Healthcare Facts and Fiction: What the General Public Needs to Understand About Healthcare in America 

Understanding healthcare delivery, pricing, payment and business is a complex dissection. We necessarily limited the scope and depth of this series as it would literally take several books to cover in any greater detail. In this final installment we will cover the single greatest factor contributing to expanding US healthcare costs and what you can do about it.

Part Five: The Single Greatest Cause of rising US Healthcare Costs (It's probably not what you think.)

Remember the good old days when parents played with their children? Outside? Remember when most kids held summer jobs, usually scut work,  you know, physical labor? Today there are actually places like Utah passing legislature allowing children to play outside with and without close adult supervision. A law? To play outside? Child labor laws have become so constrictively narrow and inhibiting that most work in most states requires a minimum age of 16. To see how onerous the laws are go to  the US Department of Labor site https://www.dol.gov/whd/state/agriemp2.htm

Government has legislated inactivity as a given minimal point while common sense has relegated physical activity to mainly organized sports. Pick up games of any sports are rare. Aside from severing connections with the outside world and retarding any work ethic development, the health consequences have been disastrous for children and adults.

Land of the Fat, Home of the Lazy

How bad? The chart below is a great state by state visual on adult obesity:

Prevalence¶ of Self-Reported Obesity Among U.S. Adults by State and Territory, BRFSS, 2016¶

Prevalence estimates reflect BRFSS methodological changes started in 2011. These estimates should not be compared to prevalence estimates before 2011.

Source: Behavioral Risk Factor Surveillance System
*Sample size <50 or the relative standard error (dividing the standard error by the prevalence) ≥ 30%

"No kidding," you may say, or, "Who cares?" Here is the crux of the situation for US healthcare:

"The estimated annual health care costs of obesity-related illness are a staggering $190.2 billion or nearly 21% of annual medical spending in the United States. Childhood obesity alone is responsible for $14 billion in direct medical costs (1)."

Obese people, defined as those with a body mass index (BMI) greater than 30, are financially crushing the US healthcare system compared to those with a normal or healthy weight. Needless to say, obese people are also more expensive employees based on productivity, illness, and insurance costs. Obese people are also at risk for serious diseases like (2):

Increase in all-causes of death (mortality)

High blood pressure (Hypertension)

High LDL cholesterol, low HDL cholesterol, or high levels of triglycerides (Dyslipidemia)

Type 2 diabetes

Coronary heart disease

Stroke

Gallbladder disease

Osteoarthritis (a breakdown of cartilage and bone within a joint)

Sleep apnea and breathing problems typically leading to the cardiac dysrhythmia atrial fibrillation

Numerous cancers including endometrial, breast, colon, kidney, gallbladder, and liver

Low quality of life

Mental illness such as clinical depression, anxiety, and other mental disorders

Lower back, foot, knee, and hip degeneration leading to chronic pain and early joint replacements 

Examining Children and Youth

Sobering views are gleaned from the children and youth data. The graph below (from Statista (3)) shows, "... one in ten preschoolers aged 2-5, one in five children aged 6-11 and one in five adolescents aged 12-19 is considered obese. That trend is most worrying, given that young people are far more likely to stay obese while childhood obesity is linked to a higher chance of an early death in adulthood. As grim as these obesity figures are, they are only part of a far larger problem in U.S. society. Just over 70 percent of all Americans are either overweight or obese, meaning people with normal weight levels are now a minority."

(charted by Statista)

One more graph by Matthew Green shows a similar picture:  https://infogram.com/us-adult-obesity-rates-since-1960-1gzxop49on65mwy

The Gist

America is a grossly overweight and obese populace. Various reasons have been proffered for this current situation including the favored social scientists triad: socio-economics, educational deficits, and genetics. While there is some validity to the financial causes it cannot be "the hook to hang the hat" in this case. Junk food like various chips and other highly processed foods is surprisingly expensive to the point of exceeding fresh produce prices for certain fruits and veggies. True head to head comparisons are not possible, but check in the grocery store next time and you will be shocked what you find. What is does take is more planning for shopping excursions. Intellectually unaware of "good" versus "bad" food choices is also a limited excuse for picking nutritionally poor foods. If you can read labels you can basically see what you are getting. Avoiding high fructose corn syrup, sugar, added salt, and so many multisyllabic words is a great start. Simply: avoid processed foods and go with fresh whenever possible. Genetics is the real laughter of excuses. From the CDC, "Genetic changes in human populations occur too slowly to be responsible for the obesity epidemic (3)." Case closed.

A great way for Americans to change the healthcare consumption curve, that is to lower it, remains simple. Get up and get out. Stand whenever possible at work. Walk whenever possible and as far as possible. Eat fresh as often as possible, consume smaller servings and avoid processed foods, fried foods, and "junk" foods. 

What all this means are true lifestyle choices like not watching as much TV or eliminating it altogether saving big dollars for... better food of course. Making activity a daily part of your life along with the discipline to eat less and better foods. This applies to children who will hopefully rekindle spontaneous play and parents wise enough to allow it.

(1) Economic Costs of Obesity | Healthy Communities for a Healthy Future

www.healthycommunitieshealthyfuture.org/learn-the-facts/economic-costs-of-obesity/

(2) https://www.cdc.gov/obesity/adult/causes.html

(3) https://www.cdc.gov/obesity/adult/causes.html

Today's post has Senior Editor and Contributor Tony hitting a rare serious tone. Prepare to be challenged, prepare to converse and read on:

So many Christians, so much tolerance…

"There's a banner waving saying tolerance will set you free, it's the latest thing
While the consequences it leaves behind are like a ball and chain"

These are the lyrics to a song by Christian artist Steven Curtis Chapman. If you are a “Christian”, at some point, a “believer” will tell you that “you need to be more tolerant, like Jesus was”. Problem is, there is nothing in scripture that says or even suggests that Jesus or any other Christian for that matter was tolerant of anything. In fact large parts of the recounting of Jesus and His apostle’s encounters with people of the day, seem to say the opposite.  This suggestion of tolerance will be given with the understanding that “we also need to be more loving like Jesus was”. Before we get too far, let’s look at the definition of tolerance or tolerate:

Tolerate  tol·er·ateb   allow the existence, occurrence, or practice of (something that one does not necessarily like or agree with) without interference.

"a regime unwilling to tolerate dissent"

synonyms:

allow, permit, condone, accept, swallow, countenance; More

accept or endure (someone or something unpleasant or disliked) with forbearance.

"how was it that she could tolerate such noise?"

synonyms:

endure, put up with, bear, take, stand, support, stomach, deal with;

abide

"he couldn't tolerate her mood swings any longer"

be capable of continued subjection to (a drug, toxin, or environmental condition) without adverse reaction.

"lichens grow in conditions that no other plants tolerate"

From Dictionary.com


So, nowhere in the definition does it mention that tolerance and love are mutually inclusive or exclusive. In fact it doesn’t mention the word love at all. Obviously as we know from the account of Jesus’s life and who He was, He loved everyone, unconditionally. However, that in no way infers that sinful behavior is to be tolerated. If sin was just going to be tolerated, why would we need a Savior? Let’s look at what Jesus said to and about people and our sin:


Passover of the Jews was at hand, and Jesus went up to Jerusalem. In the temple he found those who were selling oxen and sheep and pigeons, and the money-changers at their business. And making a whip of cords, he drove them all, with the sheep and oxen, out of the temple; and he poured out the coins of the money-changers and overturned their tables. And he told those who sold the pigeons, ‘Take these things away; you shall not make my Father’s house a house of trade.’” (John 2:13-16)


“Do not give dogs what is holy; and do not throw your pearls before swine, lest they trample them under foot and turn to attack you.” (Matthew 7:6)


“Do not think that I have come to bring peace on earth; I have not come to bring peace but a sword. For I have come to set a man against his father, and a daughter against her mother, and a daughter-in-law against her mother-in-law; and a man’s foes will be those of his own household.” (Matthew 10:34-36)

Have you read that he who made them from the beginning made them male and female, and said, ‘For this reason a man shall leave his father and mother and be joined to his wife, and the two shall become one? So they are no longer two but one. What therefore God has joined together, let no man put asunder.’” (Matthew 19:4-6)


“I came to cast fire upon the earth; and would that it were already kindled! …. Do you think that I have come to give peace on earth? No, I tell you, but rather division…” (Luke 12:49-51)


“Thus you witness against yourselves, that you are sons of those who murdered the prophets. Fill up, then, the measure of your fathers. You serpents, you brood of vipers, how are you to escape being sentenced to hell?” (Matthew 23:31-33)


“For you will always have the poor with you…”

 (Matthew 26:10)


“…go and do not sin again.”(John 8:10)

7 At this they began to argue with each other because they hadn’t brought any bread. 8 Jesus knew what they were saying, so he said, “You have so little faith! Why are you arguing with each other about having no bread? 9 Don’t you understand even yet?(Matthew 16:7-9) 


And that’s just really for starters, He also rebuked His parents when they scolded Him for staying behind, when He was 12 years old to teach in the temple. He also admonished the Samaritan woman at the well for continuing to lead a sinful lifestyle. But being intolerant of our sins doesn’t mean He didn’t love us. My kids do all kinds of stuff I will not tolerate, but I still love them, I did all kinds of stuff my parents could not tolerate, they told me to stop acting like an idiot, behave and grow up. They never told me they no longer loved me! But that’s the story from most “believers” today. The reason, the purpose of what Jesus really lived and died for, has been rewritten to ease the conscience of a world that no longer takes its relationship with its Creator as literal.


Revelation 17 tells of the Harlot or Harlot church. Some speculate that it is the perversion or twisting of a certain denomination of sect of traditional Christian faith, the turning of an established church if you will. I don’t think it is limited to the falling away of a particular denomination. I think it is the magnification and multiplication of what is happening to believers throughout the world, the steady mission creep, from the belief that the repenting of sin is what God wants, to God just loves everybody and He sent Jesus to let us know that love is all that matters. This is what Paul said about how people will act;


 Having a form of godliness but denying its power. Turn away from such as these!  (2Timothy3:5)

And James said this;


You adulterers! Don't you realize that friendship with the world makes you an enemy of God? I say it again: If you want to be a friend of the world, you make yourself an enemy of God. 

(James 4:4)


It’s important to say what we know and know what we say. It’s important to know what the Bible says. It’s important to know the “nature” of God and how He works:


"Not everyone who calls out to me, 'Lord! Lord!' will enter the Kingdom of Heaven. Only those who actually do the will of my Father in heaven will enter. (Matthew 7:21)

"If you love Me, you will keep My commandments. (John 14:15)


Be aware of the person who “scolds” you for not being tolerant and loving like Jesus. And like Jesus it will very likely be someone you know well, someone who you respect and believe to be a strong Christian. Someone whose opinion you trust and whose walk you might admire. But understand,  that’s how the evil one works. Why would you emulate or consider the opinion or admonishment of someone for whom you have no respect? Make no mistake, the blind are leading the blind even now. They are using the guise of compassion and tolerance as a compass to pull off course those who have not studied the road map of the Holy Bible. The portrait of the returning Jesus in the final book of the Bible seems a little less than tolerant;


From His mouth comes a sharp sword, so that with it He may strike down the nations, and He will rule them with a rod of iron; and He treads the wine press of the fierce wrath of God, the Almighty. (Revelation 19:15)


The next time someone questions your walk with Jesus or tries to use your faith against you, and there will be a next time, if you are telling people who you are and what you believe. Find a Christian and not just a “believer” and ask them this: “can you show me in the Bible where it says that as followers of Jesus, we must be tolerant”? If the answer is “no where” sit down and talk with them for a while! If the answer is something else, walk away!

Healthcare Facts and Fiction: What the General Public Needs to Understand About Healthcare in America, Part IV.

Understanding healthcare delivery, pricing, payment and business is a complex topic dissection. As such, we initially approached healthcare in a general fashion for Part I. Part II explained drug procurement and pricing. Part III explored the physician pathway educational process, practice and physician expected earnings. Part IV explores insurance and how it both impacts healthcare costs and dictates physician care.

Part Four: Healthcare Insurance- The dog that wags the tail

Editors note: This is a vastly wide, complex and varying subject, consequently this article is general. The intent is defining who really runs US medical care.

The snow fell hard and fast that late winter day. Two feet, then three and finally a bit more than four feet of the fluffy stuff. The above freezing warm weather following this snow roared in quickly accompanied by rain. The snow soaked in the rain, sponge-like, increasing the already stressed roofs with even more weight. With a crack, screech, and whine all 1248 square feet of the greenhouse roof buckled. In a snap the greenhouse was no more. Oh well, insurance picked up most of the cost to rebuild, but not all of it. Hey that's why we pay for property insurance after all. It's something we have for various needs, but never want to use. When required though, it can be a financial life saver.

Health insurance is probably the most confusing, convoluted, user unfriendly and all-controlling part of the US medical system. What other business is told how much they can charge and then how much they will be paid of that charge? Imagine a mechanic replacing your brakes and being told they can only charge $175 for the complete job regardless the time and resources utilized AND then being told the type of brake, manufacturer, and that the insurance company will be renegotiating this cost next year based on the mechanic's final work outcomes and customer satisfaction ratings. Oh, and the mechanic will not be paid for 90 -120 days or not at all if the billing and coding are not exactly as the payer dictates. Let that sink in for a moment and you realize rather quickly that your mechanic will stop doing brake jobs as he is losing money on that facet of vehicle maintenance and repair. Or he might find a competitive advantage that includes not working on your car because you have a heavy brake foot and need new brakes more frequently than the payer deems necessary. Your medical care is dictated by the medical insurance industry including Medicare and Medicaid (CMS- Center for Medicare and Medicaid Services) in just such fashion. If you understand this example you understand what your hospital and physician endure taking care of you and staying in business. Operating in the medical arena is demanding, difficult, and dictated. 

How is reimbursement decided? For CMS there is a disparity between payment based on geography, and outcomes ranking. For example: a routine total knee replacement may be reimbursed $36,000 in Philadelphia and $31,000 in State College, PA. So if you live in a high cost of living area you will probably be paid more than a lower cost of living area of the country. And if the physician's over-all outcomes are good the physician will also be reimbursed more than if his outcomes are not as good as the area average standard outcomes. Private insurances usually follow CMS's lead with one exception: they usually negotiate the fee and renegotiate that price annually. So one hospital or physician group may receive differing reimbursements than another in the same geography. 

If profits indicate the health of a business then health insurers are doing just fine. 

Favorite Strategies for health insurance companies profit line.

Insurances make money. Lots of it. So how do they become so profitable? By not paying out more in claims than they collect in premiums. For simplicity and brevity the following are some strategies used to make sure the equation: money in > money out remains intact.

High premiums and high deductibles- From CNBC, "According to eHealthInsurance, for unsubsidized customers in 2016, "premiums for individual coverage averaged $321 per month while premiums for family plans averaged $833 per month. The average annual deductible for individual plans was $4,358 and the average deductible for family plans was $7,983" (1). By 2017, according to PeopleKeep, the average family premium (without subsidies)—$1,021, which is 23 percent higher than the average premium of $833 for 2016 open enrollment. Average annual deductible for families—$8,352, which is a 5 percent increase since 2016 (2). Let's view this another way: in 2017 a family paid out of pocket    $12, 336 in monthly premiums and $8,352 in deductibles for a total of $20,688 out of pocket. Keep in mind this is paid with after tax dollars so the financial hit is significant, as in afford a home or not. For some it is more cutting. After meeting the deductible the insurer typically pays 70-80% of billed services. Again, there are many numbers and variations. I am using the "typical" ones. 

Rejecting claims- insufficient documentation or incorrect documentation are usual excuses along with non required care, uncovered care (I.E.- you go to an urgent care or ED for a strep throat when your doctor's office is open.)

Not paying the hospital or doctor for 90-120 days- This situation makes money management (revenue cycle management in business jargon) challenging. The insurance company uses this time period ostensibly for billing accuracy and revue, but investing the proceeds (short term treasury notes for example) for that extra time makes the insurer money. You may have heard this as "investing the float".

"Gaming the system"- Medicare Advantage Plans are sold by private insurance companies like Aetna, Human, and United Health. These Advantage plans are quality rated with Medicare paying annual bonuses to those with the highest ratings. If a plan was not rated high enough to receive the bonus, insurers would move the patients to their other high rated plans. This process is known as "cross walking" and thus insures they will receive the Medicare bonus payments. According to the WSJ, 1.45 million Medicare Advantage members were moved into higher-rated plans for 2018 (3).

Prior authorizations and step therapy- Prior authorization (PA) is a tedious process utilized by insurers to limit or not pay for certain medications, diagnostic tests, and specific treatments. PA mandates specific forms by the insurer before the treatment is OK'd by the insurance company, meaning they will pay for it. It also is a direct wedge between the patient and physician. This PA process burden is the physician's or health system's responsibility and becomes quite expensive in human hours invested. That computes to an average 36.6 PAs per week taking 16.4 hours. This PA process costs patient care delays of greater than 0ne day and up to five days for 60% of respondents in this AMA survey of 1000 doctors(4). If not PA'd the patient pays the entire fee or foregoes the prescribed therapy. 

Step Therapy is simply trying one treatment course (the cheapest), failing it and moving to the next one. The problem is this is a cookbook approach. Your specific situation may require the most expensive therapy in your doctor's clinical experience, yet that is pushed aside for the "one size fits most" approach. After the requisite failures (steps) the optimal treatment is reached. The problem remains the time delay achieving the best patient treatment the physician initially decided. For some ailments the delay is inconsequential,  for others it is mortal. 

Formulary- A doctor can write for a drug but that does not mean you will get it. To receive a drug it must be on the insurance formulary list of accepted medications. This is another way to drive insurance company costs down using lesser cost meds known as generics or non-branded drugs Many times it is fine and generics suffice. Other times it simply does more harm than good (Some doctors and patients swear by certain branded meds such as specific thyroid preparations, anti-hypertensives, and many diabetic meds.).

Quality Measures- Let's look at Comprehensive Primary Care 3 (CPC3) an alternative payment program run by CMS. This program attempts to improve population health by signifying specific goals For example, CMS deems it essential that everyone have a flu vaccine annually. If you decide you don't want a flu shot that is flagged by data collection and the doctor gets "dinged' for it meaning it is like a demerit. It also means lesser payment from Medicare or Medicaid (CMS). Type II diabetic? Hemoglobin A1c needs to be less than or equal to 6.5. If a patient does not take their medicine, control their diet, exercise and lose weight, chances are they are not to goal. Ding, ding, ding! 

HMOs, PPOs- If you seek or receive medical care out of network you will pay a higher fee. You can't always see who you want without your plan's authorization.

Of note there are also alternative payment models such as "bundling" for a specific procedure such as a total hip replacement. Bundling is a lump sum for patient's care across all providers for the patient. This is not an exclusive list but it does represent some of the most prevalent insurance company cost avoidance tactics.

Findings:

1. Remember the golden rule: He who has the gold makes the rules. Insurance companies and the government via CMS have the gold and dictate what care and increasingly how your physician cares for you. Also note health care rationing comes in many colors, sizes and shapes such as PAs.

2. Patients are a huge and rarely mentioned component driving up medical cost and usage. Look around. See any examples today?

3. Socialized medicine is here under the guise of "Population Health", a one size fits all approach. Look around at others when you are out today and think about that carefully. 

Part V, the final installment in this series, will list US healthcare facts and solutions. Some folks will probably take offense and label the solutions "controversial." Reality remains reality no matter who is uncomfortable with it.

(1) https://www.cnbc.com/2017/06/23/heres-how-much-the-average-american-spends-on-health-care.html

(2) https://www.peoplekeep.com/blog/affordable-care-act-policy-costs-up-in-2017

(3) https://www.wsj.com/articles/insurers-game-medicare-system-to-boost-federal-bonus-payments-1520788658

(4) https://www.ama-assn.org/sites/default/files/media-browser/public/government/advocacy/2016-pa-survey-results.pdf

(5) https://health.usnews.com/health-care/for-better/articles/2017-07-13/5-ways-insurance-companies-meddle-in-your-health-care

A St. Patrick's Day View

From Contributing Editor Tony Doyle

St. Patrick’s Day commemorates the passing of the missionary who it is believed brought Christianity to Ireland in the AD 400’s. As with almost all holidays, the “fun” stuff has been added in later, leprechauns, the green everything, the pot of gold, the four leaf clover, the “luck” of the Irish Connie and I are both Irish, (her maiden name was Greene) but I don’t believe in luck. I don’t believe anything happens per chance. I believe in execution and deliverance. If I execute my marriage vows, I will be delivered from the woe that comes from a broken marriage. If I execute my duties as a father, I will be delivered from the sadness over the choices my children might make. If I execute my obligations as a friend, I will be delivered from the failure of those friendships. If I execute my work out and diet plan, I will be delivered from the average and the limitations that come with it. If I execute the practice of common sense, I will be delivered from the walk back of bad decisions. But, the words execution and deliverance have many meanings. The execution of Jesus Christ delivered me from my sin and secured my eternal soul. It’s all about execution and deliverance. Happy St. Patrick’s Day, I hope you are “lucky” enough to be delivered! God bless ya’ll!

Healthcare Facts and Fiction: What the General Public Needs to Understand About Healthcare in America. 

Understanding healthcare delivery, pricing, payment and business is a complex topic dissection. As such, we initially approached healthcare in a general fashion for Part I. Part II explained drug procurement and pricing. In Part Three we will explore the education, practice, and payment of physicians. Leave your pretensions at the door. It's not what most people think it is.... 

Part III: The doctor investment: time, education, licensing, expenses, and income.

He drove down the street in his new Cadillac, an annual spring automobile ritual for as long as you can remember. You also remember the garage to the house he pulled into. The one in the exclusive neighborhood. His wife gorgeous, his children in new clothes every season of every year. They bought the latest electronics, bicycles, and gadgets of all types. First in the neighborhood to have color TV. The family vacationed as regularly as the seasons changed. The life of a town doctor was self-directed, income steady and professionally rewarding. That was the 60s, 70s, and even into the 80's. The upscale life of most physicians is long gone along with autonomous and satisfying work. It's a tough way to make a living in 2018.

The Education and Cost:

An aspiring 18 year old future physician must first attend a basic four year undergraduate school typically majoring in biology, pre-med, or some similar life science based degree. This cost is widely variable so let's look at Lancaster County, Pennsylvania where there is a private Ivy League (Yes, Ivy League.) school and a state university. Franklin and Marshall is the private institution that will set you back $69,243 per year including tuition, fees, room and board. If eligible for grants the cost drops to $28,157 per year according to CNN Money (1). Either way it is four years and between $112,628 and $276,972. We will take the $276,972 as the cost as grants and scholarships are like the weather, unpredictable and uncertain. For state residents on a budget there is Millersville University where a four year degree, including in-state tuition, fees, room and board for state residents tolls in at $114,700 (1) pre-grants and scholarships.

Undergrad Cost: $114,700 at a state university and $276,972 at a private college.

Medical school is the next step for this now 22 year old hopeful physician. Here begins the real fun. First you must take the MCAT exam for a mere $315 and you must do well on it so you pay varying costs for prep classes and materials. The next fee faced is the American Association of Medical Colleges (AAMC) who will charge you $160 for your first medical school application submission and $39 for each additional school thereafter. Keep in mind there may be a secondary application fee of up to $200 demanded by the medical school. Additionally some colleges charge "... a small fee to forward your college transcript" (2). There will be a live interview, which means travel and probably an overnight stay to add to the cost.

Like undergraduate school costs, actual medical school tuition varies from in state to out of state. Let's say our above Pennsylvania student wishes for Harvard and the $53,581 per year price tag or Johns Hopkins for nominally less $47,284 annual tuition (3). Ok, the cost is too great so this student chooses Penn State University charging $41,860 yearly for in state residents. So that leaves us on the less expensive PSU Med School side at $167,440 and another four years of time and study.

Medical School Application Process and MCAT exam: $475 minimum to as much as $4000.
Medical School Tuition: $167,440.

The now 26 year old student is currently $282,615 in debt for a state resident attending a state university and a state medical school. Intern/Residency is the next educational step and not as financially destructive as undergrad and med school. This physician education phase lasts 3-5 years. The first year, usually known as PGY-1 (Post Graduate Year 1, sometimes known as the "intern year"), exists as a general introduction to all medical areas like emergency, obstetrics, internal medicine, general surgery, and orthopedics among many others. Our future physician then spends the next two to four years in their chosen area of practice. For example, cardio-thoracic surgery may require five years total residency while cardiology may be three years.) Our fledgling doctor wants to be a cardiologist so her residency is three years. All is not lost as she now is paid $62,000 per year with the average resident pay over all specialties listed at $57,200 (4). Sounds pretty good except this is for 60-80 plus hour work weeks that were much longer and more rigorous in years past. If you find a doctor over age 45 or so, you can bet they worked 100 hour or greater weeks routinely as residents.

Now 29 years old and not so young anymore, our student really desires the allure of the cardiac cath lab. That Interventional Cardiology job requires a Fellowship of, yes, four more years. Ok, now our student is ready to embark on her medical practice journey at age 33 and with probably a few more thousand dollars debt, especially if she married and became a mother. Let's round up to $300,000 debt in a very conservative number and best case scenario. The interest rate is 4.56% on the undergraduate loan, 6% to 7% for the graduate (med school) loan (6). While our intrepid doctor does not need to pay off her student loan principal yet, she will accrue interest from day one of her undergraduate loan so waiting to pay until after her fellowship is not in her best financial interests.

Fifteen years of Training 

Our student has taken exams, lots of exams to cross the physician finish line, but the biggest lies ahead:  Board exams. Initial internal medicine boards cost $1385 followed by interventional cardiology boards priced at $2905 for our young physician. Enter one of the more nonsensical situations facing physicians. To remain "boarded" physicians are required to sit for their respective boards every ten years (Family Practice is every seven years.)! There is a cost break at $650 for the internal medicine board exam and $1200 for all subspecialties. The option is a "knowledge check" for internal medicine every two years costing $150 ($650 over ten years) and $240 for all other subspecialties ($1200 over ten years). Additionally there is a maintenance of certification (MOC) annual fee of $155 per year for another $1550 over ten years (5). So for our newly minted interventional cardiologist it will cost $2200 for IM boards/MOC plus $2750 for interventional cardiology boards/MOC.

$4290 for initial board exams then $4950 for MOC/Boards every ten years

So why all the fuss over "Boarding?" Board certification becomes important based on insurance payments, the financial life blood of all medical practices and systems. Boarded physicians are usually readily accepted to "participate"meaning receive payment from an insurance company. An unboarded doctor down the street practicing the same medicine for the same time span who is not boarded may not be allowed to "participate". That means insurance companies can limit competition and control pricing more easily with fewer participating physicians. Insurance companies love this quirk as squeezing prices downward and paying less is always in their best interest. A currently boarded physician is more clinically astute and therefore worth more money remains both ABIM's and insurers' battle cry even though there is no objective proof this is true after initial boarding. There was and still is considerable push back from physicians to this entrenched money extracting policy by both insurances and ABIM. It is simply not feasible for most physicians to carve out the time to study and shell out after tax dollars to retake an exam every ten years. Fortunately there is the new ABIM, every two year knowledge check in lieu of the every decade year exam. There is no other profession requiring retaking board exams after initial passing. The norm is maintenance by verifiable continuing education units (CEUs). I did review the twelve top ABIM executives and found no overt, formal insurance company relationships, but that doesn't prove unequivocally their are none.

Board Certification exams are monitored and offered by ABIM (American Board of Internal Medicine), which is the governing umbrella for most MD physician (DOs have their own boards) board exams and certifications in America. ABIM turns out to be a very lucrative "gate holder" industry. From the ABIM website, fiscal year 2017 shows a $54.8 million budget of which 15% goes to administration and 6% to governance totaling $11,508,000. "Physicians working for ABIM earn $400,000 to nearly $1,000,0000 annually" and "It has been estimated ABIM receives approximately $4,000 for each [exam] test question it develops" (7). Great work if you can get it. Many physicians are no longer taking this financially extractive situation lightly. Currently over 22,000 doctors have signed a petition challenging ABIM and forming a new organization: National Board of Physicians and Surgeons (NBPAS) causing the new ABIM MOC/Board process change to include the new every two year knowledge check as a very contentious and open physician revolt expanded and still rages.

Fifteen years of training and I make what and pay $45,000 annually for malpractice insurance?

Physician pay isn't what it used to be.  Our interventional cardiologist is now 33 years old, at least $300,000 in debt, probably more, and has lost out on eleven years of true income producing work that many of her high school classmates with undergraduate degrees in science and technology enjoyed. Bluntly assessed, she has lost eleven years of earning time. Now the good news: the national average annual salary for interventional cardiology is $427,000 (8). For perspective a primary care internal medicine doctor sees $219,000 average annual pay with most internists under the $200,000 threshold (8). Our doctor's salary sounds good and it is good until you look at servicing her school debt, malpractice insurance, taxes, and office overhead including Electronic Medical Records (EMR).


Malpractice insurance for our interventional cardiologist who will now practice in Pennsylvania falls somewhere on the lower end of general surgery rates or about $45,000 annually (9). Again for reference, the general internist pays on average $21,500 annually and Pennsylvania has the second highest malpractice rates (Only NY is higher) in the country (9). Malpractice insurance rates are based on court payouts and PA is a terrific payout state. And taxes! The 2018 new federal income tax rates place our doctor solidly in the 35% tax bracket. Servicing a $300,000 debt at 6.00% (The probable interest rate on her loans as discussed earlier.) over twenty years means $2149 per month payment. And electronic medical records (EMR)! EMR is legally mandated for obtaining Medicare and Medicaid payments and will cost an exorbitant $25,000 if she is an "add on" to an existing system meaning she has partners already on an EMR system (10). If she is solo, which is cost prohibitive, the expense can reach $100,000 or more.

Medical professionals spend 55 cents of every earned dollar on overhead (9). Outside of the costs discussed, much of this is related to medical coding and billing, and meeting EMR requirements. Medicare and Medicaid represent about 16 million patients in the US with Heart and/or cardiovascular disease. Many health insurances are also pressuring EMR adoption with slower physician payments as the steady pressure to those not submitting bills electronically.

So Let's Work: Another $735 every two years for medical licensure and $731 every three years for a DEA License

Yes, the medical doctor in our example must also obtain specific state mandated CMEs plus CMEs of choice to total 50 every single year to maintain an unrestricted Pennsylvania state medical license. More time and sometimes more money. Time to work....

Not so fast! Enter the insanely labyrinthine insurance credentialing process and individual state medical licensure craziness. A physician must have a National Provider Identification (NPI) number, a state medical license, a DEA number, and in some states a Pharmacy License. Credentialing is the process whereby the physician must fill out a grossly long (about 25 pages), nonsensically complex and laborious questionnaire so the physician may "take part" with a specific insurance. Oh, and she will get to perform this unbelievably silly exercise for every insurance company she wishes to participate with: code for "paid for her work and told what her work is worth, not what she charges". Insurance companies love dragging their feet in what seems an exercise in asserting dominance. The entire licensing and credentialing process can take 3-6 months and sometimes longer. Pennsylvania does not list its costs and time for medical licensure but adjacent NY does: $735 and 8-12 weeks.

If the physician moves from 10 Main Street to 12 Main street, guess what? They get to redo the entire tortuous credentialing process again based on a simple address change. One can only look at this situation and wonder why anyone would want to become a doctor in the United States. Insurance controls the industry at the political level (Medicare Part D and ACA are the most recent examples) and the provider level (Insurances "negotiate" what doctors will be paid and hold the right to deny physician payment or lower it.). Free market? Hardly.

Many of these year to year  practice expenses like malpractice insurance, EMRs, re-boarding and licensing can be mitigated if the physician decides to join a hospital/health care system. The trade off is a lower salary for less initial financial output and ongoing medical business headaches particularly in the coding and billing realm.

The final tally: 15 years and approximately $375,868 in debt to join a private practice or start a practice with some other newbies, or $300,000 to become a health system employee. Forget a solo practice as it is cost prohibitive. Return On Investment may be minimal or negative based on physician life span and uncertain future medical system legislative changes. Don't forget the long hours, call time (Anyone out there like being awakened in the middle of the night, weekends, holidays?), and other myriad regulations not mentioned in this short article.

Keep in mind this is a general example and there are many variations and considerations. Inclusive information would take volumes. The salient points: Becoming a doctor is expensive in money, time, and bureaucratic red tape. Financially extractive policies exist throughout boarding and licensing for the doctor to remain legally qualified to work. Insurance controls healthcare.

We haven't covered the AMA, coding and billing, insurance price negotiations, insurance care directives, and other health insurance industry shenanigans. They await in Part IV...

(1) https://money.cnn.com/tools/collegecost/collegecost.htm

(2) https://students-residents.aamc.org/financial-aid/article/the-cost-of-applying-to-medical-school/

(3) http://medical-schools.startclass.com/compare/24-70/Harvard-Medical-School-vs-Penn-State-Milton-S-Hershey-Medical-Center-College-of-Medicine

(4) https://www.medscape.com/slideshow/residents-salary-and-debt-report-2017-6008931#9

(5) http://www.abim.org/maintenance-of-certification/moc-faq/moc-fees.aspx

(6) https://www.accesslex.org/xblog/2017-2018-interest-rates-announced

(7) http://bilhartzmd.com/?p=1010

(8) https://www.glassdoor.com/Salaries/interventional-cardiologist-salary-SRCH_KO0,27.htm

(9) https://www.gallaghermalpractice.com/blog/post/how-much-does-medical-malpractice-insurance-cost

10) https://www.usfhealthonline.com/resources/.../electronic-medical-records-mandate/


(11) https://medicushcs.com/physician-licensure-application-fees-and-timelines-by-state/



Observations with Mark Krug, Contributing Editor


Extremism and Truth


I am always amazed how many people do not think the very things they love are systematically destroying us. We have become so accustomed or desensitized to “normal”. I look at exercise over the past few decades and look at how extreme it has become. We even have exercise games on TV as competitions. For exercise to effective, do we really need crawl through mud filled tunnels, walk across fire, shocked and/or run 5 miles while zombies are chasing us? Once again, we have gone from sensible to extreme.



This extremism has even crept into our weather reports. In years gone by we had “approaching storms”,  “a chance of snow” or “possibility of a thunderstorm”. For the past few years when a storm is rolling in, we hear “34 million people will be effected by this storm system”. We even have snow bombs, snow cyclones and polar vortexes and 24 hour weather channels. Have we become so blasé that we need these types of terms to gain our attention to the weather?



We also seem to have this insatiable appetite for quick everything. The problem is then expect a quick response. A quick response rarely lends time to think through the whole situation. Have we lost the ability to think? Do we just tend to find articles, or read just the part we agree with, and then take that as the gospel? My father taught me that math is important for more than just equations. It teaches us a logical process for thought. So maybe algebra was important but not for the actual equations.

The left is in love with Hollywood and the music industry. Yet we can argue that those two industries alone have destroyed much of the morality of this country. When it comes to violence, they also lead the way and now want none of the blame or responsibility. As usual, everyone wants all the rights without any of the responsibilities.

   

In movies, video games and other forms of media you get to see glorified, graphic real life rapes, murders and other violent crimes and gamers can even be rewarded for committing such atrocities in video games.  Take some time to read some of the books written by Lt Col Dave Grossman. If you think guns alone are the problem I will go ahead and say it, you are uninformed and I suspect not all that interested in the truth.



Stop protecting and focusing on your own little corner of the world and look bigger to see the problems, the causes and the effects. Accept responsibility, lead courageously, reject passivity and focus on eternity.

Healthcare Facts and Fiction: What the General Public Needs to Understand About Healthcare in America 

Understanding healthcare delivery, pricing, payment and business is a complex dissection. In Part Two of this series we look at drug discovery costs, the FDA and how drugs and medical devices are priced. 

Part Two- Drugs and Devices

Who can forget the tale of Martin Shkreli, Turing Pharmaceuticals and Daraprim? Approved by the FDA in 1953, Daraprim was the anti-parasitic drug used to treat malaria, and toxoplasmosis in all patients and more routinely recently for preventing and treating toxoplasmosis in HIV patients. Shkreli's company Turing Pharmaceuticals obtained the rights to the drug in 2015 and existed as the sole supplier of Daraprim. Turing promptly upped the price from $13.50 per pill to $750 per pill and Shkreli became fodder for then presidential candidates and the poster boy for all that is wrong with pharmaceutical prices, healthcare, and unbridled greed. 

Ah, drugs. America is awash in drugs. We are the most medicated populace on the planet with almost 50% of adults taking at least one prescription medicine in the past month according to the CDC (1).  The Brookings Institute's Hutchins Center (2) reports per capita drug spending at $1112 annually. Pharmaceutical costs continue leading healthcare costs higher to the tune of a 27% spending increase in 2017 (3).  

What discovering and developing new drugs and medical devices costs:

To understand drug costs you need understand the process of drug discovery through FDA approval and marketing. There are five specific steps required to bring any drug to market that spans approximately eight and usually many more years from the first human studies to FDA approval (4):

1. Discovery and Development- A molecule, protein, virus or other biological life form is identified along with its action or potential action in a given disease.

2. Preclinical Research/Phase I- This phase answers the question, "Is the drug safe for humans?"

3. Phase II- Efficacy and safety. Simply, "Does it work and is it safe?"

4. Phase III- Efficacy, safety, and side effects. "What is the best dose for maximizing benefit, minimizing side effects, and what are all the side effects?

5. Post Market Safety Monitoring- monitoring for side effects or therapeutic complications.

The FDA flow chart looks like this:

Keep in mind the entire process is approximately 8 years long in best cases and quite expensive. As in $2.5 billion expensive (5). Certainly this value is variable, but for the most part accurate. Add to that $2,421,495 for the FDA application fee with clinical data and another $304,162 program fee. And that is no guarantee the drug will be approved as approximately only one in ten are granted approval to proceed with sales and marketing. For medical devices the costs are extremely variable and the FDA process is more tortuous, yet much less expensive tolling at less than $1M in fees(6). Regardless, it remains expensive developing and testing a new drug or medical device.

How drugs get from the pharmaceutical company to the patient:

Pharmaceutical companies price their drugs based on many factors including development costs, potential market, competition, and what insurance companies, Medicare and Medicaid will pay. Factoring all variables together helps the drug company arrive at a price known as the list price. 

This is the specific point where drug pricing becomes convoluted. The list price is rarely paid. Insurance companies usually contract a pharmacy benefit management company (PBM) like CVS/Caremark or Express Scripts to handle the pharmaceutical portion of their business as do larger businesses and unions. The PBM negotiates the lower drug prices for the insurance company or business under contract. Here's how it works for a month's supply of Drug A:

Drug A's list price is $100

PBM negotiates the price to $60 and then charges the insurer or company $70 

The insurance company pays the $60 to the PBM but charges the patient a $10 out of pocket co-pay

The insurance company breaks even (cost neutral), The PBM grosses $10 and the patient pays $10 which doesn't sound too bad for the drug in this example. 

PBMs initially entered the medical arena to contract for better drug prices from manufacturers, reduce insurance spending, thus increasing medicine affordability. As drug prices increased new ways evolved to control costs. Most insurers/PBMs set formularies, which are simply a list of drugs they will reimburse. These formulary lists act as expense choke points. Certain rules may apply such as step therapy where a cheaper medicine must be used first and the patient must fail the therapy before a different (more expensive) drug is reimbursed by the insurer.  Another cost containment strategy is the tiered formulary structure. In a three tiered reimbursement formulary what this means is Tier 1 is the cheapest for the insurer and patient. Think generics and most older drugs. Tier 2 is reimbursed at a lesser amount by insurance and has a higher co-pay for the patient such as older branded drugs. Tier three are usually newer branded drugs and those not on the insurer's formulary with the patient picking up most or all costs. Another pivotal strategy is prior authorization (PA) where the physician submits for and receives permission from the insurer or PBM to prescribe a drug.

Three main issues with these cost containment strategies exist. First, the physician's clinical decision making is now secondary to whatever the insurance/PBM deems appropriate. Sometimes this is good and keeps the doctors thinking of the least expensive solution. Sometimes it flies in the face of the patient's clinical reality versus what insurance/PBM formulary decision makers want. The second issue is the patient has no say what drugs land on their insurance formulary. Last, but not least, is the responsibility for knowing the formulary structure and obtaining prior authorization (PA) rests on the physician and their ancillary office staff. This costs the patient face time with their doctor and costs the doctor's staff time sending and receiving PAs. A brilliant strategy by insurances/PBMs co-opting medical staff for drug price policing. For the medical community it is another overhead expense and time wasting mandated exercise. 

US drug prices vs. the world:

How does the US compare to other countries around the globe? In the first part of this series We mentioned the hepatitis C drug Harvoni costing $70,000 domestically versus $800 in Egypt. According to Reuters US drug prices are generally three times more expensive than England, six times higher than Brazil, and sixteen time greater than India. Why? Most countries negotiate pricing directly with drug companies resulting in better pricing. In 2006 the Medicare Modernization Act (MMA) was implemented after being signed into law three years prior. One of the unique provisos of the MMA prohibited Medicare from negotiating with drug companies for lower prices. Considering Medicare accounts for 30% of $360 billion total US drug spending in 2017, this seems either a gross oversight or is it something more? The 2000 election won by George W. Bush, 36% ($7.29 million) of pharmaceutical giving landed with Democrats vs. 69% ($18.63 million) for Republicans (8). By December 8, 2003 the Medicare Modernization Act was authorized but not yet implemented. Presidential election campaign contributions in 2004 saw 31% go to the Dems against 67% for the Republicans where GWB won his second presidential term. January 1, 2006 MMA was instituted and pharmaceutical companies enjoyed their payoff. At this time only the VA system negotiates pharmaceutical prices directly with companies and individual states may negotiate Medicaid prices only. 

Lastly, the total global pharmaceutical market in 2016 was $1.05 trillion of which $450 billion or roughly 45% is attributed to the US. Let's view this another way: America holds 4.4% of the global population and pays for almost half the World's medications (9).

Drug sales and marketing:

Drug representatives are the visible whipping posts for allegedly helping drive pharmaceutical sales and prices higher. Maybe not. Examining Johnson and Johnson we find these fiscal year 2015 numbers: 

 

     Total Revenue: $71.89 billion

     Advertising Spend: $30.12 million (0.04% of revenue)

     Research and Development Spend: $6.967 billion (9.69% of revenue)

NOTE: According to the corporate 2016 annual report on page 36 the number for Sales, Marketing and Administration is $19.945 billion (27.74% of revenue) (10). Unfortunately the sales and marketing numbers are co-mingled with the administration costs. Understanding a truer cost would delineate the sales and marketing costs alone and specify what areas such as sales, sales, print media advertising, television advertising, and digital advertising the specific spending occurred.

ALSO NOTE: J&J has a consumer division, a medical devices division and a pharma division. 

Sanofi is France's largest drug company and also a $40 billion global powerhouse. Their sales and marketing spending is reported at 3.1% of expenditures. When we compare pharmaceutical companies to the tech sector we find a range from 7% at Apple to 53% for Salesforce as seen in the below graphic from Sarah Brady at https://vtldesign.com/digital-marketing/content-marketing-strategy/percent-of-revenue-spent-on-marketing-sales/

From Sarah Brady at https://vtldesign.com/digital-marketing/content-marketing-strategy/percent-of-revenue-spent-on-marketing-sales/

The end result is variable, but this much is understood: the role of drug and device reps is a blip on the pharmaceutical cost radar, the reps bring new information to physicians who are grossly time starved. Lastly, no physician is paid by a pharmaceutical company to prescribe their drug(s). It is absolutely illegal. When looking for collusion and corruption the compass points upstream from physicians to the industrial- political complex. The saying, "Politics makes strange bedfellows," needs amending, "Politics takes on all bedfellows with cash." 

BARRIERS TO SUCCESS

1. The FDA drug and device approval process is slow and expensive. Streamlining the process is essential to decreasing the time and cost

Take away: It is expensive and time consuming to discover and develop new drugs (about $2.5 billion and 8 or more years. 

2. The US is arguably the most medicated country on the planet. 

Take away: Becoming healthier remains essential for each of us to enjoy less medical expenses and greater quality of life.

3. PBMs are an unessential layer of the patient's drug procurement pathway.

Take away: We are seeing the purchase/merger of insurances and PBMs, which should theoretically decrease patient drug costs. Hopefully we will see what streamlining looks like when Jeff Bezos and friends roll out their take on improving healthcare.

4. US patients subsidize global drug prices.

Take away: We can no longer afford to support the world's drug prices as the United States Empire crumbles and the American citizens continue losing economic ground.

5. The connection between congress, POTUS, insurance companies, drug and device companies is rife with quid pro quo relationships.

Take away: Abolish lobbyists. Congress needs to amend Part D to allow Medicare drug price negotiating rights. This is where Warren Buffett can make his influence felt as part of the Bezos, Buffett, Dimon troika. 

The nexus of Washington DC, insurance companies and pharmaceutical companies will be discussed in later segments of Healthcare Facts and Fiction: What the General Public Needs to Understand About Healthcare in America.  

Up next is a rousing romp through a physician's life. What it takes to become a doctor, obtain and maintain the various licenses to practice, rules, regulations, reimbursements, and daily life. Not for the feint hearted reader. 

(1) https://www.cdc.gov/nchs/fastats/drug-use-therapeutic.htm

(2) https://www.brookings.edu/blog/up-front/2017/04/26/the-hutchins-center-explains-prescription-drug-spending/

(3) http://www.ajmc.com/newsroom/americans-used-less-care-in-2016-but-healthcare-costs-still-soared-report-says

(4) https://www.fda.gov/ForPatients/Approvals/Drugs/default.htm

(5) https://www.scientificamerican.com/article/cost-to-develop-new-pharmaceutical-drug-now-exceeds-2-5b/

(6) https://www.fda.gov/ForIndustry/UserFees/MedicalDeviceUserFee/ucm452519.htm

(7) https://www.kff.org/infographic/10-essential-facts-about-medicare-and-prescription-drug-spending/

(8) Big Pharma Political Contributions - Drugsdb.com http://www.drugsdb.com/blog/big-pharma-political-contributions.html#ixzz57b6xuiGL

(9) https://www.statista.com/topics/1719/pharmaceutical-industry/

(10) https://jnj.brightspotcdn.com/88/3f/b666368546bcab9fd520594a6016/2017-0310-ar-bookmarked.pdf

Healthcare Facts and Fiction: What the General Public Needs to Understand About Healthcare in America 

Understanding healthcare delivery, pricing, payment, and business is a complex animal for dissection. As such, we will initially approach healthcare in a general fashion before deeply dissecting this topic in serial fashion. Today is the first in the series.

Part One: Why Amazon, Berkshire Hathaway, and JP Morgan Recently Announced Their Healthcare Experiment.

THE ISSUE

Last week the big reveal from Amazon, Berkshire Hathaway and JP Morgan Chase was announced with maximal fanfare that burned bright in the news cycle for an entire day. This business triumvirate announced their joining forces to create a healthcare company specifically aimed at reducing their respective domestic employee health costs. Currently, these three companies employ greater than 500,000 people in the US and over one million persons globally. With Amazon and Jeff Bezos's reputation for destroying brick and mortar stores, Warren Buffett's inside the beltway access to government and shrewd business moves and Jamie Dimon's financial behemoth stalking Wall Street, one would think great things to come. Outside of the healthcare sector investors sold off a bit on this news. The rest of us shrugged a collective "whatever". We've seen this play before. The powerful, entrenched characters running healthcare have persevered, even more powerful since the ACA passed. Those characters in order of power remain insurance, pharmaceutical, and medical device companies. 

WHO ARE BEZOS, BUFFETT AND DIMON?

"Why these three individuals at this time?" is the seminal question. We know our labyrinthine healthcare is expensive, stuffed with middle men, compliance costs, licensing issues, insurances, and gross overhead expenses few other businesses  endure. Starting with billionaire Jeff Bezos, known as a serious type A personality, retail industry disrupter, and sometimes a vulgar expletive, particularly when he uses the Washington Post as his propaganda mouthpiece or buys Whole Foods and turns it on its head. Yet Bezos is a master of streamlining supply chains, squeezing efficiencies, and reducing overhead by integrating technology and logistics. Oh, and he has been quietly investigating the pharmacy distribution business in several states over the past years making some pharmacy benefit managers (PBMs) a bit nervous.   

Octagenarian Warren Buffett brings his "grandfather  knows best" swagger with sayings like, "The ballooning costs of healthcare act as a hungry tapeworm on the American economy." The billionaire has a cult following amongst his shareholders where his annual open stock meeting plays to tens of thousands who make the pilgrimage to his home town Omaha, Nebraska. More importantly, he has the government's ear where he knows intimately how the system works. His father was a Nebraska senator, so he learned which arms to twist and how hard. His contacts run deep in D.C. 

Another billionaire, Jamie Dimon, chief executive of the largest U.S. bank, JPMorgan Chase & Company rounds out this audacious trio. He brings financial and business transactional clout as well as central banking experience and connections. He served on the BOD of the Federal Reserve Bank of New York. He rounds out an accomplished trio for this gargantuan task.

WHAT ARE THEY ATTEMPTING?

The three companies are forming a new company, “partnering on ways to address health care." From Jeff Bezos, “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.” Sounds far reaching and altruistic. Perhaps. Reducing overhead is not only a smart business strategy, which Amazon has followed religiously, but a necessary one for growth and continual success. 

The smile moment was reading the quote their new company would be “free from profit-making incentives.” From three billionaires this quote seems ingenuous and also unrealistic. Take away the incentive to attain material wealth through hard, smart work and the impetus for success diminishes. We've understood this historically from the original Plymouth Colony embracing a social economic philosophy and nearly perishing to witnessing current day Venezuela. "No profits" begs the question, "How is this system economically sustained?" A question without an answer thus far.

Make no mistake, this new company is about reducing healthcare cost overhead for the respective trio's current business interests. If they can achieve positive results on that scale then look for a national referendum via Amazon, Berkshire, and JPM-Chase utilizing their media power, lobbying networks, political insider relationships, and financial gravitas. Of course they will be integral parts of this system and its profits.

This is a daunting task with great risks. Certainly they will threaten and ultimately alienate certain customers of their respective empires as they gin up their new business entity. Just as certain they risk losing some business and profits while remaining beholden to their stock owners. They are not the first business giants to walk this path. AOL, Microsoft, and Intel with their respective leaders have all ventured into this space only to fail. Success depends on overcoming key hurdles like contracting directly with drug companies and eliminating the PBM or the pharmacy middle man to reduce prices and increase efficiencies.

BARRIERS TO SUCCESS

The keys to success are many. Some are simple, but most are horribly complicated. Numerous details are required for this project and success depends on several key pieces:

1. Insurance companies must be brought under control with concrete reimbursement policies. Far too many horror stories of unreasonably denied claims. This will be difficult as United Healthcare's 2017 revenue, "... exceeded $201 billion increasing more than $16 billion year-over-year. Operating cash flows grew to $13.6 billion..." quoting CEO David Wichmann. (His base salary is $1.1 million with $12.3 million total compensation.) Aetna's 2017 revenue was $60 billion with $1.9 billion earnings. (CEO Mark Bertolini made $41 million in 2016 and may walk from Aetna with $500 million if the CVS merger is realized.) 

Take away: health insurance is lucrative with a legislated customer base via ACA. 

2. Medical care needs price transparency. Very few people inside healthcare know what procedures and care cost based on varying insurance reimbursements to providers and healthcare systems. It is a convoluted, confusing, and downright diabolical system like health insurance legislated (aided and abetted) by our friends in government. 

Take away: Warren Buffett knows insurance as GEICO is wholly owned by him through Berkshire-Hathaway. As stated earlier, Warren knows the DC insider shuffle, so if anyone can develop an insurance product for less he can. He can also garner legislative support through various lobbying groups.

3. Drug costs need to decrease. Americans don't realize they subsidize much of the globes' medicines. Country specific pricing is based on GDP wealth and how well individual countries negotiate prices. Why should Harvoni for Hepatitis C cost $70,000 for a treatment course in the US and $800 in Egypt?Americans are no longer "rich" as the middle class faces extinction through high debt, high taxes and fees, minimal savings (CNBC cites 69% of Americans with less than $1000 and 75% with less than $10,000 savings.) and almost non-existent wage increases (calibrated for inflation) over the past forty years. 

Take away: The American consumer is tapped out. Consumer credit card debt is greater than $1,000,000,000,000; student loan debt is greater than $1,300,000,000,000; $8,690,000,000,000 stands in home mortgage debt. 

4. Implement immediate FDA reform. Why are pharmaceuticals leading per capita healthcare spending higher? (According to the 2016 Health Care Cost and Utilization Report that examined the per-person health care spending for employer-sponsored insurance members at from Aetna, Humana, Kaiser, and UnitedHealthcare.) One of the major hurdles is a slow, inefficient FDA. Currently it costs a drug company approximately $2,000,000,000 to develop a drug and get it passed by the FDA. Pharmaceutical manufacturers frequently cite the FDA as a significant portion of this price. This situation also exists for medical devices and the FDA.

Take away: It's the government. Get out of the way.

5. Move healthcare transactions and information to blockchain technology to prevent fraud of all sorts and ensure patient medical record privacy free from hacking.

Take away: Blockchain is the answer for clear transactions and patient privacy.

6. Everyone is free to choose, whether too much food or drink, motorcycle riding without a helmet, no seatbelts, drug use, smoking, and other risky behaviors. No problem. Have at it, but no more expecting healthy people subsidizing your bad choices. It's time to truly subsidize healthy choices and well care. Fortunately we are seeing movement in this area.

Take away: Individuals need pay for their own life decisions. Reward good actions versus financially punishing them. The current government debt and pseudo-socialized healthcare system is economically unsustainable. 

7. Motivating the individual remains elusive if there is little or no incentive (See number six above). Patient compliance remains a huge factor in sickness and wellness. Think of the diabetic that doesn't watch carb intake, is overweight, doesn't take their meds. Ditto for the patient with heart disease who still smokes, is sedentary, and takes their medication wantonly. Anything given away for free or nearly free loses its value. 

Take away: Work at keeping yourself healthy and you will decrease your healthcare costs. It's like turning a light off in a room when not in use to decrease your electric costs.

Next issue we will autopsy pharmaceutical and device costs in our system. 

Comments? Email Sid at issueautopsy@blogspot.com