Restructure or Die

This dramatic title represents the essence of what is missing from the current health care debate. The legislation is voluminous and opaque and the people are confused. The administration is successfully brokering a lot of one off deals with various parties and are to be commended as acting as a catalyst for the legislation. But it is a short term view.

Without a significant entrepreneurial infusion into the health care system to restructure the health insurance industry and the hospital care delivery system, the long term roadmap for the system is to continue to expand in the current cost inflation until there is no more budget, which then leads to allocation and a completely government run health care. Government subsidies to improve access with consumer coverage guarantees will ease the pain and bring in votes but completely miss the opportunity to change the direction.

Frankly I am shocked that the debate has continued to narrow its focus to a tactical reform of the health insurance industry. It is no longer health care reform but cost containment and brokering a deal to give the insurance industry more customers, while allowing them to provide reduced benefits so that the transaction is profitable all around. This perpetuates the current structural problems in the system such as the dominance of Medicare pricing model to fix prices and the inefficiency in hospital care delivery. In addition, it gives the insurance industry a free pass not to change their business model to add more value to the system.

So I have to say in this crucial month of August for reform, we need some immediate intervention by the private sector of America's largest corporations that will have to deal with the aftermath of this. Because it directly affects our competitiveness in the marketplace across the entire economy. If we stay on the current "glide path", eventually the employers will give up and let the government take charge with a single payer system to reduce their cost basis. This will be bad for all of us.

Here is how this could be avoided. Granted there needs to be a bill passed this year. And the groundwork has been laid for budgetary compromise, with pharma chipping in $80B, health insurance companies chipping in, and some new taxes to fund the subsidies to extend coverage. But this is only papering over the problem. In ten years, we will face another balloon payment and this time the demographics will be so difficult with aging of the population that we will be forced into allocation (also called rationing) within a single payer framework. In parallel with the current legislative progress, there must be a commitment to restructure the business propositions of the health insurers and the cost and value delivery of the hospitals. I recommend that CEO's of leading companies that have a large stake in this meet with some academic leaders such as Harvard in particular to find a path for restructuring care delivery.

For the health insurers, there needs to be a wake up call somehow built into this legislation that the status quo cannot continue. President Obama's solution to this was to have a public option to compete with them, but this just increases the downward slope of the curve toward a single payer system. Of course, for the efficiencies and value delivery to take hold, it hinges on the IT infrastructure build out, which is mainly a technical issue but also an adoption issue by the physicians. There needs to be a third directed effort to accelerate progress here not just with funding but also with expertise. I am recommending that companies in the new economy such as Google take the lead here. Microsoft is making a large investment but their vested interests in the enterprise market make them unlikely to play a neutral role.

I will continue with my own research into the ideas from Harvard and others, but I am more likely to pursue the IT related part of this puzzle myself. In particular, I am trying to identify some of the barriers to the adoption and building out of a patient controlled model. In addition, I plan to continue to post on the roadmap, because this is the missing piece for a consensus on true health care reform, not just for insurance companies. I may have some ideas for insurance companies along the way, but what is needed is to educate their executives about how to manage chronic disease through incentives and health coaching, such as the United Health's subsidiary is doing. This is still a small part of their business and takes a back seat to acquisitions for increasing their revenue and profitability. Shareholders need to be satisfied in the short term but if we are forced into single payer, they will lose it all.