With all of the headlines, stories and political spin about Obamacare, you might have missed some of the key insights from my point of view. There is a consensus among healthcare experts, industry stakeholders, politicians and consumers that the U.S. has a flawed, sub-optimal health care system. There is an access problem (folks that don’t have either insurance or access to programs of care), a cost/value problem (we spend too much for the health outcomes we get for a bunch of reasons — to the tune of nearly a $800B/year), a funding problem (current trends of health spending by public entities is not sustainable and is crowding out other necessary investments) and what I will call a data problem (we don’t really understand what works and for whom, what things cost or how the various perverse incentives impact outcomes). We lack consensus however on how to address these intertwined problems, on whether ‘competitive markets’ are appropriate and viable in the health delivery sector and on what kind of compassionate, modern and innovative society in which we want to live.
In previous posts, I have argued that the existing framework of government intervention (e.g. employer tax break for health insurance, Medicare pricing formulas/rigidity, HIPAA, etc.) is the root cause of many of the current problems above. So the key question surrounding Obamacare and its implementation readers should consider — is more centralized government involvement (direct execution like healthcare.gov, or laws/regulation/mandates) likely to lead to a better healthcare system? Let’s look at some recent evidence:
- Execution of the healthcare.gov implementation: this project has failed on every imaginable front, which has been well documented. However, the least reported but most important lesson here is the systemic failure of large, mission critical government IT projects — despite years of efforts by administrations of both parties to address the fact. Last year, I volunteered with the Romney Readiness Project and my role was to evaluate prior OMB efforts to improve the results of government IT projects and to identify potential solutions. The record for both projects and improvement programs over the last 20 years is dismal and depressing. The examples are too numerous to detail — the FAA infrastructure revamp, the IRS systems, health IT within VA and DoD — and more. The GAO, OMB and each agency’s office of Inspector General provide ‘oversight’ and generate separate reports about failing projects — over budget (by billions), beyond deadlines (sometimes by decades) and suggest corrective actions — latest one here. We have a new roles for “CIO” and “CTO” in OSTP in the White House. Substantively — despite the oversight, good intentions and new roles — the results don’t change. Government projects currently lack the appropriate framework for successful, large scale, mission critical IT projects — leadership/vision/clarity embodied in people, process, real-time adaptability, customer focus and a competitive environment driving real outcomes. My chief hoped for lesson is that, as a result of the public failures of healthcare.gov, politicians and citizens acknowledge we need to radically re-think what IT projects are appropriate for government and how to do them.
- Tools available to the government for intervening or managing ‘markets’: there have been a number of op-eds by experts recently touting the success of Obamacare. IMHO, they are mostly misleading, wishful thinking or fail to examine the root causes noted above. David Cutler in the Washington Post tries to give Obamacare credit for slowing healthcare costs in the past few years…which seems somewhat improbable given its core features haven’t been implemented yet. The types of examples he gives are – CMS across the board rate cuts (blunt instrument account for 5%), change in hospital readmissions or hospital acquired infection payments (certainly don’t need Obamacare insurance mandates for this) and then the hopes for accountable care organizations or more focus on ‘value based’ reimbursement vs. fee for service. His core claim that Obamacare had twin goals — more access/coverage and making care more affordable — I don’t accept when you observe where nearly all the energy is going (coverage). Much of the ACO activity is in the private markets not in the Medicare market. The primary tool for government to control costs (as currently structured) is to reduce rates arbitrarily or to constrain access — these aren’t the way markets work to deliver long term value. Alan Blinder in a WSJ op-ed says in order for America to be a humane society we have to solve the coverage issue (uninsured) and to be an efficient society we have to improve health outcomes for the amount we spend. I agree with these goals. However, he uses this as an argument to say Obamacare is worth it, without considering any alternative paths to accomplish said goals. In my private equity role, I get to look at the landscape of emerging health companies. Many of them are focused on optimizing around the rules set by Congress or CMS; one egregious example is the 340b pharmacy program which takes money from one pocket and puts it in another or another example has been the EMR market which was largely driven by helping physicians ‘code’ better — namely increase revenue per visit. This doesn’t lead to better health outcomes for the same or less cost. There are market segments in health; cosmetic surgery, Lasik eye surgery, dental, — where market dynamics work. In these segments, you have seen increased price transparency, bundling of services to deliver more value, flexibility and continuous adaptation/innovation which over time has delivered more value to society – as measured by more and better services for less resources. Government controlled or centrally managed systems can’t deliver this type of outcome. Good intentions and experts aren’t as effective markets with millions of incremental decisions made by providers and consumers/payers.
Update 12/4: the question of Obamacare and credit for slowing costs continues — here is a great takedown of Krugman’s NYT attempt by Goodman in Forbes.
My hope is that as a result of the Obamacare implementation failures, we start to explore and debate alternative solutions and not just try to incrementally tweak Obamacare with more and more government power and decision making…which simply won’t work.
I had the honor to listen to Dr. Lustig at the Health Evolution Partners Leadership Summit. While he didn’t persuade me at the time — I did decide to read his book — Fat Chance: Beating the Odds Against Sugar, Processed Foods, Obesity, and Disease and it did change my understanding and thinking on obesity and nutrition.
I work hard to eat smart and stay fit. I get easily frustrated by the impact of obese people in our ever day lives — in airplanes, amusement parks, and especially in our health delivery system (costs, equipment, injuries and more). I was always taught that weight management was simple — calories consumed minus calories expended — determine weight outcome. Lustig and the details in his book have convinced me that for many folks, the above is just not true (his claim is roughly 55% of US population).
Obesity is a major health problem and the issue has many public policy considerations (Bloomberg and Big Gulp anyone?) — so I figure we all need to be educated on how nutrition really works. For details, examples and the science — read the book or watch the video — below are the key insights for me that he supports with science and/or things I have changed in my own routine:
- sugar (all forms) is a much bigger culprit in weight gain than fat in our food.
- how one’s body responds to sugar is multi-factorial (hormones, insulin resistant or not, and more). Behavior and hormones interact with each other — often in pro-cyclical ways that are bad.
- form matters (in addition to volume) — specifically fiber + natural sugar has a different/better impact than refined sugar alone
- reducing caloric intake signals to your body to increase fat storage — so eating less by itself exacerbates the dieters situation
- one’s weight by itself — is a very crude measure and can give false indicators for any diet regimen. Improved muscle mass increases calories burned at rest. The desired outcome and focus should be on the ratio of muscle/bone to fat. if you start a weight loss program and reduce caloric intake without exercise — you lose muscle first (not fat) and make the problem worse.
- breakfast matters (to the hormones) and breakfast should include proteins (more eggs in my future)
- I stopped drinking OJ (even organic, fresh squeezed) in the a.m. — high in sugar and separated from the fiber, an easy change.
- I switched my bread choices to be ones with a lot more natural and whole kernels in them (fiber again)
- I switched from leanest fat possible meat choices (less than 10%) to feeling like 15% was ok
- I am reading labels even more carefully.
- I am more open to ‘public health’ options that impact the food environment
I don’t agree with Lustig’s polemic against the food industry nor with all of his solutions, which is why he didn’t persuade me at the HEP summit event. However I do agree we need better public health solutions for this growing epidemic. Now it is time for me to get out for my run!
Medicare is projected to become nearly 6% of GDP by 2040 and less than 1/3 of that is financed by existing sources of income (payroll taxes and premiums) — the rest is going to come from deficits and transfers from general tax revenues. This good news was recently released this month by the Medicare Trustees and is based on some rosy assumptions — namely the SGR actually happens (25% cut in doctor fees) — which has been postponed by Congress for the last 10 years. For those of you who want to be educated about the finances of this critical entitlement and why/how it is driving our Federal and State budgets into further deficits, I encourage you to read this quick analysis by one of the public trustees.
My take is we need to reform Medicare — how it is financed and how it operates — if we hope to have any chance of getting government spending under control. Yes, we need to provide health coverage to our citizens. But it makes no sense to do so in a way that clearly does not work and is unsustainable. As I have written in the past — we need to focus on ‘value’ in our health delivery system (better outcomes for less inputs) and not just access (insurance coverage and benefits). IMHO, this means the consumer/citizen needs to be more accountable and have more choices. The political dialog needs to start with citizens having a better understanding of our programs and what they cost. You are not going to get that from the mainstream media — I hope you all read the analysis.
I don’t know what is more outrageous:
- the fact that both the VA and DoD have technologically out-of-date and insufficient HIT systems, despite spending hundreds of millions of dollars ANNUALLY to support them
- the fact that after nearly a decade of efforts — interoperability between the systems is still a ‘future promise’ instead of an everyday reality
- that politicians (President, Congress) make grand promises, divert lots of attention and money and have absolutely zero accountability to achieve meaningful results
I sympathize with the hard working and well-intentioned folks within the DoD and VA that build and procure their HIT systems — the context and rules within which they operate are screwed up to say the least. That said, I can’t get myself too excited about the ‘sky is falling’ chorus around the upcoming budget cuts from the ‘sequester’. This is but one example (of hundreds) where current government spending (I’m sorry “investment”) is not increasing productivity, real GDP or infrastructure for the future.
“Not surprisingly, a practicing physician has un-PC thoughts on health care:
“Here’s my solution: When a person is born, give him a birth certificate, an electronic medical record, and a health savings account to which money can be contributed—pretax—from the time you’re born ’til the time you die. If you die, you can pass it on to your family members, and there’s nobody talking about death panels. We can make contributions for people who are indigent. Instead of sending all this money to some bureaucracy, let’s put it in their HSAs. Now they have some control over their own health care. And very quickly they’re going to learn how to be responsible.”
The Johns Hopkins neurosurgeon may not be politically correct, but he’s closer to correct than we’ve heard in years.”
as reported in WSJ from his speech at WH prayer breakfast. Love this guy!
I am less sanguine about their conclusion that ACA framework leads to ‘consumer driven’ care — but it is one possibility.