Healthcare, Inequality, and Bubbles

Deregulation and instability in the healthcare industry have lead to a system of acute friction, confusion, and inequality. The obvious and sad part about this fact is that it was designed to be that way. Incentives are not aligned throughout the system, and the cost of this lack of alignment is our health.

Providers are paid/reimbursed per appointment and are thus, inherently incentivized to see you as much as possible — versus being incentivized to increase the outcomes of your treatment. Payers — insurance companies — are incentivized to provide you the cheapest treatment option for a plan that you may or may not have selected yourself — ultimately we all choose our own plans, but opting into one from a small range of employer selected plans drastically decreases the probability of us opting in to the plan that best aligns with our needs. Lastly, the government — historically — has been incentivized to capitulate to the wants of the healthcare industry because capitulation lead to short term growth and profits. This is called regulatory capture — meaning the businesses that are being regulated are, in fact, running the regulators.

What are the wants of the healthcare industry you ask? Deregulation, advantageous fiscal policy, etc. Regulations are the rules of the game that are designed to make our systems work better — to ensure competition, to prevent abuses, to protect those who cannot protect themselves [1]. It is easy to see why healthcare — and other analogous industries — executives would be in favor of deregulation. The issue is that deregulation is a tool to be executed under certain conditions, not a means to grow our economy, as it has corrosive effects to our society and creates a vicious cycle of instability <> inequality, in the long run. Deregulation lends corporations a shortsighted interest to act in favor of the wealthy — rent seekers — instead of the public, which should intrinsically be the focus of companies operating in healthcare. Healthcare is increasingly becoming a public good — in the economics sense — and should be treated as such. Presently in America, it is not. There are currently 3,100 healthcare lobbyist. The most of any industry in the U.S. 12 of the top 20 healthcare lobbyist represent either pharmaceutical or insurance companies. So it is no surprise, Americans are hooked on prescription drugs — namely opioids although this is beginning to change — and the payers act as gatekeepers for deciding who will receive treatment and at what cost. This is perversely and morally out of line.

As the co-founder and CEO of a digital health company, this state of affairs concerns me…deeply. On the one hand, I can see how corporate executives would employ these tactics. Theory said they would lead to growth, and there was little historic economic data for opposers to truly push back, thus there was a strong onslaught from the right AND left in the 70’s through the 90’s. But on the other hand, we now have the benefit of economic data and know that our policies have lead to the largest Gini coefficient in American history, social unrest, and rising healthcare costs per capita. Here’s a little history lesson. After the Great Depression, the New Deal was enacted to stabilize and regulate the economy, and there were zero American market crashes through the last New Deal administration — Nixon. What happened after Nixon’s administration? In short, an organized offensive from the wealthy on the lesser classes of America. The enlightenment and progressiveness of the 60’s was perceived as a danger to the status quo, to the way things had been done and the people that benefitted from the way things had been done. Two supreme court decisions helped promote the rent seeking agenda. Buckley vs. Vale (1976) which ruled that money is a form of speech, and Citizens United vs. Federal Election Commission (2010) which ruled that the right of free speech as corporations cannot be curtailed. Think about that. Now companies created in the United States are viewed under the law are persons and can leverage their immense purchasing power, and are protected under the 14th amendment. This is part of the reason we see lobbying to the degree we do today, as well as super PACs trying to engineer elections. You can see why it shouldn’t be a surprise that Donald Trump is a candidate for the Presidency, his interest are aligned with those of the other super wealthy, and I have little doubt that, if elected, his policies will most certainly contribute to perpetuating the increasing levels of inequality in our country.

Economic policy is health policy and vice-versa. The policies we have put into place are — physically, monetarily, and otherwise — hurting the majority of Americans, and I believe there is causation between the rising levels of inequality and per capita healthcare costs. As founders, early employees, and investors of digital health companies, I believe we have a responsibility to understand the economic role that regulations play. The Glass-Steagall Act of 1933 was enacted as a response to the failure of banks during the Great Depression, and it served the country well. Is the Affordable Care Act our quasi version of the Glass-Steagall Act? Perhaps. Certainly, as we move forward in the digital health revolution that is upon us, it will serve us well to remember that deregulation, and the use of tools inherent to technology as regulatory hacks, hold the potential to lead to treacherous places like…a bubble.

About The Author

Dan Miller is the Co-Founder, and CEO of Level Therapy. You can connect with him on Twitter, Facebook, Instagram, and LinkedIn.

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[1] Joseph Stiglitz, The Price of Inequality, 89–90