Wednesday, March 29, 2017

Our Transition to Patient-Centered Health Insurance

The propagandists for big pharma and health insurance interests have been proclaiming an immediate need to “repeal & replace” the ACA to achieve “patient-centered” healthcare. They have spouted off about this crisis for seven years without formulating a better plan. They are also running around in circles because the sky is falling and the ACA is imploding. They have the right diagnosis but they have applied it to the wrong set of problems.  

This drama we are watching fits a pattern I have seen many times in my years as a management consultant. The marketing department proclaims amazing features, benefits, improvements and choices that neither the production or customer service functions can deliver. The investors fall for the marketing blitz even though the customers and product reviewers catch on to the false advertising quickly. The organization cannot deliver the goods and services as promised because of its arrogant outlook on customers, authoritarian internal governance and flawed competitive strategy to surpass its rivals. The enterprise freezes like a deer in the headlights of an oncoming vehicle. The frozen enterprise gets blindsided by a market entrant that was overlooked by its over-confident outlook. The approaching start-up can deliver the real deal and steal marketshare by delivering what makes the customers genuinely satisfied. The buyers then become:
  • eager to tell their friends and compare experiences once they join in
  • loyal to the new brand and customer-sourced reputation
  • helpful with feedback to improve products, services and support
  • curious to explore more offerings from this trusted supplier 
The Big Money Republicans in Congress added the private health insurance exchanges to the formulation of the ACA. They were certain these exchanges would maintain the competition to lower premiums and deductibles. They opposed an added public insurance option for fear it would weaken the market dynamics they relied upon to drive prices down from monopoly/captive market excesses to equilibrium prices. The market would then reward the efficient producers and incentivize innovations to better serve the customers. That has worked about as well as bloodletting did for a wide variety of illnesses during the century when Adam Smith concocted the sacred text for this approach to lowering prices and improving offerings.  

It appears the Republican Party is imploding, not the ACA. They are governing with “the consent of the governed”, but they are governed by special interests that became empowered by the Citizens United decision from the Supreme Court. The Republican Party is opposed by the Freedom Caucus on the right, the Democrats on the left and the Democratic Socialists on the far left. The sky is falling as they feared. Their giving lip-service to patient-centered healthcare is falling on deaf ears. These Republicans are about to get repealed and replaced by legislators who serve their constituencies who voted them into office. 

This bodes well for genuine patient-centered health insurance. However, health insurance is not a business. It fails when it is set up to be profitable. It punishes its customers for buying its products if the private insurer is beholden to quarterly earnings reports and stock prices. It rewards top management to excess while depriving everyone else fair pay and benefits or fair prices and services. It makes a pretense of offering quality products while delivering junk. It lobbies Congress to subsidize its flawed strategy, broken business model and corrupt internal governance. It gets away with this ruse until the real deal comes along and upstages their charade. 

Health insurance is an aggregator of health risks, setbacks and calamities. The customers are best served by the largest aggregator. Size is the prize winner among health insurance providers. An aggregator of health risk for every single citizen would be the best of all. That aggregator could be the most generous with benefits and coverages because it functions as a massive shock absorber. It would be the most motivated to fund long term medical research programs to lower the cost of treatments and prevention in the future. It could be the best to verify claims about new pharmaceuticals and treatment modalities. It would also have the largest purchasing power to impact the final cost of drugs, medical supplies and contracts with healthcare providers. It would function as the most patient-centered approach to out-of-pocket costs and protection from junk products, fraudulent claims and deficient providers. 

There is another side to the health insurance business that has nothing to do with aggregating health risks. The biggest health insurance companies have already migrated to this business model when big employers aggregate their own risk. This administrative role for claims processing and benefit plan selection is a viable business model. A private, for-profit enterprise could provide superior individual attention to each customer, streamline paperwork, accelerate response times and earn high ratings from those getting serviced. The administrative service providers could get reimbursed based on a formula that combined their number of enrollees and the customer satisfaction ratings. This reimbursement schedule creates competition among market rivals over a more comprehensive value proposition than mere pricing. 

Foreseeing this business opportunity in reimbursed administrative services could ease the transition. The health insurance providers could bow out gracefully from risk aggregation entirely, like their counterparts in Europe. Saving face with their investors becomes more likely when Republicans stop insisting that those big insurers aggregate health risks and try to profit from the flawed business model. 

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