Roadmap for Health Care Reform - Part 2

A more complete redesign of the healthcare delivery and financing system is needed. Healthcare has focused to date on curing sickness, but much of the profitability and opportunity for incremental revenue generation will result from a more consumer/patient centered view of healthcare¹. Costs can be optimized through increasing efficiency and by focusing on delay and prevention of expensive chronic disease². This is especially important for capping the contribution necessary from federal and state budgets. But revenues that can lead to investments in new technology and ultimately more choices for consumers depend on the private sector economy. Value for outcomes also needs to be increased through restructuring of business models for health care delivery, particularly for hospitals³.

The priority for immediate changes in the one to five year timeframe are centered around reducing costs of healthcare delivery through increased efficiency and increasing coverage through government subsidies, eliminating pre-existing conditions and enrolling more individuals that have lost their employment. But these changes are tactical in nature. If not balanced with a long term view they could easily lead to an irreversible course that constrains costs and allocates treatments by forcing people into a government run system. This is widely discussed as the advantage of a single payer system compared with other countries such as the UK in terms of pure efficiency and elimination of commercialism in medicine⁴. Alternatively, the more proactive approach to expensive chronic disease through patient enablement by health counselors in conjunction with personal health records, and wellness incentive programs provided by private health insurers will take us in the direction of budgetary stability and patient autonomy.

So while a national health care plan is needed for achieving a national consensus on the direction and making targeted investments, it must seek the role of catalyst rather than architect, and communicate the full implications of the structural changes. So far government has been able to successfully run the VA Medical system and the Medicare system. Both of these are centralized organizations that control pricing and delivery of services. What is needed in the redesign of the healthcare delivery and financing system is a decentralized, regional model integrating private enterprise as a change agent, and empowering the patient to manage their own health.

Taking the most successful regional models and helping them grow is one approach to doing this but most current delivery models are not delivering the level of value for outcomes and adapting quickly enough to new technology. Government alone cannot drive the remodeling of these systems since it is outside their expertise. Entrepreneurial activity must be allowed to flourish to restructure these institutions and provide new value networks. A long range vision of technology and medicine are needed to put in place the key public investments that anticipate and enable the integration of scientific and economic breakthroughs as early as possible into the system. But substantial private investment will be necessary as well to grow new companies that can actualize this patient centered model, based on new technologies such as low cost sequencing, electronic medical records, and decision support software to manage genetic information and integrate it with clinical record data to deliver more value to patients and increase their control of the process.

Budgetary constraints will limit the amount that government can accomplish in the near term. The temptation will be to cede too much control in exchange for increasing the insurance coverage of the population. But this would lead to effective government allocation of services to reduce costs, instead of increasing the value delivered in terms of wellness and management of costly chronic disease. We want to avoid the demographic spiral that this path could take as the population ages, since without better value delivery in chronic disease the health care system will be overwhelmed with costs, leaving little choice but rationing in the long term.

In six to ten year time horizon, we will move from the period of IT enablement for efficiency of delivery to a period of genomic information enablement, leading to major progress in costly chronic disease. While the information itself must be patient owned, it is a critical component of a changed health insurance model that optimizes value in outcomes rather than costs. Full genome sequencing will be at the $1000 level per patient within the next three years. A government investment in obtaining this information for all citizens, would be the next stage but a tax credit/subsidy approach would be the best solution to retain patient ownership of the information. The evolution of health counselors for chronic disease to genetic counselors will be needed to fully utilize this information in care delivery along with new decision support tools to educate patients and medical professionals.

While the removal of pre-existing conditions in health insurance is a fair and laudable goal, there has not been a figure published on the economic impact of this change. One possible implication is that private health insurance could be overtaken by an expanded Medicare, as people lose their employment and the government option has to absorb them. I prefer that we not expand the Medicare system, since it is inherently inefficient and leads to budgetary pressure to implement rationing. Therefore, the subsidy approach may be a better course to broker a solution for pre-existing conditions, with government assisting but leaving the private insurance industry in place to give them time to adapt to a new business model. As I mentioned previously the private insurance industry has a valuable role to play, but going forward it is much more than catastrophic risk reduction and cost management.

A major barrier to moving forward is the full implementation of information technology throughout the health care system. This is not for lack of effort or investment, but resistance to change in the processes of health care delivery. Government cannot make this happen. It must come from the institutions themselves, in partnership with private enterprise. The investment dollars that have been allocated to making these systems affordable still have not addressed how they are and should be used in a future health care setting. So there is a risk that this investment will be wasted. There needs to be something beyond a certification entity to enable these changes, since companies making these products want to make money based on what they have to sell now even though it is not the right solution looking forward. Once this array of incompatible systems is in place it will be very difficult to migrate.

These two issues are the major unsolved problems of the health care reform effort. In subsequent posts, I will focus on how to shift toward a patient centered model of health care delivery in the context of a remodeled private insurance industry (creating value through outcomes) and a forward looking implementation of financial and medical integrated health records (for continuous process improvement and patient autonomy).

¹Redefining Health Care. M. Porter, E. Teisberg. 2006.
--To be reviewed in a future post
²Critical. T. Daschle. 2008.
Review: Critical
³The Innovator's Prescription. C. Christensen, J. Grossman, J.Hwang 2008.
Review: The Innovator's Prescription
⁴A Second Opinion. A. Relman. 2007.
Review: A Second Opinion