Many factors contribute to the low — and, I would argue, somewhat misleading — ranking of the U.S. health care system vis-à-vis other wealthy nations, including a hugely heterogeneous population, an emphasis on advanced and sophisticated treatments for the most serious and complex diseases, and conditions, and a misguided focus on treating illness instead of promoting health. In fact, the U.S. actually has a “sick care” system, not a “health care” system.
I say that the low ranking is misleading because the U.S. health care system provides the world’s most advanced and sophisticated treatments for serious diseases and conditions. I would suggest that the advances and innovations in medicine and health care in this country are the results of a free-market system that rewards creativity and entrepreneurial enterprise. In the other wealthy countries that score higher than the U.S., there is little reward for industrious and innovative inventors and creators.
Experts and the conventional wisdom bemoan the complexity of the challenges facing our health care system; the multifaceted and nuanced problems that plague it; and the immense, perhaps impossible task of fixing it. I contend that conventional wisdom and expert opinions are nonsense. The real problem with the U.S. health care system is quite simple, readily understood, and easily fixed.
3 Factors of Low Ranking Health Care
The U.S. metrics that fare so poorly against other high-income nations are the result of three significant factors, all related to misaligned incentives:
1. The failure of employers to manage their health care supply chain
America’s employers provide insurance to half of Americans, which means that their employees purchase a large share of the health care in this country. Yet the C-Suite executives and business owners in these companies treat their health care spend differently than every other part of their business. While ruthlessly managing the sourcing of every other purchase the company makes, these business leaders ignore the quality and cost of health care, usually their second-highest operating expense. By not subjecting health care to market discipline, to standard supply chain management, employers allow health care providers — physicians, hospitals, surgery centers, and drug companies — to overcharge, gouge, and profiteer, resulting in annual increases in health care costs that drive up the cost of insurance every year. Business leaders ignore their health care spending because they make the mistake of trusting their benefits broker and health insurance company to manage the quality and cost of health care.
2. The misaligned incentives of health care’s middlemen
Health care’s middlemen, the insurance companies and insurance brokers, come between the employer that sponsors a health care plan and the health care providers who treat their patients. Both of these middlemen benefit financially when the increasing cost of health care drives up health insurance premiums. Higher premiums increase the insurance company’s profit and increase the broker’s commission compensation because the commission is a percentage of the premium. With these misaligned incentives, who can expect either the insurance company or the broker to work to lower the cost of health care, which would reduce income for both? With the employers delegating control over their health care costs to these two middlemen, it becomes clear that no one is managing the quality and cost of the employees’ health care. With no market discipline and no accountability, it’s easy to understand why health care costs — and insurance premiums — have increased every year since 1999.
3. The fee-for-service model in health care
In another example of misaligned incentives, doctors and hospitals are paid for each service they provide, which provides a financial incentive for over-testing, over-treatment, and a focus on treating illness as opposed to promoting health. This prioritizes patient and treatment volume, with no financial incentive to keep patients healthy. Compounding the problem, primary care physicians (PCP) — medicine’s front line of defense in the battle to keep patients healthy — are paid such low fees by insurance companies that they must see a large volume of patients each day just to make a living. Required to rush through each patient examination, the typical PCP doesn’t have the time to find out what really is going on with the patient, what might be the actual cause of the patient’s illness or condition. The financial demands of the fee-for-service model prevent the primary care doctor from providing the essential primary care that patients need.
5 Things to Improve the US Healthcare System
1 . Disintermediation of the Insurance Company
For the employer-sponsored group health plans that insure almost 50 percent of Americans (about 19 percent of Americans have private individual health insurance and 34.1 percent are covered by Medicare or Medicaid), disintermediation of the insurance companies, or carriers, whenever possible, is essential due to structurally misaligned financial incentives. Thanks to a provision in the Affordable Care Act that limits a carrier’s gross profit margin to 15 percent, carrier profits can increase only when revenues increase. And carrier revenues increase when health care costs go up. So, expecting a health insurance carrier to work to lower health care costs would be asking it to work against its own financial interests, nothing a successful company does for long. With no check on price inflation, health care costs have risen 261 percent since 1999, driving health insurance premiums for single employee coverage up by 293 percent. Meanwhile, carrier stock value growth 1999 through 2019 has been nothing short of spectacular, with Cigna experiencing the lowest growth rate at just 849 percent and UnitedHealthcare setting the pace with a whopping 4,729 percent growth.
2. Supply Chain Management
Just as employers manage the quality and cost of every other purchase made by the company, they must begin to apply these supply chain management techniques to the health care purchased by their employees. Not only is it the fiduciary responsibility of the C-Suite executives or the business owner, it’s the right thing to do for their employees. Applying supply chain management to health care purchases can reduce the cost of that health care by 20–80 percent, depending on the type of care and provider.
When a company needs new computers for its employees, does the CEO give every employee a corporate credit card with instructions to go buy themselves a new computer? The very idea is ludicrous. The employees likely wouldn’t know how much computer their work requires, the best brands for quality and price, the best sellers, and they couldn’t leverage a volume purchase to negotiate the best price. But every year, employers hand any employee who wants one the riskiest corporate credit card in America — the insurance card — with permission to buy any health care they can, from any doctor, at any facility, at any time, for whatever price the providers decide to charge…and the employer pays the bill without recourse or complaint.
3. Cost & Quality Transparency
Health care is the only consumer good that Americans purchase and use without knowing the quality or the price until the doctor or hospital sends the bill weeks later. And the quality of the care provided isn’t known until the patient gets better…or doesn’t. What consumer would purchase, let’s say, an automobile without knowing the price? And what company would purchase critical parts for its manufactured products without knowing the quality of those parts? Because of the mutual self-interest of the insurance companies and health care providers, individual consumers and employers are in the dark on price and quality until after the fact, when it’s too late. Our status quo U.S. health care system forces employees to play Russian Roulette, with their health and their company’s money. Only when both price and quality information is available can consumers determine the high-value — high quality at a reasonable price — health care providers.
Maureen Pacheco of West Palm Beach, FL, retained Dr. Ramon Vazquez for a spinal surgery in 2018. After his initial incisions, Dr. Vazquez noticed a large pelvic tumor, which he removed. Following the surgery, Ms. Pacheco discovered that, in addition to some fused vertebrae, she had one kidney, since the “pelvic tumor” Dr. Vazquez removed was actually a pelvic kidney, which is one that never migrated to its normal spot in the abdomen. While Dr. Vazquez’s academic and social reviews were exemplary, a leading health care quality rating service showed Dr. Vazquez with a score of “10 (inferior)” out of 100 possible points. Yet Ms. Pacheco wasn’t made aware of Dr. Vazquez’s quality score by her insurance company, which listed him in its Preferred Provider listing with no warning or notice of his low quality rating. If fact, no insurance company lists any quality information on any of the physicians or hospitals in their network.
4. Direct Primary Care (DPC)
Physicians increasingly are abandoning — partially or fully — the insurance-based fee-for-service model in favor of a subscription model in which patients, or their employer, pay a monthly membership fee. Members of the physician’s practice generally have unlimited access to the doctor and lab & imaging tests are usually included under the fee. Most important, DPC doctors can spend 30–45 minutes or more with each patient to learn about his or her personal situation, home and work life, and other factors that might contribute to health problems. Only by putting primary care doctors back into a primary role with the patient can the U.S. health care system begin truly to heal.
When I was a speaker at the DPC Summit in Washington, D.C. a couple of years ago, I asked several doctors in attendance why their interest in DPC. Each separately gave me the same story: “With fee-for-service, I have 5–7 minutes with each patient, which gives me just enough time either to write a prescription or write a referral to a specialist. That’s not primary care.”
5. Value-Based Care
The fee-for-service model in health care perversely incentivizes physicians. Replacing the fee-for-service model based solely on volume, value-based care holds health care providers accountable for outcomes, rewarding providers based on the quality, rather than the quantity of care they provide patients. The U.S. Centers for Medicare and Medicaid (CMS) has recognized the importance of moving away from fee-for-service and has instituted several Medicare programs that incorporate value-based care. Until value-based care is the norm in the U.S., waste, fraud, and abuse will continue to lower the quality of care delivered and increase the cost of that care.
A surgeon who now is working in a value-based care model told me he was thrilled to be paid for 1) doing a great job with a patient’s surgery and 2) keeping that patient from returning to the hospital due to complications from the surgery. Previously, despite his higher quality outcomes, he was paid the same as less competent surgeons whose patients suffered frequent and severe complications.
Defining Excellence in Health Care
While conventional wisdom focuses on quality of care and medical outcomes to define excellent health care, the most critical component is “appropriateness of care.” The least expensive medical claim is the one that doesn’t happen; conversely, the most expensive medical claim is the one that should not have happened. For a patient, quality of care is critical, but no one wants to undergo a procedure or surgery that is not necessary. Quality of care and high outcomes are important, yes, but the best hip-replacement surgeon in the world who sees every hip as a replacement surgery is not providing excellent care. That surgeon is complicit in the waste, abuse, and, arguably, fraud that plagues our health care system. Walmart recently announced an initiative to incentivize its employees to use the top 20 percent of doctors in each specialty, based on the physician’s commitment to providing both quality care and, most important, appropriate care. Appropriateness of care will become the key metric for determining provider excellence in health care.