailored to our mix of genes and foibles.
In fact, they’re already doing this. If you look around, the people who will be developing the future of customized health solutions are likely app developers and consumer-savvy companies like FitBit and Nike who are already invested in the quantified-self movement. And as wearable, or swallowable, diagnostics get smarter, cheaper, and more powerful, health care will continue to accelerate away from hospitals and doctor’s offices and into your living room (via the “tricorder” envisioned in Qualcomm’s X-Prize).
Health apps for 99 cents, and concierge doctors at $100 a month, can focus on prevention, wellness, and disease detection, and slashing health-care costs to a fraction of the cost of the current system. Retail clinics in Wal-Mart or Walgreens will gladly monitor our health while we buy toilet paper or toothpaste, keeping us out of expensive hospitals and shifting insurance towards catastrophic coverage for the few risks that remain truly unpredictable and threaten to bankrupt us when they strike.
This is where Obamacare goes most wrong – throwing hundreds of billions of dollars in new subsidies at the insurance market while also pushing insurance into categories called “bronze, silver, gold, and platinum” – with the powerful implication that the more we spend on premiums for broad and expansive insurance, the better the health care we’ll have.
Critics may say that the high-tech medical future I sketch is all well and good, but doesn’t detract from our obligation to offer health insurance coverage to the poor and sick who can’t afford even basic care today. And I agree.
But this gets to the heart of how we structure health insurance markets: we should offer insurance coverage that encourages both innovation in health care delivery and protection against ruinously expensive events. Ironically, our current system offers much more tax-subsidized coverage to middle and upper income Americans than the very poor.
For the vast majority of people, the vast majority of time (who only have small or routine health expenses) high monthly premiums just flush money down the drain. (The same could be said for the open-ended tax deduction for employer-provided health insurance, which drives up health care costs and puts downward pressure on wages and other employee compensation.)
Spending less on subsidies for wealthy and middle class Americans, would free up money for better coverage for the very poor. And some states, like Indiana, have already merged coverage for the poor with health savings accounts that promote responsibility and better health – the same framework we want everyone to have. (Thankfully, this experiment will survive Obamacare, at least for another year.)
As consumer oriented health care diagnostics proliferate and become even more inexpensive, savvy patients and consumers will gladly pay the modest penalties to stay out of Obamacare’s mandated insurance schemes, because they’ll save thousands of dollars along the way. And the growing acceptance of high deductible plans will encourage consumers to stop thinking of insurance as the only way to pay for health care, and stop thinking of health as something that just comes from a doctor’s office.
Two trends will eventually converge to kill health care as industrial policy: the first is that we simply can’t pay for it, at the state or federal level, without crippling the rest of the economy. The second is that advances in science and technology will make health care solutions increasingly personalized, throttling one-sized fits all health care schemes.
The demise of health care via industrial policy should be welcomed by the Left—because less spending on health care will mean more money available for other social priorities like education, infrastructure, and basic medical research on diseases where we don’t have any good prevention or treatment tools (like Alzheimer’s). In the long run, improving job, housing, and education prospects in America’s inner cities – making them better places to live and work and raise children – may do more to improve minority health outcomes than spending more money, for instance, on Medicaid coverage.
This doesn’t mean that government won’t still have a role to play. Enough subsidies will still flow to make sure health savings accounts and high-deductible plans are accessible to those who need help buying even basic coverage. Government should also aggressively move to rollback state and federal regulations that protect incumbent providers and hospital monopolies from lower cost innovators. (The University of Chicago economist John Cochrane has a great paper on regulatory roadblocks to health care competition and innovation here.)
And Obamacare doesn’t get everything wrong. It allows for HSAs, and even allows physicians who offer direct primary care services, like Qliance, to offer insurance on state-health insurance exchanges, with catastrophic policies wrapped around as a backstop. That’s the right model, even if Obamacare includes them only as an afterthought (and blunts additional incentives for insurance innovation through burdensome regulations like the Medical Loss Ratio.) There’s also plenty of room to attack anti-competitive federal and state health care regulations (like provider licensing) without dismantling Obamacare first.
Obamacare’s worst feature is that it locks in mid-century ideas of what medicine and health insurance should be. Ironically, America moved on a long time ago and continues to move forward, even if we still pay for things the same way we did in 1965.
Eventually, our laws (including Obamacare) will have to catch up with our new medical reality—more diverse, more complex, and yes, more consumer-focused than ever before.
INVESTORS NOTE: Some of the biggest insurers offering HSAs, who stand to benefit from consumer-driven health care include United Health (NYSE:UNH); Aetna (NYSE:AET); and Wellpoint (NYSE:WLP). Hardware manufacturers like Apple (NASDAQ:AAPL), and more recently Samsung (KSE:005930.KS), may see a strong upside from the wearable diagnostics market. Meanwhile, Nike (NASDAQ:NKE) and FitBit (which is privately owned but recently received a $43M investment) already have a strong stake in this sphere.
You be the judge…
Related:
Rate Shock: In California, Obamacare To Increase Individual Health Insurance Premiums By 64-146%
Yet Another White House Obamacare Delay: Out-Of-Pocket Caps Waived Until 2015
Labor Unions: Obamacare Will 'Shatter' Our Health Benefits, Cause 'Nightmare Scenarios'
Not Qualified For Obamacare's Subsidies? Just Lie -- Govt. To Use 'Honor System' Without Verifying Your Eligibility
Democrats' New Argument: It's A Good Thing That Obamacare Doubles Individual Health Insurance Premiums
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