Healthcares Uncertain Future

The recent election has had a reeling effect on most Americans. There is a prevailing sense of uncertainty about many important matters that are vital to this country’s future. However, healthcare, which currently represents  approximately 17% of GDP looms large in the uncertainty column.


Irrespective of anyone’s particular view as to the advantages or disadvantages of Obama Care, or whether the plan initiated by President Obama adequately, substantially, or even substantively addresses the underlying healthcare issues, it is most certain that healthcare cannot  be steered like a sports car, but maybe and hopefully it can be navigated like a cruise ship. Even if change can be effected, it is reasonable to assume that even if there were quick fixes, it most certainly would have to be phased in over time to allow the economy, marketplace and government to efficiently implement and absorb the changes. What I’m trying to say is that any hope or promise of somehow pulling a rabbit out of a hat is unrealistic, irrespective of the ultimate plan and corresponding changes, particularly, given the time needed to adjust for and to the unintended consequences of the seismic changes that have been promised.  Simply stated, to those who believe that healthcare can be transformed overnight – please be ready to readjust your sights.


One challenge that I see in the future is that it is easy to promise lower cost and higher quality healthcare, however, in a sense the quality and cost of healthcare pull in opposite directions unless there is a new paradigm – a paradigm that has not yet been articulated.  If you add quality, it raises the cost, and if you lower the cost of insurance you have less money to pay for whatever benefits you are offering. To further complicate matters, President-elect Trump said that he intends to leave coverage for pre-existing conditions. Aside from the actual cost of covering those situations, the ability for adverse selection looms large. Essentially, adverse selection means that the people who are most likely to buy the insurance are the people who need it the most. Let’s face it, insurance, by its very nature is a redistribution of risk. If you cannot distribute the risk between those who are less likely to need medical care and those who are more likely to need medical care the general principles of insurance become inapplicable.


Another issue is the apparent failure to distinguish between the cost of healthcare and the cost of healthcare insurance. I think it is best understood by way of example in which someone goes to lease a car. The marketplace  can in an effort to lower the cost of an auto lease focus on lowering monthly lease rates by squeezing markups charged by the dealer, negotiating lower interest rates, or have subsidized interest rates promoted by the automaker , but ultimately one gets to the point where if you don’t lower the actual underlying cost of the car you can’t lower the monthly or overall cost of the lease. Similarly, with healthcare, you can squeeze the doctors in terms of their reimbursement, you can squeeze the hospital in terms of their margins, but you reach a certain point (a point that we may have already reached) in which you cannot achieve any material efficiencies unless you lower the underlying cost of healthcare. There seems to be some mental block between understanding that increased insurance premiums reflect increased cost of providing medicine and the increased cost of underlying medical care.


Of course, when we get to this point in the conversation the big target is Pharma. The general argument is a call to arms to get those high-priced drugs out of the stream of commerce. However, the insurance companies seemingly have already negotiated down the cost of these drugs, and many of these drugs actually save lives. Even if Medicare started negotiating prices, it would be a small step in the right direction which carries its own potential consequences. But, do we really want to suppress innovation in healthcare?  A very small percentage of potential drugs make it to or through clinical trials, and then a very small percentage make it through the lengthy and torturous FDA approval process. If the few winners do not earn enough money to pay for the other laggards (those drugs that either don’t make it to the finish line or will only treat a few people) big Pharma may cut R&D budgets, which ultimately will impede our progress. The bottom line is that ultimately it will lead to debilitated health or loss of life. This is a decision that we will have to make as a society.  The issue of the propriety or ability of the government to dictate pricing to private industry is beyond the scope of this article.


Lower cost higher quality healthcare is a great tagline. However, I think it is easier said than done.


As a final note, it pains me to see American healthcare in a state of suspended animation. As just one example, I recently saw a flyer for a very large convention from the American Bar Association for its Health Law practitioners which is scheduled for the beginning of December. I am sure that in the months leading up to this convention there were numerous and highly detailed discussions relating to prevailing regulations, future trends, emerging strategies and various other very important topics. I can only wonder what they will be discussing as they look at their notes and PowerPoint slides for the scheduled presentations, all the while twiddling their thumbs and trying to figure out whether (or how) to keep on saying that we will have to see how much of the presentation will be around in six months, whether the stroke of a pen will make the presentation wholly irrelevant, or that thanks to the new administration they won’t have to wait a year for another health law convention.


What do you think?

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