July 14th, 2020

Improving the US Healthcare System: 6 GREAT IDEAS AND 5 NON-SOLUTIONS

​US healthcare system provides the highest quality of care on the planet. Our system has fully harnessed the power of free market economics for innovation and efficiency, but is still subject to systemic barriers. San Diego in particularly has amazing systems including Scripps, UCSD, Sharp, and others. Access to care and cost are a separate issue. In my career working as an insurance broker since 2005, I am often asked what actions could be taken to improve access to care and cost.
Here are some good ideas and non-solutions, in my opinion.
6 GOOD IDEAS
1. Improve population health:

• Improve exercise and diet education in K-12 schooling.
• Mandate only healthy natural food choices for school breakfast/lunch programs for schools receiving federal funding.
• Consider increased sin taxes on tobacco, alcohol, junk food, sugary drinks.
• Create a legal framework for a lower-premium rating tier based on standard bio-metric benchmarks to incentive people to stay in shape.

2. Improve pricing transparency and billing efficiency:

• HSA plans were introduced in 2003 by President Bush were a good first step, but healthcare pricing is notoriously opaque.
• Government needs to mandate clear guidelines for pricing and billing transparency. New transparency guidelines issued by HHS in November 2019 are a step in the right direction, but sweeping legislation could revolutionize this broken portion of the marketplace.

3. Capping Rx pricing based on global benchmark data:

• US Rx pricing is substantially higher than anywhere else in the world.
• Rx drugs are developed and manufactured throughout the entire world, and largely monetized in the US due to lack of any price regulation.
• By capping US prices to no more than 120% of the global average price index for each drug, the US could effectively equalize the drug price disparity between US and the rest of the world without stifling innovation or creating a government bureaucracy. Higher prices would be pushed to other countries.

4. Scrutinize hospital consolidation/monopolization:

• Hospital consolidation may provide efficiencies from economies of scale in many cases, but excessive consolidation may cause hospital systems become monopolies in a geographic region. Current US antitrust legislation (starting with the Sherman Antitrust Act of 1890) is not setup to effectively regulate the regional nature of healthcare monopolization.
• Southern California patients generally have plenty of options. In Norcal, Sutter Health has drawn scrutiny for market monopolization. Rural areas are particularly susceptible to a monopolized health system if local health systems merge.

5. Improve mechanism to cover uninsured patients:

• President Ronald Reagan created our current de facto universal healthcare system via the COBRA act of 1985 which requires emergency room to accept all patients regardless of legal status or ability to pay.
• Private insurance ultimately subsidizes a large part of this inefficient mechanism, causing turbulence for both hospital systems who often must write off a large % of their emergency room cost and patients who must ultimately subsidize this inefficient mechanism via shockingly high ER care costs.
• Government programs to directly fund basic care clinics for all patients would help fix the issue that society is already paying for.

6. Referenced-based pricing:

• Customarily, a health insurance plan often pays a % of the total cost for a given procedure. With an 80% coinsurance plan, a patient will pay 20% of the cost for any surgery whether it cost $10,000 or $100,000. The patient has limited incentive to scrutinize cost particularly if they hit their out of pocket maximum.
• In a reference-based pricing plan, patients receive a flat dollar amount for a specific procedure. For a specific surgery, they may get a flat $20,000. If they can find a provider who will do the surgery for $20,000 all in, the surgery will cost them nothing. If they want to utilize the most qualified provider in town who charges $30,000 for the surgery, they will need to pay $10,000 out of pocket.
• Patients on plans with reference-based pricing retain a high level of choice in the care they receive.
• These programs are common on self-insured plans, but generally unavailable on most consumer plans.

5 NON-SOLUTIONS
1. State-by-state limiting Rx copays:

• Colorado, Illinois, and other states have introduced legislation to limit Rx copay costs to $100 per month. While this may help consumers initially, costs will be pushed to all insured plans members without the root cause of the high costs being addressed.

2. Government-set Rx pricing:

• One proposed solution is to have government set prices like most countries do. This would have a short-term impact at reducing cost. However, the long term impact to Rx innovation could be immense. The life saving therapies of 2040 and beyond may never be funded and developed.
• High Rx prices in the US effectively subsidize Rx R&D for the entire planet, so it is a fine line.

3. Association health plans:

• These provide lower costs for some, and higher costs for others. Certain industries with a lower risk characteristic are able to cherry pick their members out of the general risk pool and offer lower rates. This is a great value to association members, but raises rates to the broader risk pool. The next benefit to society is neutral. California has done away with AHPs for the small group market for this reason.

4. Short-term medical plans:

• These plans may serve a place in the market, but by nature are not a solution to high health insurance prices.
• Short-term medical plans are less regulated with limited benefits and often leave the insureds on the hook for substantial additional out of pocket expenses.

5. Out-of-state plans:

• Unless medical services are rendered in another geographic region, these plans have zero net value at reducing cost.
• For example: if a Californian was to purchase a lower cost medical plan from an Ohio insurer who offers lower rates which correspond to the lower cost of medical care in Ohio, they would need to travel to Ohio to get their care.