By Kenneth Croen, MD
Americans are desperate for realistic healthcare solutions. We have the world’s most expensive healthcare system, and over 30 million citizens have no coverage. These facts largely explain America’s very low ranking on healthcare performance measures among peer nations. Healthcare costs overwhelm family budgets, and strain the resources of businesses and municipalities. Our hyper-polarized government has been unable to come up with acceptable solutions to achieve two necessary goals: universal coverage and lower costs. Providing quality healthcare for all citizens at an affordable price is essential, and must become a bipartisan effort.
Some of the approaches to fix our healthcare system would make a bad situation much worse. Since the 2016 election, Donald Trump and the GOP have been trying to abolish Obamacare. Were this to happen, millions more would lose their insurance coverage, and people with pre-existing conditions would find themselves uninsurable, or paying extraordinary premiums to get coverage.
At the opposite extreme, some Democratic candidates and voters are lining up to support Medicare for All, a one step solution to achieve both universal coverage and lower costs. This model abolishes coverage from private insurance companies for about 180 million individuals, many of whom are quite satisfied with their current health plan. In its place will be a government run single payer system that covers all citizens at lower cost by reducing overhead and paying significantly lower fees to providers. These lower fees will jeopardize the survival of many healthcare institutions, reducing access to care, and leading to millions of lost healthcare jobs. It also places full control of prices, pharmaceutical formularies, and access to services in the hands of elected officials who have demonstrated disparate views on such basic topics as the right of US citizens to have access to healthcare.
Most of the remaining Democratic presidential candidates advocate for a public option to achieve universal coverage. Medicare X is one such proposal that offers coverage to all Americans but leaves the private insurance sector intact. Nevertheless, public options are perceived as a threat by the health insurance industry because they offer a less expensive alternative. Connecticut lawmakers had to abandon their plan for a public option under pressure from private payers. Washington state recently managed to pass a public option but, due to pressure from providers and payers, had to make it much more expensive than Medicare and closer to the cost of private insurance. This limits the number of uninsured that will be able to afford coverage, and markedly reduces cost savings that might have accrued to the state. In short, the essential goal of universal coverage will be met with significant resistance and, therefore, will likely be more costly than current public plans.
A Free Market Strategy
As difficult as achieving universal coverage will be, the challenge of reducing healthcare costs is far more daunting. Instead of relying on government regulation to control costs, a free market strategy that addresses the basic flaws of our current system might have greater appeal. Under the current model: 1) almost no one (patients or providers) knows the costs of healthcare; 2) until deductibles were introduced, nobody cared about the costs of healthcare, and still many with insurance coverage do not; 3) providers have an incentive to maximize billing and get no push back from most patients with insurance coverage; and 4) private payers don’t care if healthcare becomes steadily more expensive since raising premiums and deductibles covers their costs and increases their profits.
An obvious solution starts with making all fees transparent and readily available both before and during an encounter. People need to know that the price paid for an MRI in one location can be $4000, but just $500 a few blocks away. A colonoscopy can be $8000 or $1000 simply depending on location. An emergency room visit can cost thousands of dollars but far less in a primary care or urgent care facility. An insurance company recently reimbursed an emergency room in Florida $36,000 to administer a rabies vaccine which, in a private doctor’s office would have cost $3000. Only insurance companies know the details of fee variation, yet they rarely instruct patients on where to get lower cost care. Information about fees will be much more useful when they are paired with quality measures. Until such information is available, primary care physicians can help direct patients to high quality low cost centers as long as fees are available in real time during a visit.
Even when given the opportunity, most American consumers have made little effort to learn about the price of healthcare services. Six states operate websites that show healthcare prices. New Hampshire has one of the best, showing median prices for 124 different procedures. The impact of this site has been small, however, since only 8% of New Hampshire residents have used it. Healthcare consumers need to have skin in the game before they learn to shop for the best value. To change that dynamic, co-insurance rather than high deductibles would keep consumers engaged on cost at all encounters throughout the year. This is exactly how Medicare was designed – requiring that patients cover 20% of their healthcare expenses. Most Medicare recipients, however, bypass this cost sharing role by purchasing gap coverage or Medicare Advantage plans to shield them from that 20%. If consumers are responsible for a portion of the cost, they will be more attentive to prices. The co-insurance percentage can be means-based and range from 1% to 20%. All such policies should also have an annual out of pocket cap (which can also be means based) so that patients with unusually high expenses can be protected.
To the extent that this free market strategy will lower individual and global healthcare spending, it will also be met with resistance from the healthcare lobby. However, since consumers will be slower to bend the cost curve, it is much less of a threat than a single payer system. It will likely take years for consumers that are both aware and concerned about healthcare costs to learn how to use this information to reverse the upward spiral of healthcare spending. This will also spur a competitive marketplace where price and quality matter – not just size, convenience, and marketing.
Some have argued that exposing prices might backfire, and cause low cost providers to raise their fees. Healthcare fees are not up to the providers. Insurance companies determine fees and walk away from negotiations that don’t meet their needs. Consolidation, however, is a real threat since low fee providers become high fee providers when they join hospitals and large practices. Efforts to encourage competition in the healthcare marketplace will be needed.
The HELP committee of the US Senate held a series of hearings on healthcare costs last summer and submitted a bill with bipartisan support in June, 2019 for the Senate to consider. In addition to focusing on price transparency, their legislation targets surprise medical bills as well as pharmaceutical pricing. These are common sense strategies that will offer significant protection for many healthcare consumers.
Price transparency is already a priority of the current administration. If Democrats adopt this approach as well, it could be the foundation of a bipartisan effort to reduce healthcare costs. Substantial resistance from the healthcare lobby can be expected, but it will have less impact if the initiative is bipartisan.
Most individuals will develop a costly illness during their lifetime. The top 20% of healthcare consumers spend an average of $45,000/person/year, while the top 5% spend an average of $111,000/person/year. Under the current model, most Americans can look forward to using up most of their life savings on healthcare. With each passing year, millions of Americans are hurt by our healthcare system. There is an urgent need for change. Hopefully, the 2020 election cycle will produce meaningful reform.