For this week's formal assignment I decided to do an A3 Report as if my elevator pitch were rolled out to a single company. My elevator pitch was for a company idea called "Invigorate Health Strategy" and below is the essential framework that would be applied to a client company faced with progressively increasing healthcare costs. The perceived problem/challenge is the healthcare costs and deteriorating wellness associated with the current healthcare system. The proposed solution is to switch paradigms away from "repairing the sick" to "keeping the healthy people healthy". Given that the vast majority of people are healthy from birth, that most chronic (and costly) conditions are preventable, and that it costs far less to prevent a condition than to treat it, this radically different approach should have tremendous ROI and much better outcomes in terms of quality of life and productivity. I do not have the nifty graphics from the MIT Sloan article, but the objective is similar.
Essentially the objective of this proposed framework is to restructure health and wellness strategies around keeping healthy people healthy instead of treating the sick as cheaply as possible. My strategy was heavily inspired by Dr. Dee Eddington of the University of Michigan and his research on public health, health strategy, and healthcare cost management. This strategy was adapted from his book "Zero Percent Trend" and most the credit behind framing the problem and seeing the path towards the solution belongs to him. To say his work has been inspirational for me in my capacity as a healthcare and clinical program analyst would be a serious understatement. The aforementioned book "Zero Percent Trend" has shown me the possibilities and opportunities within the healthcare industry and gave me a huge boost to motivation and enthusiasm to try to make a difference, in all honesty it may have helped me find my true calling/vocation.
This is very interesting Dave and a good example of the A3 report. It is an eye opener and people do not understand how much of the US spend is accounted for Health Care. It is an epidemic at this point.
ReplyDeleteDo you feel there is a need for government regulation/taxation in order to address some of the influences driving this epidemic?
I have written extensively on what I think would be some good first steps to try to stem the tide, but to be brief, I am a very strong advocate for prohibitively high taxation on refined food, simple sugar, and tobacco. These taxes would make the costs of the food/junk food more reflective of their societal costs. It is mind boggling that a pound of potato chips is cheaper than a pound of broccoli.
DeleteDenmark recently imposed a tax on fat, which is one approach, but unfortunately is based on old nutrition science. Recent research has shown that carbohydrates, especially refined carbohydrates that lack micronutrients or fiber (e.g. white bread), to be a root cause for obesity, elevated triglycerides, diabetes, hypertension, etc. Food science (not nutrition) has figured out ways to provide massive amounts of calories at a low cost to consumers, but these calories lack nutritional value.
As a result, people get to eat lots of cheap, non-nutritious food and accumulate health problems, but the cost of the health problems are spread throughout the system via taxes, higher insurance premiums, and so on. Using taxes on the bad behaviors that ultimately lead to the health problems should help control the cost for people who do not accumulate poor health as well as shift the burden of bad decisions onto those who make the bad decisions.
I could write a ton about why healthcare is a mess and how I think it could be fixed but the above is, in a nut shell, the answer to your question regarding how I feel about using taxes to draw out the desired behavior.
This is a well-crafted 3A report; I can't help to wonder if there are any free-market solutions where health care costs may be reduced? I receive my health care through my employer; however I visit my doctor less than I visit my dentist for a given year. Would there be financial incentives toward reducing risk factors for the individual, currently my health insurance premiums are rated the same as if I was a 50 year old obese diabetic.
ReplyDeleteYou have to consider that you are getting a group rate, so everyone in your firm gets the same basic premium price, the only modifiers are, for the most part, going to be # of people enrolled.
DeleteThe incentives to improving health behaviors is typically through the wallet. For example, my employer charges an additional $600 in health insurance premium as a penalty for people who do not take a health risk assessment and get a biometric screening. There are also outcomes based incentives where you give people cash for lowering their BMI or keeping it healthy.
As for a really powerful free market mechanism to touch healthcare, high deductible plans aka HSA plans aka consumer driven health plans tend to be a very powerful tool to make people price sensitive for medical care. These plans make medical insurance more like auto and home insurance in that it is designed to avert financial annihilation in the event of a catastrophe. Unfortunately these are kind of an all or nothing thing because you need a lot of people to be price sensitive for price to do its thing. if 1% of the population is on HSA and 99% have old-school indemnity plans (crazy hypothetical) then the 1% on the HSA model are going to get hosed.
I wonder what this A3 Report would look like if Obama had completed it! Very interesting perspective. Taking a page out of Peter's blog post, what would you consider to be the major causes of the healthcare issues this country faces today?
ReplyDeleteIn a nut shell the two biggest causes are:
Delete1.) A lack of stewardship for our health - people are either ignorant or willfully apathetic towards their health until something goes wrong, but by then it's probably too late. this covers lack of exercise, poor diet, lack of preventive care, and any other thing action you can think of that allows someone to improve their health.
2.) Entitlement complex - This is being called entitlement complex for lack of a better term, but the irrational belief that health insurance should cover everything at little to no cost is a huge driver of cost. The analogy I like to use is imagine if auto insurance covered gas, tires, oil changes, window washer fluid, etc on top of liability and collision. This is what people do with healthcare. This is part of why a trip to the ER takes 4+ hours. This is why premiums and medical costs go up at 2-4x inflation/CPI. People are so price insensitive with healthcare that there is no market to help force efficiencies to emerge in consumption or delivery, this leads to a ton of waste, but that waste has a cost.
Those are two of the biggest drivers for escalating cost that I see. I saw a lengthy and thought provoking presentation on how high cost claimants (extremely ill people) are the real driver, but to me, since those conditions can be prevented with lifestyle changes, the real root cause driver is the lack of stewardship. That's one example but I think it makes my point about stewardship, or the lack thereof, as being a major problem.
I would have assumed that the rising mean age of the Baby boomer demographic with complex age related medical conditions was the largest culprit to rising medical costs.
DeleteI will say that the two points you mentioned David are potentially the most common and correctable issues facing the health care industry.
Do you think that Health Care costs could be lowered potentially by using technology to diagnose ailments rather than seeing a doctor every time (for example: sick children, ear infections, flu) and administer a treatment plan based on that diagnosis. We are seeing today the application of recognition software to identify: criminal or suspicious behavior. A software application that performs most Primary Care functions should not be that far of a stretch under this paradigm.
Do yo think that Health Care costs could be lowered potentially by using technology to diagnose ailments rather than seeing a doctor everytime (for example: sick children, ear infections, flu) and administer a treatment plan based on that diagnosis. We are seeing today the application of recognition software to identify: terrorists, criminal or sucpicious behavior. A software application that performs most Primary Care functions should not be that far of a strech under that paridime.
Luke, you touch on some interesting points. I will address them in order:
Delete1.) The baby boomers aging is definitely a contributor to healthcare cost but you have to take a step back and look at the entire spectrum of the USA population. While older people cost more, and some medical professionals argue that we spend way too much on end of life care, the reason they cost so much is due to complex conditions. Cancer is linked to extended lifespans since you have far more cell generations and therefore more opportunities for the cancer mutation to occur, but it is also linked to myriad causes and precursors but age is the biggest driver. Aside from cancer, which is very expensive, a lot of high cost conditions are the result of years of neglect. A heart attack, renal failure, stroke, etc do not normally happen to healthy people with healthy lifestyles, rather they are critical events related to chronic conditions that are by and large preventable. Obesity, diabetes, hypertension, and coronary artery disease are expensive, and they lead to a pervasive upwards "creep" in medical costs, but it is a little more insidious because the creep occurs for several years before the critical incident.
2.) From an economics perspective, I still think that the root cause of cost escalation is due to pricing mechanisms being completely broken or removed from healthcare due to the way health insurance works in the USA. This goes hand in hand with the lack of stewardship from my previous comment. People do not care about their health and they do not care how much it costs to fix it. If they cared more about how much it cost to fix it they might take it more seriously and view it as an asset. Think of your car, if you had car repair insurance that made you cost insensitive to repairs you would probably neglect your car until it stopped working, then get it fixed because you do not care how much it costs or have any incentive to avoid the repairs. The goal of this is not to make people who are sick/hurt avoid care, the goal is to make people stop and say "oh man if I continue to live like this I may be staring down a huge medical bill in a few years when I have a heart attack". The old adage "an ounce of prevention is worth a pound of cure" almost perfectly describes healthcare.
3.) There's two effective means to reduce cost that are related to what your second point. First, some medical systems/markets have technological assistance to facilitate treatment and diagnosis. I believe Kaiser Permanente has the capability of, for example, sending your PCP a photo of a rash and getting a diagnosis and treatment plan without needing a visit. Second, nurse practitioners are becoming more and more vital to the healthcare field as first line medical care. A nurse practitioner is essentially a doctor without the ability to perform surgery (I'm taking some liberties here but the scope of what they can treat is actually quite broad) but costs far less. CVS' Minute Clinic service is an excellent example of an extremely transparent, convenient, and affordable way to get outpatient care without having to go to an emergency room or urgent care center.
Please do not hesitate to reply with more questions or observations. Thank you for the comments.
The sad thing is a lot of people have limited choices in their health when you consider the volume of processed foods and the amount of hours we are expected to work and commute in a given day to maintain a certain standard of living. Raising a family will compound this time crunch until it reaches zero. Not to sound negative, the problems with the health care system come from a lack of personal accountability. These are symptoms of a larger issue whereby the family unit is getting squeezed out of their current standard of living. This is world-wide problem, not just here in the US.
DeleteI agree, especially regarding personal accountability. Something drastic may be necessary soon if we do not reevaluate the system and whether or not it is beneficial to the that exist within it.
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