How Healthcare is Changing . . . and What It Will Mean For Us (Part I)

According to the US Centers for Medicare & Medicaid, US healthcare expenditures in 2022 totalled some $4.5 trillion dollars, or almost 17% of US GDP.  Incredibly, Americans are devoting almost 1/5th of the country’s money to doctors’ visits and healthcare treatments every year. 

To me, that is flabbergasting.  . . . Not that healthcare isn't important.  But one hopes that for that sort of money the healthcare in the US would be exceptionally good.  Is it?

 Below, I’ve pasted in two graphs from a research study conducted by the Commonwealth Fund comparing the healthcare expenditure and performance of the US against 10 other high-wealth countries.  Those countries were: Canada, France, Australia, the Netherlands, Norway, Switzerland, Sweden, Germany, New Zealand, and the UK.  The first graph displays the combined ranking of these 11 countries along five different dimensions of health:  access to care, the care process, administrative efficiency, equity, and health care outcomes.   The second illustrates the total healthcare expenditure of these countries and how those totals changed between 1980 and 2021. 

As you can see, while the US appears to spend far and away more money than any other of these countries, it boasts by far the worst care.   

And, it has been so for many, many years.

It is perhaps not surprising that many Americans are fed up and looking for change.  Sadly, those people are generally not senior executives in the pharmaceuticals industry.  We’re also not seeing significant calls for change from the US government or even from the US medical industry itself.  Of course, there are exceptions, especially among practicing physicians who feel that they aren’t able to give their patients the quality care they need.  But generally there isn’t any great discussion or lobbying for healthcare change in the USA right now.

Except among the employer community. 

Indeed, it is employers who stand to gain enormously from healthcare improvement in the US . . . and probably around the world.  As you might know, in the US at least, it is through the workplace that the majority of Americans receive their health insurance.  (Interestingly, it’s not too different for the expats here in the UAE.)   But the cost of these employer-paid premiums are rising; and they have been for quite a while.  According to an analysis by healthcare policy research firm KFF, healthcare premiums have been increasing steadily since 1999. The increase from 2022 to 2023 apparently averaged some 7%.  More seriously, it seems that the average family premium has increased 22% since 2018 and 47% since 2013.

And, again, those cost increases were accompanied by less than impressive health outcomes. In comparison with those 10 other high-wealth countries included in the Commonwealth Fund analysis, the US boasts the lowest life-expectancy rate at birth and has the highest percentage of adults with chronic illness. It also has the highest maternal and infant death rates within the group and the highest rate of deaths from avoidable or treatable causes.   

In other words, US employers are paying increasingly more for a healthcare system that doesn’t seem to keep people well.   This can’t be a good thing for the employers’ competitive capability, not when 60% of US adults have a chronic illness . . . and often more than one.  And, some 41% of adults over the age of 20 are obese . . .  not overweight but obese.  How productive can your workers and executives be when they are overweight, sick, and probably very tired? 

Obviously, this situation is a serious one for everyone concerned: employers and workers alike.  And, let’s not imagine that this situation is entirely unique to the USA.  Again, most expats here in the UAE are covered by employer-provided insurance.  And, sadly, the UAE could not claim that the population here is the healthiest.  According to 2018 UAE National Health Survey, the median time spent by the population in physical activity each day is 0.0 hours.  Perhaps as a consequence of their lack of movement, some 25% of adult men and some 30% of adult women are obese. 

So, what is to be done? 

Of course, countries around the world such as Belgium, Australia, Germany, and Switzerland offer a beautiful array of healthcare schemes that seem to make a good deal more sense than the current scheme in the US.  Lots can be learned about them here.  But let me tell you about one US experiment that may - despite its failure - just change the future of healthcare for all of us around the world.

This ‘experiment’ was launched in 2018 by three corporate powerhouses:  Amazon, the online retail giant, Warren Buffet’s Berkshire Hathaway, the investment company, and JPMorgan Chase, the largest bank in the USA.  These three companies also happen to be among the largest employers in the US, so they all have very real interest in improving the quality and reducing the cost of their healthcare expenditures.  In short, their bold experiment involved the creation of a new company called Haven, with the explicit intent of exploring and testing new ways to deliver healthcare to the approximately 1 million employees of the three companies.  If Haven came up with a method that really worked, the idea was that, of course, they could expand it.

The US financial markets watched the launch of Haven with bated breath and great expectations.  Not surprisingly, the stock values of major health insurers dipped noticeably when Haven’s launch become public.  The US financial markets knew massive change was coming.  How could these three behemoths not move mountains?

Sadly, they didn’t.  In spring 2021, just three years after its launch, Haven was disbanded. Implementing real change in these three very different companies proved to be logistically impossible but lots of learning was done despite the practical failure.  A corporate statement describing Haven and it’s closure wrote that:  “Haven explored a wide range of health care solutions, as well as piloted new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable.” It was a nice try.

The real news is that in the aftermath of Haven's closure, Amazon has doubled down on its commitment to overturn the healthcare industry. Since then, the tech giant has embarked on a series of strategic investments and initiatives that, interestingly, align with the principles of something called 'value-based care,’ a healthcare delivery approach that is exploding across the the USA and has been experimentally adopted in Dubai. 

But what exactly is value-based care, and how might its principles reshape the future of healthcare not only in the United States but on a global scale?

Well, we need to stop.  The nature and impact of value based care will be the subject of our next blog.  But let me at least explain that value-based care places emphasis on delivering quality care to patients with a focus on outcomes rather than volume.  To encourage this new attention to outcomes, value based care radically changes the financial motivations of physicians and medical clinics. With value based care, there are no more fee-for-service payments.  There’s just a fixed payment for caring for an individual over some defined period.   Take it from me, a former accounting professor, financial incentives are powerful;  this just might be the way we heal the world.   

I’ll share more next week.

Yours in Health & Happiness,

Sarah