Watch This Space: 3 Phenomena That Will Drive Health Care Innovation in 2019

By REBECCA FOGG 

Back at their desks after the holidays, health care payers, providers and policymakers across the country are staring down their list of 2019 priorities, wondering which they can actually accomplish. Innovation to improve care quality and reduce costs will top many lists, and progress on this front depends, in no small part, on conditions for such innovation in the health care marketplace. Here are three phenomena unfolding there that I’ll be following closely this year to understand what innovators are up against, and how they’re responding.

1. The legal battle over the Affordable Care Act (ACA). Over 20 million previously uninsured Americans acquired health insurance between 2010 and 2017, many due to the ACA’s premium subsidies, ban on pre-existing condition restrictions, and Medicaid expansion. At the most fundamental level, this coverage expansion has vastly improved one of the most important conditions for a healthy population—access to health care. But it also supports innovation toward better, more affordable care.Coverage expansion means providers get reimbursed for more of the care they deliver to patients who are unable to pay, which strengthens their financial position. It also enables some patients to maintain more continuous health insurance coverage, hence see a doctor more regularly over time. This, in turn, facilitates providers’ development of more effective approaches to management of long-term, chronic disease, which causes untold suffering and costs the U.S. hundreds of billions in direct medical costs.
   
   But Texas federal court judge Reed O’Connor’s December 2018 ruling on the case Texas vs. Azar jeopardizes all those benefits. In it he asserts that the entire ACA became invalid when a portion of it—the tax penalty for individuals who do not acquire health insurance as mandated—was eliminated in the Tax Cut and Jobs Act of 2017.

   The ACA remains in force, and Timothy Jost argues persuasively in a Commonwealth Fund analysis that the ruling is rooted in faulty logic, and will likely be overturned. Mere uncertainty or confusion about the law’s fate, however, could still undermine its positive impact on innovation. For instance, payers and providers could reduce investment in innovation in anticipation of a reversal in coverage gains, or consumers might abstain from seeking care in the belief they’re no longer covered for it.

   So I will not only be waiting for an ultimate decision on the law’s validity, but also watching for industry players to tip their hands regarding possible post-ACA strategies, in order to anticipate the effects of the drama on innovation in care delivery.

2. The industry shift toward value-based payments. The health care industry’s dominant, fee-for-service payment model reimburses providers for discreet care services delivered, and has been linked to unnecessary and ineffective care. Value-based payment models, by contrast, reimburse providers on the basis of care quality and cost-effectiveness, rather than just volume delivered. Value-based payments are thus an essential driver of innovation toward better, more affordable care.Provider adoption of value-based payments has been accelerating over the last decade. For example, the Healthcare Transformation Task Force (HTTF), a non-profit consortium of leading payers, providers and patient groups, estimates that 47% of its payer and provider members were operating under some form of value-based payment model in 2017, up from 30% in 2015.

   Increasingly, payers striving to improve their return on investment in care have been driving the trend. The U.S. Centers for Medicaid and Medicare Services (CMS), accounting for a whopping 37% of all national health expenditures, has been particularly influential on this front. And the agency’s new Medicare Shared Savings Program rules, which compel participating providers to take on financial risk of care much sooner than in previous years, strongly suggests it will continue to support value-based payments under the Trump Administration. However CMS has also cancelled some Obama-era initiatives aiming to drive adoption of value-based payments, such as the mandatory hip fracture and cardiac bundled payment models, hoping to inspire voluntary participation in bundled payment models instead.

   The latter may indeed prove effective, but it is too early to tell. So, I’ll be watching closely to see if the agency stays its historic course in favor of value-based payments, and whether its strategy for promoting the models actually impacts their uptake by providers.

3. Big-name partnerships promising innovative health care solutions. Historically, merger and acquisition activity in health care delivery has mainly involved payers and providers. But 2018 saw the blossoming of M&A and partnerships between traditional health care players and businesses with origins outside the industry, including hook-ups between Aetna/CVS, Humana/Walgreens, and Amazon/JP Morgan/Berkshire Hathaway (led by renowned physician Atul Gawande). Tech giants also advanced into the industry on their own, with Google, IBM, Microsoft and others joining forces to break down barriers to data interoperability in health care.In forging such unions, these companies aim to tackle America’s crisis of care cost and quality, and they have ample profit motive to do so. Given that a number of them have already transformed the way Americans live and spend, they might just have the innovation chops for the job, too. But none of them is much beyond pilot stage with their partnerships, and others have been stubbornly tight-lipped about their plans. I’ll therefore be following closely for any scraps of news they let fall about how they’re approaching the problem, whether they’re seeing success….and whether Dr. Gawande will finally name his enterprise, so that we industry analysts can refer to it in fewer than 33 characters.

Conditions have never been more compelling or, in many respects, favorable, for innovation toward better, more affordable health care in America. But they are constantly changing. So innovators have to closely monitor trends in their operating environment, and bet on the best way to shape their enterprises and strategies to navigate through the inevitable uncertainty. I’ll be keeping a keen eye on the market and their efforts, too, and hoping for the best.

Rebecca Fogg is a senior research fellow at the Clayton Christensen Institute, where she studies business model innovation in health care delivery, including new approaches to population health management and person-centered care.

from THCB http://bit.ly/2UtUkz1

Health in 2 Point 00, Episode 67 | uBiome, Planned Parenthood and Lively

On Episode 67 of Health in 2 Point 00, Jess is appalled at the CDC’s salmonella warning for hedgehogs. But in other news, Jess asks me about uBiome, which has raised over $100 million, laying off over 50 people; Planned Parenthood’s new chatbot that helps answer teenagers’ questions about sexual health; and Lively’s recent $16 million raise for their telehealth hearing assessment platform. Don’t forget to stop by our booth at HIMSS in 2 weeks! —Matthew Holt 

from THCB http://bit.ly/2G9WG21

Overprescribing Is a Key Component of the Opioid Crisis — Here’s How to Stop It

By DAVE CHASE 

Today’s opioid crisis is one of the most dire side effects driven by our dysfunctional U.S. healthcare system. A recent JAMA Surgery report found that many surgeons prescribe four times more opioids than their patients use. This opens the door for misuse and abuse later on. In fact, the total combined cost of misuse, abuse, dependence and overdose is about $78.5 billion.

Unfortunately, there’s a direct connection between the low-quality care many patients receive, and the astounding rates of opioid addiction. Often, insurance plans offer access to high-cost, volume-centric physicians and include high deductibles — creating an expensive cycle that doesn’t focus on patient outcomes. Instead of taking the time to figure out what is actually ailing a patient, these overworked and nearly burnt-out doctors get them in and out the door with a referral and a prescription for more pills than they could ever need.

What may surprise you is that employers play a large part in setting the stage for addiction. Millions of Americans get their health insurance from their employer, and a majority of those plans are fully-insured. To determine what insurance plan they offer, employers work with a benefits broker to purchase one from a carrier like Aetna or Cigna. Each year, employers and their broker join together for an annual dance — the broker tells them that healthcare costs are rising so their insurance rates have gone up, usually by 5-20 percent. The employers don’t know better than to accept these increases, filtering them down to employees in the form of higher premiums. Despite costs constantly going up, the quality of care does not follow.

The reality is, cash prices for healthcare services haven’t actually gone up by much. Employers have been asleep at the wheel — but they can begin to enact change immediately. By working with a transparent benefits advisor, employers can design health insurance plans that incentivize their employees to visit high-quality, value-based primary care providers and Centers of Excellence: organizations with proven records of positive patient outcomes that are less likely to overprescribe unnecessary, addictive drugs.

Most employers trust that their broker has done their research, shopping around for the most affordable and effective health plans. Unfortunately, some benefits brokers don’t have their clients’ best interests at heart. They may be following hidden financial incentives to keep employers on expensive plans with poor offerings because they receive commissions and bonuses from certain carriers. Employers should ask their brokers to disclose this information (it should include whatever bonuses their office receives from carriers, which heavily influences what they present to clients), and also see how quickly they are willing to meet. The sooner they are able to, the more time they can go through the pros and cons of multiple plans before making a final decision.

When comparing plans, it’s important to keep in mind that high cost does not mean high quality. And further, most status quo plans cover the same low-quality care that has largely led to the opioid epidemic. Poor primary care is a product of the fee-for-service model under which most primary care practices operate. In this system, the more tests, procedures, scans, and other services a physician orders, the more money their organization makes — and employers and patients pay for. Many of these are unnecessary and often require follow-up or referral appointments. More people needing to see a doctor means it takes longer to make an appointment, waiting rooms are crowded, and the appointments themselves are usually ten minutes or less.

Short appointments prevent physicians from having enough time to get to the root cause of a patient’s problem. And because lower back pain (LBP) is a common issue, especially among older and working adults, physicians hoping to satisfy patients quickly prescribe them painkillers like hydrocodone, oxycodone, morphine or benzodiazepines. This, despite the fact that we know these drugs aren’t effective in treating pain, only masking its symptoms.

By comparison, in a value-based primary care setting, doctors are incentivized to spend more time with patients because they are rewarded for positive outcomes. These physicians have a better chance of getting it right the first time – reducing the need for follow-ups, unnecessary tests, and patient costs. For a patient with LBP, a value-based primary care physician may find out that the patient is sitting too much or isn’t educated on the proper exercises to prevent or relieve back pain. Rather than write an opioid prescription (likely including too many pills), a physician focused on value may show the patient how to change their technique to prevent further damage, plus recommend a physical therapy or stretching program. In my book on the employer role in the opioid crisis, nothing created more fertile ground for the opioid crisis than an undermined primary care model. It’s just one of the twelve major drivers of the opioid crisis, but it’s a particularly critical element to preventing addiction upstream.

This kind of care better employees’ health and for employers’ bottom lines because in order to provide access to value-based primary care, employers can cut ties with their old fully-insured health plans and instead work under a self-funded health plan. This type of plan is one in which an employer pays for their employees’ healthcare using their own money. This may sound risky, but that’s why such employers purchase stop-loss insurance – coverage that kicks in after certain claims thresholds. And for those employers concerned about this being too much work, a third-party administrator (TPA) will process claims and provide administrative support for a monthly fee.

Under a self-funded plan, employers will no longer have to budget for those annual 5-20 percent premium increases. Plus, employers can have more control over the quality of care their employees receive. In addition to encouraging their employees to visit the value-based primary care providers they’ve identified, they could also send their employees who need high-cost, high-risk surgeries to Centers of Excellence, which are often recognized for their high success rates for certain procedures. Employees who go there are likely to save money in the form of fewer complications, readmissions and prescriptions. Boeing did this for its employees, sending those in need of cardiac or spine care and hip or knee replacements to Mayo Clinic in Phoenix and Scottsdale, Arizona.

The health plans employers offer, and the low-quality, status quo care that they provide, have all contributed to today’s opioid crisis, including rampant overprescribing. Fortunately, a solution exists: health plans that provide access to value-based primary care. All employers have to do is put it in motion.

Dave Chase is co-founder of Health Rosetta, which aims to accelerate the adoption of simple, practical, non-partisan fixes to our health care system, and the author of “The Opioid Crisis Wake-Up Call: Health Care is Stealing the American Dream. Here’s How We Take it Back.” 

from THCB http://bit.ly/2HAKGsz

Radiology Firing Line | Meet the Patients

By SAURABH JHA 

Should Radiologists talk with Patients? In this episode of Radiology Firing Line Podcast, Ian Amber MD, assistant professor of radiology at Georgetown University advocates for patient interaction.

Listen to our conversation here.

Saurabh Jha is a contributing editor to THCB and host of Radiology Firing Line Podcast of the Journal of American College of Radiology, sponsored by Healthcare Administrative Partner

from THCB http://bit.ly/2TooRyd

AHA’s FutureScan Publication Available Now

Out this week is the AHA (or more precisely their SHSMD division’s) Futurescan publication. This year it’s edited by futurist Ian Morrison @seccurve and it features a bevvy of forecasting articles including one called “Flipping the Stack: Can New Technology Drive Health Care’s Future?” by Indu Subaiya and Matthew Holt (i.e. me)

To take a look at the listing and perhaps even buy a PDF or hard copy (yes, it’s not free, remember that whole capitalism thing, but it’s the cheapest thing you’ll ever get from a hospital!) follow this link  — Matthew Holt

 

from THCB http://bit.ly/2FS0RQK

Health in 2 Point 00, Episode 66 | Ciitizen, Limelight Health, The Pill Club, and ADURO

On Episode 66 of Health in 2 Point 00, Jess and I talk about money, money and more money. For one, Ciitizen, a health records company focusing on cancer patients, just closed a $17 million round. Limelight Health, which helps employers put together quotes for employee benefits, raised $33.5 million, and The Pill Club, an online birth control prescription and delivery service, raised $51 million. Jess also asks me about ADURO’s $22 million raise and why the employee wellness space is continuing to get so much funding. And again, be sure to find us at our booth at HIMSS! —Matthew Holt

from THCB http://bit.ly/2FPikt8

The Future of the Affordable Care Act: Unscathed by Attacks from the Right, Overtaken on its Left?

By ETIENNE DEFFARGES 

Having survived years of attacks from Republicans at the federal level, will the surviving ACA be rendered obsolete by Democrats’ local and state efforts towards universal health care? This could be an ironic twist of fate for Obamacare. Conceived out of the conservative Heritage Foundation’s ideas and an early experiment in Massachusetts under a Republican governor, President Obama’s signature legislative achievement could very well survive its most recent judiciary challenge. But over time the ACA is susceptible to obsolescence, because of the many universal health care solutions being pushed at the state level.

Let’s start this brief outlook for Obamacare by reviewing how it has played defense, quite successfully thus far: During most of 2017 and 2018, the future of the ACA was always discussed in the context of Republican efforts to repeal it. After all, the GOP controlled the White House and both Chambers of Congress. Hadn’t Republicans spent the last four years of the Obama administration promising to repeal Obamacare the instant they could? And so they went after the ACA in 2017 with all the levers of Washington power. But repealing is one thing, legislating another: We know what happened in July 2017, when the last “repeal and replace” effort was defeated in the U.S. Senate by the narrowest of margins, because three Republican Senators, Susan Collins, Lisa Murkowski, and the late and much regretted John McCain, voted against the repeal. With their December 22 tax law, Republicans did succeed in eliminating the ACA’s individual mandate tax penalty owed by individuals failing to maintain “minimum essential coverage.” Most medical plans qualify for this, as long as they meet a number of requirements, such as not charging more for pre-existing conditions. For good measure, the Trump administration used executive orders in 2018 to allow low-cost plans not meeting these ACA guidelines to be offered by employers. Twenty state attorney generals from Republican states, led by Texas and Wisconsin, also initiated litigation against the ACA, arguing that without the tax penalty the law had become unconstitutional.

On November 6, after having campaigned heavily on health care and the protection of pre-existing conditions, Democrats won control of the House of Representatives, making further legislative challenges to the ACA very unlikely. The Midterm elections also saw three newly elected Democratic governors in Kansas, Maine and Wisconsin promising to bring to their constituents a key provision of the ACA, Medicaid expansion. The citizens of Idaho, Nebraska and Utah will also get Medicaid expansion, following the success of local ballot initiatives. In total, around 800,000 people are poised to gain access to Medicaid for the first time in these six states: Obamacare is on the march! Not so fast. On December 14, 2018, U.S. District Judge Reed O’Connor ruled for the twenty Republican states and against the ACA, arguing that once Congress repealed the tax penalty that enforced the individual mandate, the whole legislation became invalid—everything within the ACA, protections for pre-existing conditions, children under 26 insured within their parents’ plans, Medicaid expansion, etc. A lot of voices, not all of them from Democrats, criticized the ruling as stretching a legal principle called “inseverability” far beyond reasonable boundaries—how could for example the ACA Medicaid expansions be bundled with the individual mandate tax penalty? Legal scholars argued that Judge O’ Connor’s ruling ignored settled law, i.e. that Congress had refused to repeal the entire ACA in the summer of 2017, striking down only a portion of the legislation under the December tax law, and leaving the rest of the ACA standing. This ruling is being appealed by sixteen other states supporting Obamacare, joined in January 2019 by the newly installed Democratic House. After the appeal, will the U.S. Supreme Court have to rule (for the third time) on the constitutionality of the ACA? If this becomes the case, one has to remember that the Court affirmed twice the constitutionality of the ACA, in 2012 and 2015, with Chief Justice John Roberts voting with the majority on both occasions.

Despite this judicial development and the Trump administration slashing advertising and promotional budgets for ACA enrollments, the law remains very popular: After its six annual enrollment season, the ACA federal insurance marketplace proved again to be very resilient, with the number of Americans signing up for 2019 ACA health plans down only 4% relative to the prior year. Not surprisingly, Americans are interested in good health care coverage at affordable prices.

But what if good and affordable health care coverage came from sources other than the ACA? The Democrats’ success in campaigning on health care for the recent midterms did not go unnoticed, and 2019 opened up with a flurry of new local and state universal health care proposals. If successful, these initiatives would represent a new front, on the left of the political arena, in the health care battles unleashed by Obamacare. Mayor Bill De Blasio has just mandated universal health care for all New Yorkers, even undocumented ones, bringing coverage for the first time to about 600,000 people. Newly elected Governor Gavin Newsom promised in his inaugural speech to enact full access to health care for all Californians. His first $209 billion budget blueprint, of which health care accounted for close to 30%, included a state health insurance mandate (to restore the repealed federal ACA mandate); increased insurance subsidies for Californians under the ACA (bringing them to individuals making between 400 and 600 percent of the federal poverty level); and access to Medical for undocumented immigrants up to 26 years of age. (One of Newsom’s first executive orders was to direct Medical to negotiate directly with pharmaceutical companies to demand lower priced drugs for its 13.5 million enrollees.) Not to be outdone, Washington State Governor Jay Inslee proposed a public option for those who do not qualify for Medicaid but cannot afford health coverage from private markets in his state. Similar efforts to help uninsured people who earn too much to qualify for local Medicaid plans are underway in half a dozen states, Colorado; Connecticut; Illinois; Minnesota; Nevada; and New Mexico.

Many states will not wait for the end of paralysis in Washington DC, and policies pioneered in the states often lead to fundamental changes at the national level. As mentioned above, the comprehensive Massachusetts health care legislation signed by Republican Governor Mitt Romney in 2006 became the blueprint for Obamacare. Similarly, the ACA employer’s mandate, enrolling private businesses to increase access to health care, has its roots in long-enacted legislations in Hawaii and San Francisco. This means that during the two years leading to the 2020 presidential elections, there could be many state and local health care initiatives granting health care to millions of people, people who no longer would have to look for insurance in a ACA health exchange. Enrollment in these exchanges could then plummet. Medicaid expansions are likely to be the longest lasting component of the ACA…until some form of federal universal health care legislation (in 2021? 2025?) replaces the landmark legislation.

Author of “Untangling the USA: the Cost of Complexity, and What Can Be Done About It,” Etienne Deffarges has counseled, created, and invested in countless organizations during his professional life as a management consultant, business executive, and entrepreneur.

from THCB http://bit.ly/2RYfoQH

The Perfect Storm: When Parkinson’s Patients Enter the Hospital

By HOOMAN AZMI MD, FAANS 

When a patient enters a hospital either in an elective or more urgent manner, the main focus of the care team is to address the chief complaint. Other diagnoses, while important, may not receive as much attention. While this may not affect patients in most circumstances, it can be very impactful in patients who have Parkinson’s disease (PD). Studies have demonstrated that when patients with Parkinson’s disease enter the hospital, they are more susceptible to developing hospital related complications. Patients with Parkinson’s disease have a higher length of stay (LOS) than those entering the hospital for the same diagnosis without PD and can develop complications such as dysphagia, confusion and falls, impacting their outcomes and increasing their LOS.

Awareness about PD and its treatment and implications thereof are critical in ensuring reduced risks for this patient population. People with PD are very dependent on their medication, and timing of this medication is critical to maintaining good symptomatic control. In the outpatient setting, the main goal of medication management for these patients is to provide as much ON time as possible while minimizing side effects of the medications, such as dyskinesia. ON time describes a period of time when the medications are working and symptoms are controlled. Patients with advanced PD may have considerable difficulty with motor fluctuations if they transition from the ON state to an OFF state when the medication effect has worn off and they are symptomatic. The fine tuning of the medication regimen is pain-staking and often the result of multiple office visits and telephone calls to arrive at the best schedule customized for the patient.  This can often result in seemingly unconventional timings (sometimes on the quarter after the hour) and at time q3 or even q2 intervals. Deviations from these regimens, even as little as 15 minutes delays, can have deleterious effects on patients with PD, as detailed above.

When patients with PD enter the hospital, attention is seldom paid to the exact timing of medication administration.  If a patient takes a particular medication six times daily, ordering the medication six times daily in the hospital defaults to standard timings that often are different from the patients’ own regimen, causing timing errors.  Almost 75% of PD patients who enter the hospital have delays in their medications and more than 60% of these patients can have complications during their hospitalization because of these delays.

Other factors also contribute to worse outcomes in PD patients. Many of the PD medications are not routinely carried in hospitals. Replacing a patient’s medication with seemingly similar alternatives that may be available at the hospital is not recommended, and indeed can be as detrimental as delays or omissions in medications. In addition, several drugs used particularly in the hospitals are contraindicated in PD patients.  Some anti-emetics such as Compazine and Reglan and several antipsychotics have dopamine antagonist properties which worsen PD symptoms, and indeed administration of these medications can increase risk of hospital acquired complications for patients with PD and increase their lengths of stay.

The challenge that in-hospital care teams face in tackling these issues is compounded by the nature of why PD patients come to the hospital.   The majority of PD patients who enter the hospital do so for non-PD related issues. In fact, over 85 percent of patients come in for conditions completely unrelated to their Parkinson’s disease, such as pneumonia, heart attack, gall stones and elective surgeries.²  Parkinson’s is often somewhere lost in the problem list, and these patients are admitted throughout the hospital based on their presenting issues. Therefore, any effort to address the suboptimal care of patients with PD has to be hospital-wide and not unit based.

There is hope, however, for addressing these shortcomings. Studies have shown that education can improve awareness for these issues. A hospital wide education program which addresses Parkinson’s disease, its management, and the importance of timing of medications and contraindicated medications for this patient population is the cornerstone of any effort to improve the care of PD patients. This educational campaign needs to be hospital wide and continuous.

Other important interventions can also help bridge these gaps. Patient identification is crucial, as most PD patients enter the hospital for non-PD related complaints and PD can be overlooked.   Clearly identifying patients with PD in the electronic medical record helps prevent the patients from being lost in the shuffle and alerts the care team to initiate any protocols or care plans that may be available specifically for Parkinson’s disease.

Ensuring that all or as many PD medications as possible are on formulary is very important.  While these medications are expensive and may not be as commonly used as antihypertensive agents or hyperglycemics, substitution of the medication for an alternative which may be less expensive and is on the hospital formulary is not appropriate.  The efficacy will be different for the patients, and giving the patient an alternative to what they are taking may be as detrimental as delays or omissions of their medications.

Working with different services to eliminate contraindicated medications from routine order sets for PD patients will also help advance this cause greatly.  Education is a critical part of any protocol.  Many different services come in contact with these patients and contraindicated mediations can be ordered.  Direct discussions with the hospitalist groups, ER, and anesthesiologists, among other departments, are critical to ensure reduction in these errors.

Probably the most important point is ensuring that PD meds are ordered in a custom fashion and that general hospital medication schedule defaults are avoided.  It is critical that the staff is educated to the importance of timing of medications and that these medications are not just ordered as four times or six times daily but that they are ordered according to the actual time that the patient takes the medicine at home.  Most EMRs have custom medication timing options which should be encouraged.

We have instituted the above efforts at our own institution, and over time this has helped reduce the length of stay and re-admissions for Patients with PD.  More importantly, it has enabled us to better care for this vulnerable patient population.

It is important to note that The Parkinson’s Foundation provides an excellent resource for patients with PD who are going to the hospital. The Aware in Care program is a valuable tool that has been designed for patients but is also quite useful for healthcare professionals. The kit provides information that patients can share with their health care team which enumerates the importance of medication timing, avoidance of contraindicated medications, and educational points that address the knowledge gaps that are present for the care of PD patients.

Hooman Azmi, MD, FAANS, is the Director of the Division of Functional and Restorative Neurosurgery at Hackensack University Medical Center in New Jersey and the co-author of Parkinson’s Disease for the Hospitalist: Managing the Complex Care of a Vulnerable Population.

from THCB http://bit.ly/2sJcqky

Has U.S. Health Care Spending Finally Stabilized? An Outlook for 2019

By ETIENNE DEFFARGES 

The official 2017 statistics from the U.S. Department of Health and Human Services (DHHS) are out, and there are some good news: The annual growth rate of health care spending is slowing down, and is the lowest since 2013 at 3.9%—it was 4.3% for 2016 and 5.8% for 2015. The bad news is that our health care cost increases are still well above inflation, and that we spent $3.5 trillion in this area, or 17.9% of GDP. Americans spent $10,739 on health care in 2017, more than twice as much as of our direct economic competitors: This per capita health care spending was $4,700 in Japan; $5,700 in Germany; $4,900 in France; $4,200 in the U.K.; $4,800 in Canada; and an average of $5,300 for a dozen such wealthy countries, according to the Peterson -Kaiser health system tracker from the Kaiser Family Foundation, and OECD data. Spending almost a fifth of our GDP on health care, compared to 9-11% for other large developed economies (and much less in China), is like having a chain tied to our ankles when it comes to our economic competitiveness.

Could 2019 be the year when our health care spending actually decreases, or at least grows at a slower pace than inflation? Or will we see instead an uptick in costs for health care consumers?

To answer these questions, we need to look in more detail at the largest areas of health care spending in America, and at the recent but also longer term spending trends in these areas. Using the annual statistics from the DHHS, we can compare the growth in spending in half a dozen critical health care categories with the growth in total spending, and this for the last three years as well as the last decade. Over the last decade, since 2007, these costs grew 52% in aggregate (from $2.3T to $3.5T) and 41% per capita (from $7,630 to $10,740).

1)  Private Health Insurance costs ($1.2T in 2017) grew 4.2%, 5%, and 6.9% in 2015, 2016 and 2017 respectively. This is faster than total health care costs, in part due to the strong average cost increases that followed the implementation of the ACA (“Obamacare”) marketplaces and subsidies. On the other hand, over the last decade, private health insurance costs only grew 40%, less than total health care spending. So we should be able to anticipate some stability here, but no significant change in the business models used and reductions of patients’ out of pocket cost, co-pays, deductibles, etc.

2)  Medicare costs ($706B in 2017) grew 5.1%, 3.5% and 3.5% in 2015, 2016 and 2017 respectively. Over the last decade, they grew 37%. Good news, Medicare cost increases lag total health cost increases. Bad news, the 5.1% cost increase in 2017 is high. What will we have in the next 5-10 years? Unfortunately, Medicare costs will likely increase faster than total health costs, due to the aging of the U.S. population, and this trend will continue at least until the last “Baby Boomer” reaches the Medicare eligibility age of 65.

3)  Medicaid costs ($582B in 2017) only grew 2.9% in 2017 and 4.2% in 2016. On the other hand, with the ACA’s Medicaid expansion, they grew 9% in 2015 and 11.8% in 2014, as several new states expanded Medicaid under the Obamacare guidelines. This will be repeated in 2019, following the November 2018 Midterm elections: Three newly elected Democratic governors promised to bring Medicaid expansion to their constituents. This has already been done in Maine, with Kansas and Wisconsin next. Plus, the citizens of Idaho, Nebraska and Utah will also get Medicaid expansion, following the success of ballot initiatives during the recent Midterms. In total, around 800,000 people are poised to gain access to Medicaid for the first time in these six states. This is very good news for national health coverage statistics, and of course for the new enrollees, but it also means that Medicaid costs are likely to increase at a strong rate in 2019 and 2020. The impact on overall health care spending will be mitigated, though, by fewer visits to expensive emergency departments from people without health insurance. From a patient’s standpoint, this will be the strongest positive impact of the ACA in 2019.

4)  Hospital spending ($1.1T in 2017) and Physician and Clinical Services costs ($694B in 2017) have grown in line with the overall health care costs, in recent years as well as over the last decade. With increased merger activity among health care delivery providers, their pricing power increases with industry concentration, and it is unlikely that we will see spending in these areas grow much more slowly than total health costs.

5)  Administrative costs, like a snake in the grass, represent the biggest outlier in U.S. health care costs. What good can come out of excess administrative costs? Employment! Yes, but this is not the type of employment that adds to our economic competitiveness…The numbers in this area are tragic: $259B in 2017, with well above average cost increases of 6.5%, 5.6% and 5% in 2017, 2016 and 2015 respectively—and a whopping 65% over the last decade. We spent more on administrative costs than the United Kingdom spends on total health care. Let’s do some quick math here: The dozen large developed economies mentioned above spend an average of 2% of total health care costs on administration, versus 7.4% in the U.S. All other things being equal, if we too spent 2% on admin. costs, we would save $190 billion per year, enough to insure pretty much all our uninsured at today’s costs. Unfortunately, this sad state of affairs is the reflection of the enormous complexity of our health care system, and as long as we cannot surmise the political will to do a complete overhaul of how we provide health care to our citizens, this will continue. A potential sign of improvement in this area will be when technology innovations lead for the first time to a demonstrated ability to cut health care costs. Thus far, and unlike in any other industry, the opposite has proven true, and administrative costs have grown hand in hand with ever more complex electronic health records, patient accounting systems, the use of big data and other IT innovations. Complexity reigns supreme in U.S. health care, and even Silicon Valley is unable to do anything about it.

6)  Drug Costs: I have saved this most often mentioned culprit in health care costs for last. And yes, drug spending over the last decade has outpaced total health care spending in America, principally in the 90s and early 2000s, where it grew in double digits annually. Americans spend about twice as much in this area than residents of other rich developed countries. Surprisingly, however, spending on prescription drugs in pharmacies and other retail outlets only grew at 0.4% in 2017, at $333B, and 1.2% in 2016. After increases of 9% in 2015 and 15% (!) in 2014, could galloping pharmaceutical prices be behind us? To have more certainty in this area, one would have to be able to track the aggregate costs of drugs used in hospitals (not reported in the DHHS statistics), often very expensive ones, in part because these costs are well reimbursed by both private and public payors. Because it has become such a political rallying cry, we could very well see some bipartisan legislation, not just to contain but reduce prescription drug costs in our country. We all know what should be done: Eliminate the absurd clause within Medicare Part D that does not allow Medicare, the largest purchaser of drugs in the country, to negotiate prices directly with pharmaceutical companies; and allow the import of lower-priced drugs from reputable countries such as Canada, Germany and Japan. Any partial movement in this direction, such as the recent proposal by the Trump administration to allow the import of lower cost pharmaceuticals in certain areas for Medicare, would likely lead to a reduction in prescription drug costs for U.S. patients.

In summary, U.S. health care costs will continue to grow at a rate above inflation in 2019. The aging of the population, Boomers reaching the Universal Care promised land (called Medicare here), will ensure continuing growth of Medicare costs; Medicaid costs will increase too, with six new states adopting its expansion; hospital costs growth may slow because more insured patients means fewer uninsured write-offs; administration costs will remain intractable; the one potential good surprise for U.S. patients (and those of us who like political bipartisanship) could come from the area of prescription drugs, with corresponding reductions in out of pocket costs—fingers crossed. But since even a 20% reduction in drug costs—an amazing achievement—would only lead to a 2% reduction in total health care costs, it is hard to project an outlook that does not see at least a 2-3% increase in U.S. health care costs in 2019.

Author of “Untangling the USA: the Cost of Complexity, and What Can Be Done About It,” Etienne Deffarges has counseled, created, and invested in countless organizations during his professional life as a management consultant, business executive, and entrepreneur.

from THCB http://bit.ly/2U3SV1G

Health in 2 Point 00, Episode 65 | Microsoft-Walgreens, Google, and HIMSS

Today on Health in 2 Point 00, Jess is braving the oncoming blizzard in Boston for MassChallenge. In this episode, Jess asks me about some crazy things happening in health tech, from the recently announced Microsoft-Walgreens partnership to compete with Amazon, to Google buying new smartwatch technology from Fossil, to Jim Cramer’s suggestion that Apple should buy Epic. Also in some HIMSS news, Atul Gawande has pulled out of HIMSS. But—I’ve got a booth for Smack Health at HIMSS this year, so stop by to find some Smack startups & Jess doing WTF Health interviews as well. –Matthew Holt

from THCB http://bit.ly/2RHa2JW