At TEDMED this year, we will hear from three Speakers and Innovators who approach health care through the lens of economics. Through their work, we will explore different ways to think about allocating our finite resources in a world of limitless possibilities.
A natural experiment is an observational study that allows for the random—or seemingly random—assignment of study subjects to different groups. These kinds of experiments are rare but important when studying ideas that are impossible or unethical to recreate in the setting of a controlled experiment. Former Emergency Department social worker-turned-Medicaid researcher Heidi Allen seized the opportunity to study one such organic experiment in 2008, when the state of Oregon decided to expand its Medicaid program. There were 90,000 people who signed up for the expanded program, but as a result of limited funding, only 10,000 people were chosen to participate by random lottery. This unique circumstance provided Heidi and her team of researchers a randomized controlled trial with which to study the effects of Medicaid coverage.
The experiment’s results were complicated in terms of their impact on the newly-covered patients. Some outcomes were clearly positive—such as patients experiencing declining rates of clinical depression and financial stress as their medical debts decreased. Other results were less desirable. For instance, data indicated that the newly covered patients’ physical health markers—such as blood pressure, cholesterol, and cardiovascular disease—did not significantly improve. Along with these results, valuable lessons were learned. Heidi’s landmark research helped uncover truths about the role that health insurance plays in the lives of low-income Americans with limited access to coverage.
Even for people with health insurance, trying to understand or predict the costs that will accompany health care can become overwhelming. Often, it’s impossible to ascertain the cost of medical procedures in advance, and it’s not unusual for surprise bills to arrive months after your appointment. Eligible co-founder and CEO Katelyn Gleason wants to take the mystery out of medical billing. By integrating with existing medical systems, Eligible offers patients up-front information on the price of their procedures and co-pays, allowing them to pay at the time of service instead of waiting for months to receive a bill. Eligible not only benefits patients, but also physicians—who are saving valuable time not having to track down patients’ payments, helping them to collect up to 700% more revenue at the time of service.
While Katelyn is helping patients and providers demystify health care billing, health policy expert Amitabh Chandra is focusing on the important role that precision medicine will play in the future of drug pricing. Amitabh encourages us to consider the economic choices necessary to fund the next generation of medicine, in which the creation of targeted therapies that apply to smaller groups of people will change the economics of pharmaceuticals as we know it.
Funding and research in precision medicine are booming and for good reason: this approach hopes to maximize efficiency when treating disease. Currently, the Orphan Drug Act and other FDA regulatory incentives provide economic impetus for pharmaceutical companies to pursue precision medicine research. Yet it’s important to recognize that smaller markets, less competition, high technological manufacturing costs, and increased effectiveness could all result in eventual rising drug prices. Amitabh explores how we can incentivize companies to continue making precision therapeutics that patients can actually afford.
We are excited to hear more from each of these TEDMED Speakers and Innovators about their work investigating ways we can maximize our resources in economically sustainable ways. Join us at TEDMED this year to get to know them and their work better.
On April 30, a multi-disciplinary panel of experts joined us for a Great Challenges live online event to examine health insurance’s shift from a business-to-business industry to a business-to-consumer one. Moderated by USA TODAY’s healthcare policy reporter, Jayne O’Donnell, the group discussed what is working, what’s not, and what it all means for businesses, for consumers – and ultimately – for healthcare costs. If you were unable to join us, check out the recast below:
We had so many important questions that our participants were unfortunately unable to adequately address each during our one-hour event. We gathered our unanswered questions and posed them to our participants so that they could continue the conversation off-air. Here’s what Jennifer Sclar and Abir Sen had to say:
How does a person’s gender, race, age, or socioeconomic status affect the likelihood that they will take on the consumer role in insurance purchasing?
Jennifer: The likelihood that people will have to take on the consumer role in insurance purchasing will largely be dictated by forces beyond their control. It is a role that people will increasingly be forced into, either because of the insurance mandate or because their employer is moving to a defined contribution model and away from a defined benefit model. However, there are enormous differences among groups in terms of where they will shop for insurance, how they will shop for insurance, and how successful they will be in terms of procuring the best product for the best price. There are issues and differences among groups that we know about and that we can use to try to maximize engagement across the board.
With respect to gender, we know that the overwhelming majority of health decisions are made by women. Women are far more likely to select an insurance plan for their family, make doctor’s appointments and treatment decisions for themselves and their families (including their children and their parents), and deal with insurance company billing and eligibility issues. With respect to race and ethnicity, we know that the States and the federal government have been far less successful in their efforts to reach out to minorities, and Hispanics in particular, than other uninsured groups, and this is a serious problem that needs to be addressed. With respect to socioeconomic status, we know that the ability to pay for insurance, even when it is heavily subsidized, is a huge barrier to entry for many uninsured groups. And, finally, we know that the older and sicker you are, the more likely you will be to sign up for insurance and that the long-term health of any insurance marketplace will depend on the ratio of older/sicker enrollees to young invincibles. Successful strategies to address the particular barriers to entry for each group will be imperative to the success of the ACA, as well as the long-term trend toward the consumerization of health care.
What impact will more patients taking control of their insurance purchases and having “skin in the game” have on healthcare costs?
Jennifer: Complicated plan design and increased cost sharing will lead to demand for greater price transparency and clearer billing practices. Patients will demand to know what they are being charged for, and the underlying costs. This will likely lead to greater competition and lower prices for routine care, but could result in higher prices for more complicated procedures.
Abir: That’s difficult to answer without accounting for all the other variables — the overall health of the population, the advances that are being made in medical technology, and whether the advances increase or decrease overall cost, to name a few. If all of those variables are held constant, I would expect that consumers having more skin in the game would reduce healthcare costs due to the consumer making better decisions (such as getting generic substitutions over brand name drugs where possible, going to urgent care versus ER, and getting more preventive care).
Several of you have products that allow for plan comparisons. But what resources exist for people to learn basic concepts of health insurance?
Jennifer: Most plan comparison tools offer consumers basic definitions of key insurance concepts. The problem for most consumers, including those who are highly educated, is that they are not really interested in learning about health insurance. Most consumers just want to know that they will have the coverage they want, when they need it. Health insurance is a very complicated financial product. Clear Health Analytics tries to strike a balance between the few who will want to have a deeper understanding of insurance, and the majority who want to know what they are buying (e.g. Will my doctor be in network? Are my meds covered? Can I see a mental health professional?), and what it will cost. We offer more in-depth information in pop-up boxes, which allows the screen to remain relatively clean and uncluttered. Consumers can also visit healthcare.gov and the State Based Marketplaces to learn more about health insurance; they can also consult a navigator, assister or an insurance broker.
Abir: A well-designed product will obviate the need for people to understand the nits and nats of health insurance. In 2015, you don’t need to be able to code in order to use a computer. In the 1970’s, you did. The computer industry developed user interfaces that allowed the layperson to use their product quite easily. With the advent of consumerization, a similar evolution will happen in healthcare. Now, the interface may not be solely internet-based — it may incorporate human components through phone, chat and even in-person meetings. We don’t know exactly what that looks like yet. We do know that a user-friendly interface must and will develop.
With patients rather than businesses as consumers, insurance companies will likely need to change the way they do business. What will that look like?
Abir: As individuals become more accountable for their health care costs, they are also going to start holding the entities that provide them healthcare services more accountable. This includes insurers, providers, administrators, and so on. The pressure from consumers and the dynamic of competition will force everyone to up their game or risk losing the consumer’s business! All of this will have a positive impact on product design and customer service. Insurance companies will need to create products that people actually want to buy. Providers will have to incorporate technology to improve the consumer experience. As everybody focuses on making the consumer happy, we will truly get a consumer-centric system.
As an aside, we need to stop thinking about and referring to consumers in the healthcare industry as “patients.” It’s like calling everyone who purchases auto insurance an “accident victim.” This distinction is important because the way we think about consumers needs to incorporate both those who are actually sick and accessing healthcare, but also those who aren’t and are truly just buying insurance.
A few insurance companies (such as Florida Blue) have opened brick and mortar stores to sell plans and provide customer service in-person. Is this a trend you see taking off? Why or why not?
Jennifer: This will be interesting to watch. The medical loss ratio provisions of the ACA have made brokerage commissions increasingly unaffordable for insurance companies. Commissions are characterized as administrative overhead, which means they must come out of the 15-20% of premium dollars that insurance companies are permitted to spend on administrative expenses. Insurance companies are looking for creative ways to cut administrative costs, and brokerage commissions are an easy target. Moreover, many insurance companies are eager to get into the private marketplace space. The marketplace will change many long-standing arrangements in the health insurance industry, including those among insurance companies and brokers, and those among brokers and consumers.
Abir: There is a reason why airlines don’t have brick and mortar retail stores. When people buy plane tickets, they usually want to compare across various airlines and see which one is cheapest and/or most convenient. Likewise, in a consumer driven market, individuals will want to compare across several insurance companies and find a plan that suits them the best. It doesn’t make sense for them to go to a store where they can only get plans from one insurer, being sold by that very insurer.
Each insurance policy has unique coverage constraints, co-pays, agreements with pharmacies, etc. How would you counsel a health insurance consumer to be a savvy shopper when it comes to doctors, hospitals and pharmacies so that they’re paying the least but still getting excellent care?
Jennifer: This is where access to data and innovative technology can really help consumers. Clear Health Analytics, as well as others, have created – and will continue to create – cutting-edge technologies that can help consumers evaluate costs, availability of preferred doctors, facilities and prescriptions. One of the major changes that the ACA brought was the elimination of underwriting for health insurance. This makes health insurance ripe for a major change in the way it is distributed. Brokers are no longer evaluating consumers for risk – it is merely a matter of matching the right consumer with the right policy, and that is a task that is uniquely suited for an amazing technology platform. Beyond the insurance purchasing decision, Clear Health Analytics wants to help consumers use their insurance by offering information on treatment options, costs, outcomes, and quality.
Abir: I would advise them to get an advisor who is independent, who doesn’t work for their employer, who doesn’t work for their insurance company, and has no financial conflict. Come to Gravie.com – we are open for business!
The United States spends more on healthcare than any other Western nation – more than two and a half times the amount spent by most developed countries. Even so, most Americans do not have access to quality, timely care. Patients seeking care face unpredictable costs for even the most routine diagnostic procedures, like blood testing.
These hurdles are so prohibitive that seeking out healthcare is often viewed as a last resort – an option to be considered only when symptoms appear. In some cases, this can be too late. Elizabeth Holmes reminds us that access to affordable, preventive care is a human right. It is this right – the right to be as healthy as possible – that is at the root of her mission to make actionable health information accessible to everyone at the time it matters.
At TEDMED 2014, Elizabeth talked about this right and the importance of enabling early detection and empowering individuals to make educated decisions about their healthcare.
Elizabeth Holmes, TEDMED2014. Photo, Jerod Harris, TEDMED.
We reached out to her with a couple of follow up questions about her work and her company, Theranos.
Why does this talk matter now? What impact do you hope the talk will have?
We believe the right to protect the health and wellbeing of every person – of those we love – is a basic human right. Yet, in the United States today, healthcare is the leading cause of bankruptcy. Similarly, lack of healthcare is the leading cause of the suffering associated with finding out too late in the disease progression process that someone you love is really, really sick. We believe that every individual has a right to accurate, affordable, real-time health information before people become so sick that it is too late to change outcomes.
What is the legacy you want to leave?
Our mission at Theranos is to make actionable information accessible to everyone at the time it matters most. Theranos is a new paradigm of diagnosis, in which every person will be able to see the onset of disease in time for therapy to be effective. Through it, we see a world in which no one ever has to say “goodbye” too soon, and people are able to leverage engagement with their health to live their best lives.
“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.” –The Universal Declaration of Human Rights, Article 25, Point 1.
The snowball started with Steve Brill’s epic Time cover story, “Bitter Pill” (subscription required). In some ways, it’s been an avalanche ever since, and the whole topic of pricing transparency in healthcare has become front-and-center to the much larger healthcare debate. In many ways, I think we’ve made more progress on healthcare pricing transparency this year than the preceding 10 or maybe even 20 years.
Until recently, we’ve all been held captive to a system that had no real obligations and refused to openly share the cost of any service or procedure with us as patients. Walk into any of America’s 5,000+ hospitals and ask the cost for a full knee replacement. At best, you’ll get a quizzical stare. At worst, you’ll be asked, “How much you got?”
According to this 2013 study from Brigham and Women’s Hospital, there are about four million Americans living with a total knee replacement, and we average more than 600,000 full knee replacements per year. How can anyone, anywhere –with any remote credulity– say that we either don’t know or can’t tell you the cost of this high-volume procedure? The corollary would be like saying that McDonalds hasn’t the foggiest idea of their cost for a potato, bun or meat patty, and that we’re not allowed to know the price of a hamburger until after it’s served. It is laughably absurd, except that it’s all so tragic and represents (in aggregate) about 18% of our GDP.
Until fairly recently, the U.S. healthcare system has been perfectly content to revolve around the employer as benefits provider and the innocuous and relatively small patient co-pay. Even after full implementation of the Affordable Care Act, the bulk of Americans (about 48%) will continue to get their health coverage through their employer. Another 27% will continue to get their health coverage through Medicaid or Medicare. Those two groups alone represent about 75% of the U.S. population (~ 321 million in 2016).
Dan Munro will moderate a live, online Great Challenge discussion about transparency in health care pricing on Thursday, October 10 at 2PM ET. Find out more here.
Brill’s article definitely sent shock waves through the $3.5 trillion healthcare industry, but it was anecdotal evidence. It wasn’t really indicative of a systemic problem. Like Mayor Vaughn in the movie Jaws, we found it too easy to say “a few bathers were injured” and that the small beach community of Amity was not infested with a man-eating shark. “Amity, as you know, means friendship.”
All of this lurched another big step forward earlier this summer when the Government released payment history for 100 procedures at more than 3,000 hospitals around the country [Government Drops Big Data Bombshell On Hospital Industry]. The Washington Post included a revealing chart of charges at two hospitals in Florida that are literally fewer than 2,000 feet apart.
The evidence was clear, and now voluminous, accumulated over several years from about 60% of the hospitals in the U.S. There was simply no discernible logic to acute care pricing. It wasn’t state, regional or even local; it wasn’t an inpatient versus outpatient facility and it wasn’t a different procedure. In other words, there was no reason for such a wide variation in cost.As a contributing factor, something else also kept happening year after year. The cost of insurance for access into the healthcare system kept escalating. Then the actual benefits started to be less generous. Deductibles kept increasing. Services like dental, vision and mental health were completely stripped out and companies were still choking on their annual commitment to employee health benefits. This scene – as described by one CEO – played out faithfully for many employers – each and every year.
“When an employer sits down with his health care providers – the broker, the health plan, the physician, the hospital, the drug and device firms – everyone in the room wants it to cost more – and they’re all positioned to make that happen.”Lynn Jennings – CEO of WeCare TLC – Top Ten Healthcare Quotes for 2012
Even big, bellwether companies like Microsoft began to buckle under the toll. For the first time in its storied history, the global software giant could no longer simply extend rich healthcare benefits without an employee contribution. At a surprise “town-hall” style meeting in 2010, Microsoft informed its sizable employee base and then released this statement.
“We can confirm that Microsoft has begun to evolve its employee health care benefit. There will be no changes for the next two years, but in 2013, employees will contribute to their health care.”
That’s the backdrop. But the scenario is changing rapidly. Today, there are a host of new companies like Castlight Health, PokitDoc, and Clear Health Costs that have jumped in to fill the void of healthcare pricing. Castlight Health, founded in 2008, is arguably the oldest and could easily be one of healthcare’s next IPOs. In the course of about five years it has raised over $180 million in venture funding. Castlight isn’t really a B2C solution as much as a B2B (employer/employee) one, but there are others targeted directly at all of us as patients.
The questions and challenges, however, cascade quickly from there.
What is the larger objective? For healthcare to mirror a consumer-centric, retail model?
What value does pricing alone have when it’s untethered from either quality or affordability?
As a consumer I’m definitely motivated to find the best healthcare I can, but what if it’s way beyond my reach financially?
Will this spawn a kind of healthcare lending industry like education and mortgages?
What real difference, if any, can pricing make in an emergency situation? NB: Hospital admissions through the ER represent about 50% of all hospital admissions (here)
In healthcare, demand will always exceed supply. Are we, in fact, building unrealistic expectations around the capacity of transparency alone to lower pricing?
A few things are becoming crystal clear. As evidenced by this banner headline in the Wall Street Journal last month, “Walgreen to Shift Health Plan for 160,000 Workers,” our healthcare system is moving away from a defined benefit model of healthcare coverage to a defined contribution model. In that model, more choices will become available, and served with consumer convenience, including price. That price may be untethered from quality (or personal affordability), but it will be transparent. The last remaining question could well be: What do we do with it?
Dan Munro is a freelance writer and Contributor at Forbes. He writes regularly about the intersection of healthcare IT, policy and innovation at Forbes.com. Read more from him here, and follow him @danmunro.
Opinions expressed by our guest bloggers do not necessarily reflect TEDMED’s.
TEDMED will host two live, online events today to discuss Great Challenges of health and medicine: Addressing Healthcare Costs and Payment Systems from 1-2pm EST; and Coming to Grips with End-of-Life Care from 3:30-4:30 EST.
Join us for an informal, moderated discussions on these Great Challenges. Share your thoughts and quiz the Team – we’ll answer selected questions on-air. You can also submit questions and share your perspective with the community via Twitter, tagging your tweets with #GreatChallenges. Follow TEDMED on Google Plus to get started, or join on TEDMED.com.
We’ve also announced three new speakers for TEDMED 2013: Victor Wang of GeriJoy, Inc., which creates virtual companions for seniors; Zubin Damania (aka ZDoggmd), Director of Healthcare Development for Downtown Project Las Vegas and a standup comedian who mercilessly pokes fun at the foibles of our medical system; and Sara Horowitz, founder and Executive Director of Freelancers Union.
Click here to see our speaker roster to date, and here to apply to TEDMED.
Kavita Patel, MD, is Managing Director for Clinical Transformation and Delivery, Engelberg Center for Health Care Reform and Economic Studies Fellow at the Brookings Institution. She’s also a practicing primary care internist at Johns Hopkins Medicine and served in the Obama administration as director of policy for the Office of Intergovernmental Affairs and Public Engagement in the White House.
What is the one thing all of the stakeholders have in common in the health care reform scenario?
No matter who you get in the room, everybody wants to know: How can we do the most to control spending, but also to miminize unintended consequences? That is universal. As a doctor, I was thinking, ‘How can I minimize unintended consequences to my patients?” Another common issue – participants were all willing to put their own personal agenda aside, because they realized they were part of a much bigger conversation. People felt there was a higher purpose to this.
Do people bring their own health experiences to the table, even unconsciously?
We have this common joke in D.C.: An ounce of information is not worth as much as a pound of anecdote. So the joke is always that anecdotes and stories carry more weight. Yet at the end of the day, we try to ask: If you had a personal experience that really motivated you, what can then can we learn from that is applicable to a lot of people?
You were part of the senior staff of the Health, Education, Labor and Pensions (HELP) Committee under Senator Ted Kennedy’s leadership. Looking at the healthcare system in Massachusetts now, what can we learn from it as a nation?
Massachusetts embraced the role of information dissemination broadly and put money aside for it. They knew that simply talking among themselves was not going to give state residents much information: How they could get insurance, what insurance means, why they should have it. That’s something that’s lacking on our national level.
I’m really concerned about adults who just don’t realize they have options. I think that wives and mothers who already shop for insurance will respond, but what about elderly men who have to sign up for Medicaid? It’s really hard to get outreach to those people. I’m a physician and employee, and the last time I chose plans, I found it’s not easy. We did all this work in health reform, and then there’s you, sitting in your house. How do we connect the two to go the final mile and make a difference?
I was saying to colleagues, ‘We should get Dr. Oz and Oprah to talk about health reform.’ That was a joke, but what if we could have some kind of informal spokesperson to help in the efforts?
Some employers are saving on healthcare costs by improving employee health with incentive programs. Everybody wins. However, do we run the risk of putting companies in the position of being a healthcare “Big Brother?”
I do think that having these things in place will help employers think of things more broadly. It will create more incentive for employees if the plans are structured around more than, say, ‘Get your flu shot.’ That’s great, but it’s certainly not going to change the dynamic. You also hope for some spillover effect. If all the Fortune 50 companies have health and wellness programs, that might open the way for health plans to offer some of these wellness incentives themselves to improve their ability to contain cost and improve care.
Will we see companies who strive to hire only the healthiest of employees at some point? Is it happening already?
That was a concern that a lot of labor and patients rights group expressed, but in order to mitigate that we have to be transparent about how people might change hiring practices. And so far we haven’t seen that happen. Even outside of tax incentives, employers are stepping up and doing things because it’s the right thing to do. We had very active conversations about making sure people don’t get lost in this process. If you are in a work environment where that’s happening, you need to be able to bring that forward without repercussion.
Why doesn’t the government have more healthy behavior incentives for its own employees?
One of the biggest sticking issues has been where and how we would roll it out. How do you do something that affects one of the biggest employers in the world? We didn’t have the access to the very things we would talk about. But we didn’t have a gym that we could use; the White House didn’t have a gym. The White House, with leadership from the First Lady’s efforts, helped to secure a farmers’ market for the community around the White House to promote healthier eating. But even that step took a lot of time and effort.
As a primary care internist, what were some of your own hopes as you observed the dialogue going into the construction of the ACA?
The hope I had was to get rid of the idea that the cost of treatment or insurance would prevent you from trying to be as healthy as possible. I saw it all the time; I saw that patients didn’t take their medicines or see a doctor because they couldn’t afford the co-pays. To me, that was where the reform hit reality. I thought, ‘There’s got to be a better way to do this. Can we make the system cost less and still be patient centric?’
Do you talk to your patients about cost?
I do. If someone comes in and wants a certain test or prescription that I know that is not necessarily the best treatment for what they’re asking, and it’s the more expensive one, I ask them, ‘What made you think about wanting this?’ 99.9 percent of the time they say, ‘I had a friend…’ or ‘I saw it on the television.’ We usually end up choosing another course, something better. But that takes time. It’s far easier for a doctor like me to write the prescription or order the tests. That’s the tension with controlling costs.
How did a family doctor end up in policy?
I had been doing research in mental illness and veterans, and my work caught the attention of Ted Kennedy, and one thing led to another. D.C. seemed a very foreign place — I think it does to most of the country — but I’m tapping into my physician roots more and more each day, which gives me great insight that I’ve spent decades trying to gain. So I’m coming full circle.