Sixty-six million years ago an asteroid hit earth, bringing about the extinction of the dinosaurs, and wiping out roughly seventy-five percent of life on the planet. Don’t look now but there’s an asteroid approaching in the rearview mirror of the U.S. health care system. We need to step back from the political gridlock and pay attention …
Trump’s proposed 2019 budget is based on the Graham-Cassidy bill that failed last fall and would reduce federal Medicaid spending by $1.4 trillion over the next 10 years. This represents a massive cost shift to states which, in turn, will reduce enrollment, disenfranchising millions of low income Americans from timely and affordable access to health care. The backlash to this effort is a growing momentum toward single payer proposals like Senator Sander’s “Medicare for All” bill. There is much to recommend this approach from the standpoint of access and reduced administrative cost—but without fundamentally changing the health care business model, a single payer approach is just another way to pay for the current system, which will no more solve the challenges facing the U.S. health care system than will simply defunding it.
This tension between defunding the ACA and adopting a single payer system will simply perpetuate the political stalemate on health care reform that has paralyzed us for decades. This stalemate is due, in large part, to the fact that neither “side” assumes any change in the current health care business model: we either pay for it or we don’t. Framing the debate in this way, narrows the solution space to zero-sum choice between cost and access. The Republicans want to dramatically cut health care spending, regardless of the human consequences; while Democrats want to dramatically expand access, regardless of the budgetary consequences.
The challenge lies in finding a third way; reframing the debate from a binary choice between funding or defunding the current delivery model to a serious effort to redesign the health care/business model itself in a way that allows us to expand access and reduce cost while maintaining quality and health outcomes. That is essentially what Oregon sought to do when it created a new care model—the Coordinated Care Organization (CCO)—in 2012. While far from perfect, this new model embraces the key elements I believe are necessary to resolve the challenges facing the U.S. health care system: expanded access for a defined-benefit, the delivery system assuming financial risk and accountability for quality and outcomes, and a global budget indexed to a sustainable rate of growth.
Offering alternative care models that incorporate these elements is essential, not only to maintain the ACA Medicaid expansion, but just as importantly, to reframe the national debate from a choice between cost and access to a focus on designing a new business model that allows us to expand access and control cost. Absent timely and strong leadership to reframe the debate in this way, the health care system is rushing headlong toward a major disruption, which the industry will not be able to control and is not nimble enough to respond to.
And yet, many in the health sector continue to respond like dinosaurs, wandering unchanged across an increasingly bleak landscape even as the Asteroid draws near. While there are some efforts to get ahead of the coming disruption, many players are simply trying to become bigger dinosaurs through mergers and acquisitions, which is not a prudent strategy for survival in an era of exponential change.
The return of trillion-dollar budget deficits, as projected by the Congressional Budget Office, will further swell our $20 trillion national debt, even as Medicare enrollment grows from 44 million to 67 million over the next decade. Pressure on congress to reduce the cost of federal health care programs will relentlessly increase as the intersection of an aging population, a hyper inflationary medical system and medical technology swells the ranks of the elderly, increases the incidence of chronic disease and provides ever-more expensive ways to treat them. Unless the debate has been refocused on redesigning the health care business model, the only political option on the table will be to defund the existing delivery system—leading to a huge cost shift, a dramatic loss of access and the unraveling of an industry that accounts for eighteen percent of our economy and is the nation’s largest employer.
The other possibility—which may well happen before we reach a budget crisis-driven scenario—will be the introduction of new business models that disrupt the traditional health care market in much the same way as Amazon has disrupted the retail industry; Air B&B has disrupted the hotel industry; and Uber has disrupted the taxi industry. And our complex, inefficient, and extremely expensive health sector is ripe for disruption. With an opaque pricing structure, it is difficult for consumers to navigate and even more difficult for them to compare cost and quality. Furthermore, unlike most industries—where digitalization and big data have lowered cost, improved quality and made products and services more accessible to more people—technology in health care has gone in the opposite direction: increasing cost and reducing access. A sort of “Moore’s law” in reverse.
Earlier this year, Amazon, Berkshire Hathaway and JPMorgan Chase announced that they were planning to set up a new company to offer transparent, lower cost health care to their U.S. employees—a company “that is free from profit-making incentives and constraints.” Comcast and other large employers are following suit; and this year alone U.S. technology companies have put nearly $3 billion of equity financing into health care startups. It is important that we get ahead of this disruption—whether it comes from a budget/debt crisis or from the market—to ensure that it does not lead to an even more fragmented and inequitable system than the one we have today.
We must recognize that many, if not most of these new disruptive business models will only be looking at parts of the system—at ways to get a larger share of the $3 trillion we currently spend each year on health care. Few, if any, will be taking a holistic view of the entire system; and none will be competing for that significant and growing segment of our population that is uninsured and cannot afford to pay—the same vulnerable population that will be impacted by defunding the Medicaid expansion. The asteroid will undoubtedly provide sufficient energy for change. The challenge is to figure out how to shape and guide that change in a way that leads to a better health care system for the American people. That is the conversation we need to jump start.
