I usually start my articles with some sort of historical context. In this instance it won’t be about such ancient history.
Several years ago my wife fractured her back. She was taken to one of the largest hospitals in the area where one would expect the care to be top notch. While in the emergency room, among a host of others, she was seen for about ten minutes by two trauma care doctors who asked a few questions, and then left, never to be seen again.
When the bill came we were asked to pay $6500 for trauma care in the ER. That was in addition to everything else and all the other doctors who actually did something. The $6500 was the bill for ten minutes and two specialty physicians asking a few questions.
I’m reasonably certain that more than 99.99% of all patients would have paid that bill. We, however, were lucky. I’d read about this specific practice of billing for services not provided in the Wall Street Journal and for whatever reason it stuck with me.
Dr. Eric David who also happens to be a lawyer as well, wrote, “I’ve served on trauma teams in two of the busiest hospitals in New York City, and I know what a trauma-team activation looks like: doctors, nurses and residents running and yelling, IV lines, monitors. You know one when you see one. Nothing like that happened around my son.”
Nothing like that happened with my wife either. It took us ninety days and a lot of anger, angst and obsessive follow up but in the end that article paid off and the bill was removed. It paid for my Wall Street Journal subscription for the rest of my life!
The Republicans gave a mighty effort to end Obama Care and at the end of the day they failed. President Trump has indicated that he wants to move on with the rest of his agenda. I can certainly understand that although they were counting on the savings from revamping the health care program to aid in the President’s plan for tax reductions.
However, we, the people of the United States, are left with a medical system that is broken. Simply allowing it to break further is not acceptable. Nor is the partisan politics that have gotten us here. Charles Krauthammer, a conservative columnist notes, “a broad national consensus is developing that health care is indeed a right.” He doesn’t agree that should be the case, but he does understand that we are the only major developed nation left that does not provide medical care to all of its citizens regardless of their ability to pay.
In my view, allowing Obama Care to fail will only serve to harm more Americans as well as our reputation with the rest of the world. Before President Trump emerged in his present guise he wrote in his 2000 book ‘The America We Deserve’, “I’m a conservative on most issues but a liberal on this one. We should not hear so many stories of families ruined by healthcare expenses … We must have universal healthcare.”
Interesting stuff and obviously I believe that as well. But, even if you are a free market believer, the facts are that our present healthcare model is both overpriced and underperforming.
That’s material because everyone one of us will face a severe illness in our lifetime. Some folks get lucky and it isn’t until very late in life. Others are not so lucky. But everyone will face some conglomeration of heart disease, stroke, cancer, mental illness, diabetes, HIV or any number of other severe illnesses that are obscenely expensive to pay for. I can’t tell you which card you will draw but as one friend of mine recently said, “Life becomes very hard.”
That’s before even thinking about how to pay for all of the medical services you might need. Cancer alone can cost hundreds of thousands of dollars.
Thus, I believe it is unconscionable to allow our elected officials to place healthcare to the side. I’m not going to pretend that I have all the answers, but what I do know is that any plan that cannot gain a majority of both parties is a plan that will not serve all Americans. No Republican voted for Obama Care and no Democrat voted for the Republican plan. That, in my view, is a demonstration of Congress’s complete abrogation of their responsibility to we the people of the United States as well as a clear demonstration of their subservience to the special interest groups that pay for their election campaigns.
I want to begin by demonstrating that what we have isn’t working. The chart below shows clearly that, as David Ignatius writes in the Washington Post, “Americans don’t realize how bad our system is. Health care costs are far higher in the United States than in other developed countries but our health is worse.”
Since 1980 we went on a medical spending spree that has not, for the most part, delivered corresponding results. We spend roughly a third more than the nearest nation to us, Switzerland, and their citizens, on average, live about four years longer than we do. Australia and Japan get about the same lifespan as Switzerland and their costs are roughly half of ours.
Hence, as a former business executive, what I would like to see President Trump set as his first objective is a reduction in medical costs of 30% over the next five years. That would still leave us spending more than every other developed nation, other than Switzerland, but it would bring our costs down materially benefiting both our citizens and our national debt. It is also the only way we can afford to insure everyone!
That is a tall order and I know some of you would note that many of the countries shown above have socialized medicine, which is true. Thus, as another friend of mine commented you have to consider the tax rates in those countries because they are likely paying much more in taxes than we are and thus it may not be an apple to apple comparison. Finally, it is well known that in a number of those countries you must wait forever for anything but an emergency. These are just a few of the arguments we use to explain away our poor performance.
To be sure, not everything we are doing is wrong. CNBC noted that the, “mortality rate for cancer is among the lowest out of the 13 countries (they looked at) and cancer rates fell faster (in America) between 1995 and 2007 than in other countries.” That’s very good and it speaks well of our research, technology and medical communities. But, as noted by the Commonwealth Fund International Health Policy Survey of 2015, America’s infant mortality rate is the highest among those same 13 countries! We also have the highest percentage of those over 65 with two or more chronic conditions and we are the most obese nation
Therefore, at least in my view, it is very hard to make the case that America is getting this right. According to the Journal of the American Medical Association, “life expectancy is declining in the United States for the first time in nearly twenty years…and the gap in life expectancy between the richest and poorest Americans is fifteen years for men and ten years for women.” As Mr. Ignatius notes, “That’s an appalling trend.”
I’m not here to say that Obama Care is the answer. In fact, insurers represent only one part of the healthcare system problems. Nevertheless, I do believe it was a start and I do believe the Republican plan that failed was a step in the wrong direction. More importantly, it did nothing to correct any of the other issues we have with regard to cost in the rest of our healthcare system. But, those are my politics and beliefs. My real point in this commentary is that we can and must do better. We should be holding both parties of Congress accountable for accomplishing that in a non-partisan manner. Healthcare should not be a partisan political issue.
Thus follows my second prescription for President Trump. He should take a page from the military and establish a non-partisan commission comprised of both political parties, private industry,physicians and citizen groups and give them the power to make changes. We have done a similar thing with regard to base realignments in the military, which was highly politicized, and it is working. The same principle can be used here.
Third, we need to do what any well-run business with a problem does. We need to benchmark our performance against those of others and learn from those who are doing better than us.
In 1995 Taiwan, which is a free market Nation, had 41% of its people lacking health insurance. Writing about this Fareed Zakaria says, “The government decided to canvas the world for the best ideas before instituting a new framework.” Today they have universal coverage and are spending only 7% of GDP on healthcare versus America’s 17 or 18%.
As a case study I want to focus on just one Nation, Switzerland and describe a system that Forbes Magazine, a strong supporter of free markets and capitalism, believes has the best healthcare program of any of the developed Nations. They write, “The performance of Switzerland is even more impressive when you consider how fiscally stable it is. The Swiss system, called Santésuisse, is striking in its differences to ours.”
Keep in mind that the commission I propose would look at many countries and their practices but space here precludes me from doing that. If we actually reduced our expenses by 30% we would reach Switzerland’s level of spending and thus I felt they would serve as a good example for such an approach. I’m not trying to be all encompassing in this review. Rather, I’m just trying to suggest a way forward.
“Despite this apparent stinginess,” Forbes goes on to write, “the Swiss have achieved universal coverage for all its citizens. The Swiss have access to the latest technology, just as Americans do, and with comparably low wait times for appointments and procedures.” Impressively, 99.5% of their citizens have health insurance! Some of you may be thinking that it’s a government run system the leans to the socialist side of things. But I would describe their model as a hybrid system that has the government and private industry working in concert to achieve their Nation’s healthcare goals.
Forbes continues on, “Swiss citizens buy insurance for themselves; there are no employer-sponsored or government-run insurance programs. Hence, insurance prices are transparent to the beneficiary. The government defines the minimum benefit package that qualifies for the mandate. Critically, all packages require beneficiaries to pick up a portion of the costs of their care (deductibles and coinsurance) in order to incentivize their frugality.
The government subsidizes health care for the poor on a graduated basis, with the goal of preventing individuals from spending more than 10 percent of their income on insurance. But, because people are still on the hook for a significant component of the costs, they often opt for cheaper packages; in 2003, 42% of Swiss citizens chose high-deductible plans (i.e., plans with significant cost-sharing features). Those who wish to acquire supplemental coverage are free to do so on their own.
Because they can choose between plans from nearly 100 different private insurance companies, insurers must compete on price and service, helping to curb health care inflation. Most beneficiaries have complete freedom to choose their doctor, and appointment waiting times are almost as low as those in the U.S., the world leader.”
Recent data from Commonwealth supports that. With 17% of the Swiss population over 65, where the highest percentage of medical costs occur, versus the U.S. with 14% they still outperform us on cost. Those waiting to see a specialist more than two months in the U.S. total 6% versus 3% in Switzerland. They have more hospital beds than we do and more doctors. Fifty four percent of their citizens believe their health care system works well versus only 25% in the U.S. and only 7% of the Swiss believe that their system must be rebuilt from the ground up versus 27% in the U.S.
To be sure, their system isn’t perfect. Their doctors make less than physicians do in the United States. General practitioners earn about a third less and specialists about half as much. But the most expensive of their medical schools charge $8000 US dollars a year for tuition, room and board. My daughter’s in state medical degree at UVA will cost her parents about eight times more than that. She is a lucky one because ninety percent of medical students in the U.S. finance ninety percent of the cost of their education.
Faced with that kind of debt load you can bet they are going to want to maximize their income. You would too! They are not alone either. For profit hospitals, medical equipment firms, insurance companies and the pharmaceutical industry all want to maximize their profits. But all of that profit and spending isn’t working. Here’s another snapshot of our performance against an array of developed nations. We rank dead last.
But, the chart also shows that the Swiss are not the model for everything. In fact, no one is. There are no perfect models. In Britain, which is a socialist model, the quality of care is the best in the world but their physicians working conditions are not. The point of looking at multiple Nations is to take a little from each of those who outperform us in a given area and meld it into our system. That’s how well run companies go about improving.
If we are going to have, what I refer to as a real right to life, which means more than simply being born, then we must move to my fourth prescription which is that it is well past time to recognize that we must have universal healthcare coverage for all of our citizens and the only way we can do that is to bend the cost line down.
We have simply lost touch with the rest of the world. Using the Swiss model as a point of comparison the average cost for bypass surgery is less than half ($75,000 compared to $ 36,000) of that in the United States. An MRI in America is nearly ten times the cost of one in Switzerland and a CT scan is double. This is 2013 data as reported by the International Federation of Health Plans. Healthcare in the aggregate represents 17 to 18% of GDP in America and only 11% of GDP in Switzerland.
What has happened, in my opinion, is that we have become caught up in focusing, for the most part on the insurance system i.e. Obama Care but that is a mistake. Certainly we need to fix our insurance issues because they are not operating efficiently. Free market insurance companies average 17% overhead expense versus Medicare’s government run program which operates at 2%. There’s plenty of room there for improvement. Interestingly for me as a former credit union guy, the Swiss require their health insurance carriers to be not for profit. Frankly, I think that is brilliant because credit union’s by and large provide a better deal to consumers than for profit banks and my guess is the same holds true in this vain as well.
But, we do have to think about this carefully. The National Center for Policy Analysis in the U.S. notes, “Despite competition, choice, private ownership and portability, the Swiss system is still very bureaucratic, perhaps as much or more so than our own. It has mandated benefits, price controls on providers and other regulations that make it hard for entrepreneurs.”
They also point out that, “Although long term insurance relationships are the norm, the Swiss have been moving in the direction of managed competition which encourages people to switch health plans….Under managed competition, everyone’s incentives are perverse.”
Of course I don’t think you can get much more perverse than charging $600 for two Epipens that cost less than $20. One would think that health care would be more efficient as a free market enterprise. After all, that’s true in most instances. But as far back as 1963, “economist Kenneth Arrow, who later won a Nobel Prize, offered an explanation as to why,” this does not work well in healthcare. “He argued that there was a huge mismatch of power and information between the buyer and seller.” You can choose not to buy a car easily enough but, “if a doctor insists that you need a medication or a procedure, you are far less likely to reject the advice.”
That is how for profit hospitals, doctors, medical device firms, pharmacuticals and insurers have gamed the system and I choose those words deliberately. We have made health care a for profit capitalist enterprise. That’s fine if you have money. You can afford to insure yourself well enough to cover the cost of having cancer. But, for most Americans those costs are becoming prohibitive.
I’m not going to tell you the following chart will make you happy but in Ohio hospitals are required to be transparent in their pricing. So, the Cleveland Clinic, whose CEO is noted as a visionary, clearly lists the pricing for their services (I’m only showing one area but they do list everything you could imagine):
I can assure you that the major hospital my wife went to does no such thing. Indeed, when I called to complain the customer service representative said, “well, that’s the code the doctors put down so that’s what we bill you.” A recent study by the U.S. Academy of Medicine, “estimates that 30% of (the $3.4 trillion spent for U.S. healthcare) is wasted on unnecessary services, high prices, inefficient delivery, excess administration and fraud.”
Which brings me to my last piece of prescriptive advice for the President. Don’t just focus on insurance. Use this commission to begin revamping every sector of the healthcare delivery system. Require a plan that is clear in its goals and objectives with defined deliverables and expected completion dates. Demonstrate to all Americans that you care and that you mean business.
Doctor Eric David, who doesn’t agree with my views, nevertheless, wrote my closing when he said in the Wall Street Journal on September 2, 2014, “I believe in free-market solutions almost as strongly as I believe in abiding scientific principles such as relativity. I think the quality of care in the U.S., if you have the right insurance, is the finest in the world. As a biotech executive, I think the U.S. is responsible for driving more global medical innovation than any other nation.
But our actual delivery system is just a mess. The new Affordable Care Act is just “a complex and somewhat ugly patch on a complex and somewhat ugly system,” as Princeton economist Uwe Reinhardt put it. Nothing will change until we shift incentives away from overuse and upcoding, but both Democrats and Republicans have spent more of their time attempting to scare their constituencies than they have deeply examining incentives and proposing any solutions—free market or otherwise.”
Health care should not be a political football, Mr. President, and we the people of the United States of America should not have to be embarrassed by our system’s performance. You ran a very large company. You know how to do this! As former President George Bush once said, “Let’s roll!”