I know many will perceive the following as heresy. Nevertheless, I believe the comments made by Newt Gingrich this past weekend were more important than the revelations disclosed by Arnold Schwarzenegger regarding his heretofore hidden love child. Yes, I actually believe what I just wrote. I don't always agree with them, but Gingrich’s comments reminded me of the serious debate that is occurring across this country and the parlous state we are in due to the level of our healthcare spending and the results we get for it.
Healthcare Benefit Costs are the boa constrictors that are slowly squeezing the life out of the companies that we are trying to build in the United States and are choking the state and municipal governments in America. We feel the pinch in our portfolio companies at my firm. Moreover, the Hay Group released a report for the Bedford Central School District that I serve that demonstrates alarming annual required contribution numbers. Our district is accruing liabilities at a terrifying rate and we must change the system or…either the taxes to support the current system will crush us or the costs of doing business through providing traditional healthcare benefits will. The situation is not all that much different for traditional, low deductible “Cadillac” healthcare plans in the private sector. They, too, have simply become unaffordable.
I am revisiting a topic that I touched upon back in February when I began a discussion regarding Healthcare IT. Getting a better handle on how, why and where we spend our healthcare dollars is an excellent idea and mapping spending and tracking procedures, regimens and outcomes is both good business and good science. Nevertheless, unless and until we move away from a third party payer system except for catastrophic illnesses, we will not make any real progress on costs. The current situation presents nightmarishly bad incentive structures. Physicians recommend diagnostic procedures and treatments to patients (everything under the sun to avoid liability) and patients usually accept whatever is recommended because they are not paying for anything beyond the deductible or co-pay amount, which is the responsibility of the insurance company or the government under traditional plans.
No matter how good we get with any healthcare IT analytics systems, we can never overcome this horrible incentive structure. All experiments that try to tweak the healthcare system in some way without fundamental reform will ultimately fail. The only solution that will work to reduce ever escalating costs is for the patient ultimately to have control over the payments to be made to the physician. The patient will then have a strong incentive to shop for the best physician at the best price. The debates should be over the amounts and the mechanisms of allocating and transferring funds to the control of the patient. Patients would then be free to purchase high deductible plans of their own choice, pay directly, or even purchase supplemental private plans. Since not everyone will be able to afford insurance, there must be consideration of the level of taxation necessary to cover those who cannot afford high deductible, catastrophic insurance and some type of health savings account for regular or preventive care. It is not fair or a good use of resources to have indigent patients clogging up emergency rooms. Such facilities would then not be available when truly needed. If our country were to move in this direction, I believe it would be a system not unlike the one used in Singapore today and it would cost much less than what we spend on the private and public side in the United States.
Empowered and informed patients are better patients and better consumers and they save companies money. Their care is equal or better than their counterparts’ at companies with traditional plans. The Cigna Choice Fund Experience Study simply cannot be ignored. Yes, we can all argue that such a study is self-serving. But that is far too simplistic an analysis and unnecessarily dismissive. The logic and the incentive structure behind the Cigna Choice Plan is too compelling to ignore and it is time to move toward a system with a high deductible health care plan and something akin to health savings accounts and that these are funded for those who cannot afford them. We can do this as companies and as a nation or become less competitive, more highly taxed and poorer. The choice is ours.
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