Healthcare 2.0 Is Broken
How is it that a healthcare system, that is provided in the wealthiest country in the world, can have astronomical expenses to its population, while also performing poorly in comparison to other developed countries? According to the Centers for Medicare & Medicaid Services (CMS), in 2020 it was estimated that the average cost of healthcare expenses per person was $12,530 (1). With the average annual salary in the U.S. being $56,310 in 2020 (2), that means that the average American spends ~22% of their before tax income on healthcare alone. Even more important, how is it that despite there being cries for change since the late 80s-early 90s, and despite multiple attempts at government-backed health reform, is it possible that the situation has continued to worsen over the years. The answers are incredibly complex, yet it can be summarized in a very simple manner. As we say as healthcare providers, it’s because we have only been treating symptoms, instead of treating the true underlying causes. In this case, the underlying causes of Healthcare 2.0. Healthcare 2.0 is a term I coined that defines the era of healthcare when it started becoming a commodity- a product or service where the offerings of producers are indistinguishable (3). All doctors are the same, so I might as well go to the largest organization with the most resources and newest technologies. If I receive a diagnosis from one doctor, it should be expected that all of the other doctors will say the same. If one doctor fails me, then it should be expected that other doctors will fail me as well. This era began around the time of the internet boom of the early 90s.
Michael E. Porter and Elizabeth Teisberg explain their fully comprehensive analysis of the current U.S. healthcare system masterfully in their book “Redefining Healthcare,” where they conclude that, in order to effect real positive change in U.S. healthcare, you must change the nature of competition within its system (3). Currently as it stands, the competitive landscape of U.S. healthcare acts as a commodity that is dictated by one key component; Bargaining Power (3). The ways in which healthcare organizations are able to obtain bargaining power are through offering the largest discounts to organizations for their services, and by capturing the largest volume of patients possible (3). Both healthcare organizations (hospitals, clinics, physician-owned groups, etc.), as well as health insurance companies use this same tactic to compete and bargain against each other (3). Here’s an example for healthcare organizations: In order for the largest hospital system in your local area to obtain the largest amount of patients, that system must offer the largest discount to commercial insurance companies, so that those companies are more likely to send their customers to them, in order to maximize their own profitability (3). How do healthcare organizations make money from this? Easy, just charge as many services as you possibly can per patient, decrease the pay of your employees/providers when necessary, and price gouge the patients that end up needing to pay for services that aren’t covered by their insurance (3). I’ve personally seen on several occasions where hospital systems markup their original charges by 500-600% for services not covered by their health insurance plan, in order to cover for their generous discounts to the insurance companies. That strategy is known as Cost Shifting (3). In the financial game of cost shifting, everyone wins except for the patients. Here’s an example for insurance companies: If you were to compare the health insurance benefits of the employees of a large employer such as google, compared to the health insurance benefits of a small business employee, you would find a drastic difference in the benefits that the google employee has compared to the small business employee; as far as costs go. The employee of a larger employer pays far less and has many more options/locations of services available to them. When I look back at the time I was working in a small privately owned clinic, I only ever remember patients around my age (I’m 26) being those that worked for big tech companies or universities. Hmm, probably because many people my age would prefer not to spend that kind of money with the debilitating student loan debts that many of us have hanging over our heads, and the minimal amount of paid time off that we have available. That’s just a hunch though.
Another downfall of healthcare 2.0 is the undesirable ratio of general practice/primary care physicians to specialists in the U.S. compared to other developed countries, that is leading to poor health outcomes. In the U.S., 88% of physicians are considered specialists, leaving only 12% for primary care and preventive medicine services (4). The reason why this is such a problem is because primary care/preventive medicine services are the only services that have been shown to improve the health of a general population while also driving down healthcare costs (5). Compare this to Canada, where only 55% of their physicians are specialists (4). Canada runs on a single payer healthcare system with overall outcomes that are surpassing the U.S., but this comes at a different cost, as their wait times to see a specialist are longer than here in the U.S, and they also have higher rates of adverse medical events (bad/harmful outcomes) with specialist care(3). This should be expected though since the general population is actually able to afford the cost of care, leading to an increase in productivity of the providers to satisfy the demand. This in turn, can lead to an increase in treatment errors from the providers. There’s been a growing desire for the U.S. to establish universal health care for its population, however we’re not ready yet. We have not educated/empowered our communities enough, we have not been taking the appropriate financial approaches towards healthcare spending, we have not optimized the efficiency of healthcare service delivery, we do not have equitable access to medicines/technologies, we do not have the workforce to provide care under a single payer system, and we do not have the proper surveillance of outcomes with the care that is being provided (patient satisfaction ratings are not a sufficient way to assess quality of care) (6).
As Michael Porter wrote, “attempting to require participants in the system to behave contrary to their interests is futile. Making the health [insurance] plan-patient relationship more adversarial only exacerbates the problem. More litigation only leads to escalating legal costs, wasteful defensive medicine, and more burdens on patients. More rules and bureaucratic procedures only stifles innovation and drives more talented people [away] from medicine. What patients need is better health care, not more recourse for care that is denied or poorly delivered.” (3) Healthcare 2.0 is broken, and we are greatly due for an upgrade.
I hope everyone had a chance to learn something new after reading this! In the next post, I will be discussing the solutions that Healthcare 3.0 poses. Stay tuned!
References:
Center for Medicare and Medicaid Services: (https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet)
Bureau of Labor Statistics: (https://www.bls.gov/oes/2020/may/oes_nat.htm)
Porter, M. E., & Teisberg, E. O. (2006). Redefining health care: Creating value-based competition on results. Boston, Mass: Harvard Business School Press.
Health System Tracker: (https://www.healthsystemtracker.org/chart-collection/u-s-health-care-resources-compare-countries/)
Shi L. The impact of primary care: a focused review. Scientifica (Cairo). 2012;2012:432892. doi:10.6064/2012/432892
: Briggs AM, Huckel Schneider C, Slater H, et al. Health systems strengthening to arrest the global disability burden: empirical development of prioritised components for a global strategy for improving musculoskeletal health . BMJ Global Health 2021;6:e006045. doi:10.1136/ bmjgh-2021-006045
