When It Comes to Healthcare, Democrats and Republicans Are Both Wrong
For more than a decade they’ve been arguing about how to pay for a broken system. It’s time build a new system that’s cheaper, more consumer-friendly and more equitable.
By Hemant Taneja and Stephen Klasko, M.D.
A few weeks ago, a handful of lawyers stood inside the United States Supreme Court and argued with each other about the Affordable Care Act. Again. On one side were attorneys trying to make the case that the entire act should be struck down because the ACA’s individual mandate has effectively been made null and void by Congress. On the other side were lawyers arguing the opposite: the ACA should be preserved.
The justices’ questions suggest they’re likely to keep the law intact when they issue an opinion next year, but no matter what they decide we should all recognize one important fact: ACA or no ACA, we’re not having the right conversation about healthcare in our country.
For the last dozen years, our health-policy debate in the United States has been about who’s going to pay for the status quo. Unfortunately, the status quo is the problem: a broken, fragmented, inequitable, sick-care-driven, insurance-driven, hospital-driven system that was built for the 20th century. What we should be talking about is how to change the system all together.
The Covid-19 pandemic has only further revealed how dysfunctional our current healthcare approach is. Despite the heroic work of frontline workers, hospitals have lost more than $500 billion this year, in part because they’ve had to cut back on profitable elective surgeries that in typical years keep them in the black. Meanwhile, the health insurance industry, which was already flush, has seen its profits increase two- and three-fold this year, largely because it continues to take in big premiums but doesn’t have to pay for those expensive elective surgeries. The health insurers aren’t doing anything wrong. This is just the system we have.
A Lack of Alignment
How screwed up is this approach? Let’s put it this way: If someone arrived here from Mars and was told to create the most absurd system possible, they’d design something close to what we have now. It’s a system where a patient gets to see a doctor, but the insurance that covers her visit really has nothing to do with her — her employer was the one negotiating with the insurance company. And if the patient has a procedure, her doctor doesn’t send her a bill. Instead she gets a 125-page document — probably listing some ridiculous cost — that explicitly says: THIS IS NOT A BILL.
There are a lot of problems with our current approach to healthcare. But its most fundamental flaw is the way it distorts how consumer markets are supposed to work.
In most market sectors, the person who decides what to buy, the person who pays for it, and the person who benefits from it are the same: i.e., the consumer. If you go buy a car, you decide which car based on its features, your needs, and your budget. You pay for it with your cash or a loan. And then you benefit from it — you get to drive the car.
In healthcare, who decides, who pays and who benefits are all different.
If you have chest pains and rush to a hospital, a medical professional decides what to do. You most likely have little input — no way to make a choice based on likely outcomes and your budget. A third party — an insurance company — will pay for it, so there’s no discussion of costs between you and the hospital. Neither you nor the doctor knows what you’ll ultimately be charged or what the doctor or hospital will make. Yet it’s you who benefits from the care, even though you’ve had almost no input on what you’re buying or how much you’re paying.
Separating those three elements — deciding, paying, benefitting — results in strange behaviors in the market. It creates a system where insurance companies are incentivized to pay out as little as possible while charging policyholders as much as possible. Where consumers have no reason to pay attention to what anything costs. And where healthcare providers make more money the sicker people are.
When the Affordable Care Act was passed in 2009, there was hope that, in addition to widening access to healthcare, it would also reduce the cost. Cost-reduction hasn’t happened. Instead, the middle of the medical ecosystem has only gotten fatter. Just look at the valuations of companies in the middle: Since the ACA became law, generic drug company stocks have quadrupled, pharmaceutical stocks have gone up six times, and health insurance stocks have gone up nine times.
There’s no other business on the planet that says, how big can we make the middle? Everyone else is trying to get rid of the middle.
The Promise of Health Assurance
When you think about how change has happened in every other industry, you realize it hasn’t come from the government saying, “We’re going to do this” or “We’re going to pay you for that.” It’s come from the consumer saying, “I’m mad as hell and I’m not going to take it anymore” — and then actually having real alternatives.
Covid-19 is starting to make that “mad as hell” moment a reality. And fortunately, alternatives for consumers are developing.
Health assurance is an emerging category of healthcare that has the potential to fix a lot of what’s wrong with our system. Health assurance companies offer consumer-centric, data-driven, cloud-based services designed to help us stay well, so we need as little “sick care” as possible. They use AI responsibly and aim to let us forget about doctors, pills, hospitals and insurance companies. They promise to make healthcare access economically rational for consumers. And they can drive costs down while improving outcomes — better health, more empathy, fewer mistakes, less inequity.
Everyone wants to “fix” healthcare — even people who work in healthcare. The best way forward now is to encourage companies and inventions to bloom in the health assurance space. That is far better than arguing about legislation that would only find another way to pay for the old, expensive, frustrating healthcare industry.
