Discussing Healthcare's Variable and Evolving Paths
The recent election has had a reeling effect on most Americans. There
is a prevailing sense of uncertainty about many important matters that
are vital to this country’s future. However, healthcare, which currently
represents approximately 17% of GDP looms large in the uncertainty
column.
Irrespective of anyone’s particular view as to the advantages or
disadvantages of Obama Care, or whether the plan initiated by President
Obama adequately, substantially, or even substantively addresses the
underlying healthcare issues, it is most certain that healthcare cannot
be steered like a sports car, but maybe and hopefully it can be
navigated like a cruise ship. Even if change can be effected, it is
reasonable to assume that even if there were quick fixes, it most
certainly would have to be phased in over time to allow the economy,
marketplace and government to efficiently implement and absorb the
changes. What I’m trying to say is that any hope or promise of somehow
pulling a rabbit out of a hat is unrealistic, irrespective of the
ultimate plan and corresponding changes, particularly, given the time
needed to adjust for and to the unintended consequences of the seismic
changes that have been promised. Simply stated, to those who believe
that healthcare can be transformed overnight – please be ready to
readjust your sights.
One challenge that I see in the future is that it is easy to
promise lower cost and higher quality healthcare, however, in a sense
the quality and cost of healthcare pull in opposite directions unless
there is a new paradigm – a paradigm that has not yet been articulated.
If you add quality, it raises the cost, and if you lower the cost of
insurance you have less money to pay for whatever benefits you are
offering. To further complicate matters, President-elect Trump said that
he intends to leave coverage for pre-existing conditions. Aside from
the actual cost of covering those situations, the ability for adverse
selection looms large. Essentially, adverse selection means that the
people who are most likely to buy the insurance are the people who need
it the most. Let’s face it, insurance, by its very nature is a
redistribution of risk. If you cannot distribute the risk between those
who are less likely to need medical care and those who are more likely
to need medical care the general principles of insurance become
inapplicable.
Another issue is the apparent failure to distinguish between the
cost of healthcare and the cost of healthcare insurance. I think it is
best understood by way of example in which someone goes to lease a car.
The marketplace can in an effort to lower the cost of an auto lease
focus on lowering monthly lease rates by squeezing markups charged by
the dealer, negotiating lower interest rates, or have subsidized
interest rates promoted by the automaker , but ultimately one gets to
the point where if you don’t lower the actual underlying cost of the car
you can’t lower the monthly or overall cost of the lease. Similarly,
with healthcare, you can squeeze the doctors in terms of their
reimbursement, you can squeeze the hospital in terms of their margins,
but you reach a certain point (a point that we may have already reached)
in which you cannot achieve any material efficiencies unless you lower
the underlying cost of healthcare. There seems to be some mental block
between understanding that increased insurance premiums reflect
increased cost of providing medicine and the increased cost of
underlying medical care.
Of course, when we get to this point in the conversation the big
target is Pharma. The general argument is a call to arms to get those
high-priced drugs out of the stream of commerce. However, the insurance
companies seemingly have already negotiated down the cost of these
drugs, and many of these drugs actually save lives. Even if Medicare
started negotiating prices, it would be a small step in the right
direction which carries its own potential consequences. But, do we
really want to suppress innovation in healthcare? A very small
percentage of potential drugs make it to or through clinical trials, and
then a very small percentage make it through the lengthy and torturous
FDA approval process. If the few winners do not earn enough money to pay
for the other laggards (those drugs that either don’t make it to the
finish line or will only treat a few people) big Pharma may cut R&D
budgets, which ultimately will impede our progress. The bottom line is
that ultimately it will lead to debilitated health or loss of life. This
is a decision that we will have to make as a society. The issue of the
propriety or ability of the government to dictate pricing to private
industry is beyond the scope of this article.
Lower cost higher quality healthcare is a great tagline. However, I think it is easier said than done.
As a final note, it pains me to see American healthcare in a state
of suspended animation. As just one example, I recently saw a flyer for a
very large convention from the American Bar Association for its Health
Law practitioners which is scheduled for the beginning of December. I am
sure that in the months leading up to this convention there were
numerous and highly detailed discussions relating to prevailing
regulations, future trends, emerging strategies and various other very
important topics. I can only wonder what they will be discussing as they
look at their notes and PowerPoint slides for the scheduled
presentations, all the while twiddling their thumbs and trying to figure
out whether (or how) to keep on saying that we will have to see how
much of the presentation will be around in six months, whether the
stroke of a pen will make the presentation wholly irrelevant, or that
thanks to the new administration they won’t have to wait a year for
another health law convention.
What do you think?
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About Mendel Zilberberg: An attorney, visionary and entrepreneur admitted to practice in New York, New Jersey and Florida who has represented and counseled clients with nationwide interests in many areas of the healthcare arena.
MZ blog : www.stateofthought.com
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