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Psst…Bezos, Dimon and Buffett: Let’s Lift the Veil on Medical Prices

This past week, we learned of a bombshell joint announcement from three significant U.S. business leaders on fixing our healthcare system: Jeff Bezos (Amazon), Jamie Dimon (JPMorgan Chase) and Warren Buffett (Berkshire Hathaway). These three individuals and organizations plan to form a new independent healthcare company for their 1.1 million employees in the U.S.  In the past, many other large business organizations have attempted to transform this healthcare system that is ripe for disruption and widely considered wasteful and inefficient. To date, however, such activity has met limited success. Conventional wisdom suggests these three behemoth companies do not have critical market power to make inroads on transforming an industry intent on gobbling up more of the U.S. economy.

So, what is different with this latest announcement? Based on this rather skinny declaration, we know very little and only time will tell.

We do know, however, this ‘new’ approach cannot happen soon enough. David Cutler, a Harvard health economist, calculated that administration accounts for nearly a quarter of the total healthcare cost in the U.S. – double the rate in the next bloated country. Karl Vick wrote quite succinctly in TIME magazine: “The U.S. healthcare system is the antithesis of Silicon Valley. Grossly inefficient and user-unfriendly, it may be the least transparent enterprise outside of the Kremlin – and just as awash in money.”

Is it possible this new coalition may propel other employers (and other payers) to band together and look for local alternatives to drive transparency in an industry that is notorious for obfuscation? The common word that is often used to change a particular industry is ‘disruption.’ Harvard professor Clayton Christensen started the Christensen Institute to address how industries can be changed (disrupted), usually through technological innovation.

The ‘pricing’ veil – A personal experience

This past December, after experiencing dizziness and double-vision, coupled with a slightly slower speech pattern, a family member was taken to an urgent care center in Mankato, MN. After undergoing a few initial tests, it was recommended the patient be transferred by ambulance to a hospital two miles away – presumably for more in-depth testing that was not available at the urgent care facility. Needless to say, this sudden turn of events was loaded with confusion over the cause of the medical problem and the impending worry.

As a patient or a family member of a patient, we seldom are prepared for what issues and challenges we face when seeking care due to a sudden medical ‘episode’ or ‘emergency.’ In fact, we typically fly by the seat of our pants when we enter the unknown world of healthcare. Even the well-intentioned medical staff are sometimes bewildered by the symptoms and possible causes of those symptoms.

Confusion reigns further when, in our case, the hospital’s electronic medical records don’t communicate with the tests previously performed at the urgent care center just 30 minutes earlier – even though both facilities are part of the same medical system! Because of this, identical tests (EKGs, blood work-up, etc.) were replicated at the hospital – unnecessary charges equating to additional costs for the payers – and increased revenue for the provider(s). I’m still working on that issue, by the way.

Thankfully, my brother and his wife were with us, which was both comforting and beneficial while attempting to discern the next course of action relating to tests and treatments. By default, we quickly assumed the role of being the ‘patient advocate’ – a daunting task.

Gratefully, the bank of medical tests found no cause for the aforementioned symptoms, although not knowing the cause remains a concern. As many of you know, the shock does not end when the patient is discharged following a litany of medical tests that occurred during a two-night stay. The second shock wave arrived a few weeks later in the form of an ambulance invoice in the snail mail and a host of ‘explanation of benefits’ found on our carrier’s website for all the other charges that occurred at the urgent care center and hospital.

The invoice for a two-mile ambulance joyride was only $1,887.79, while the urgent care facility chimed in at about $5,744.* The hospital invoice for tests and a two-night stay represented the price of a brand spanking new mid-level automobile – $24,579.40. All told, the total charges were $32,211.19, while the carrier applied their ‘network savings’ of $2,779.35.

In their recent article, “Why the U.S. Spends So Much More Than Other Nations on Health Care,” authors Austin Frakt and Aaron Carroll make the case, using a recent study in JAMA along with other research, that higher prices are the real culprit, more so than higher utilization of services by Americans when compared to residents of other countries. Yes, despite the increase in population size and the aging of U.S. citizens, health spending greatly outpaced the spending found in other countries, even after adjusting for other factors. Ashish Jha, a physician with the Harvard T.H. Chan School of Public Health is quoted in the Frakt/Carroll piece saying, “The U.S. just isn’t that different from other developed countries in how much healthcare we use. It is very different in how much we pay for it.

Why is this ‘pricing’ problem happening in the U.S., you might ask? Much of this has to do with fundamental limitations of competition in the American healthcare system. This veil of secrecy has little to no accountability on how prices are determined. Bezos, Dimon and Buffett are looking to blow up this highly-guarded industry standard. The rest of us can no longer afford to play the role of ‘innocent bystanders.’

After discussing the dearth of sensibility in healthcare pricing with a friend who works in the insurance industry, he sent me the following comical YouTube clip that cleverly attempts to address the medical price conundrum.

My recent family experience was yet another reminder that no matter our professional background, seldom are we prepared to confront the shock and confusion of the healthcare we receive…and the bills that result from that care.

The status quo in healthcare must be blown up. If existing players and stakeholders resist being part of real solutions, then the eventual sea change will sweep them into a new reality that may be difficult to survive.

As ‘real’ payers of healthcare, maybe employers can become the change they wish to see in the healthcare industry. After all, sometimes business interests can align with those of humans.

But only time will tell.

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*Some billing discrepancies remain while attempting to discern a number of charges found on Mayo’s list billing with what was paid by my insurance carrier.  The list-billing from Mayo, I’m convinced, was clearly not meant to be a consumer-friendly document.

Expansion of Medicaid – What REALLY Matters?

Quality care diceA new randomized and controlled clinical trial provides fascinating information for Iowa (and other states) to review while policymakers consider whether or not to expand Medicaid. I highly encourage you to read this study, as it helps frame the real issues we must focus on as a state and country.

Published in The New England Journal of Medicine, ‘The Oregon Experiment – Effects of Medicaid on Clinical Outcomes,’ study reviews the potential effects of expanding Medicaid to impact healthy outcomes when health coverage becomes available to low-income adults. As you have correctly guessed, the petri dish for this experiment was the state of Oregon.

When expanding Medicaid for the poor, the primary benefits can be lower depression rates, greater health-care utilization and the elimination of catastrophic medical expenses for those who acquire the insurance. According to the study’s primary author, Katherine Baicker, a Harvard health economics professor, “The purpose of insurance is not to just get you access to healthcare, it’s to protect you from financial ruin if you have an expensive condition.” Dr. Baicker was one of many speakers at Harvard’s “Forces of Change” series on healthcare that I attended in Boston a few years back…she is a wickedly smart and a concise researcher.

In Iowa, a great debate has erupted (mostly along partisan lines) about whether to expand Medicaid or pursue a new but untested plan offered by Governor Branstad. Both approaches have supporters and critics for a number of reasons – arguments founded on facts, emotion and, you guessed it, politics.

So what is the truth?

I don’t pretend to have the answer. However, the Oregon Experiment does give additional insight on the implications for any legislative activity enacted in this state. It is common knowledge that having insurance coverage allows us to seek medical care that will make us healthier and more productive…and we won’t go bankrupt. We also know that having insurance provides each of us a peace of mind, it certainly does for me. Finally, having insurance improves access to healthcare providers and services. Enough said, right?

Not so fast – after learning of this new study, we may need to reassess this logic and maybe qualify it a bit more. The study findings consistently support the importance of delivering QUALITY health care to our population. To borrow a quote from Dr. Ashish Jha, another wickedly smart physician and researcher at Harvard, “The explanation is simple. It’s not about access to healthcare; it’s about access to high quality healthcare.” Baicker’s recent study certainly supports Dr. Jha’s conclusions.

We cannot expect to have a healthier population by merely providing insurance to gain access to necessary care. In fact, there is evidence that shows doctors who spend a great deal of their time serving Medicaid recipients deliver lower-quality care. Insurance will unlock the door to gaining access to care, but having this access does not ensure we receive quality care that will improve our health.

The Affordable Care Act (ACA) attempts to improve access to care for those least fortunate in our society – and most everyone agrees that this is important. However, the ACA does little to control spiraling costs and improve the quality of care being delivered. By adding more insureds into an already dysfunctional, high-cost ‘system,’ will only make our health costs considerably greater and even more uncontrollable over time.

It’s like rearranging the chairs on the Titanic.

Improving the health of our population means that we must pursue logical steps to ensure that high-quality care is being delivered at a reasonable cost. Gaining access to care is not enough…we must commit to having high-quality care accompany this access. Dr. Jha articulated this point very well: “Quality is the link between healthcare services and better health outcomes.”

It is time to make sure this healthcare ship is traveling in the right direction. It’s what we all should demand…it’s what we all deserve!

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