10 thoughts on the state of healthcare from Scott Becker


1. Healthcare, given that we have 325 million-plus people in the U.S. with an aging and growing population that is living longer, is a very complex problem.

2. When I hear any executive, technology person or sales person look at an audience and say, “If everyone would just use this type of coaching app for diabetes or behavioral health, we would cut billions of dollars in costs,” I cringe, scoff, laugh and tend to get angry. I recently heard this in a speech I listened to.

3. Healthcare at its core is really taking care of individual patients. I see the theories behind population health and preventive health but I’m skeptical that it’s a fix-all.

4. When people say there should be no fee for service, I tend to think they’re representing some constituency. I assume at some level someone will still need to get paid to do something.

5. Hospitals and physicians and many providers will struggle as they become more reliant on governmental pay and as commercial patients are siphoned off. Government reimbursements will soften.

6. I’m not so dumb as to not see the irony in the campaign signs that said “get the government’s hands off my Medicare.”

7. Notwithstanding No. 6, whenever the government does place fingers on the scale, they are often wrong, and it often has massive unintended consequences.

8. The system costs with 325 million-plus people in the U.S. are crazy and insurance costs per family are insane.

9. Both parties are tone deaf as to the needs of the American people. Simply stated people that are poor need healthcare, and people that aren’t poor need affordable healthcare. These people are both Republicans and Democrats.

10. Given the quasi-monopolies of insurance companies in certain areas and the lack of insurance options, it’s likely we will need some sort of public option at some point.


Creating Effective Health Care Markets


Building a health care market

Disagreement about the role of markets lies at the root of many of our fiercest health care controversies. One side believes that unleashing market forces will rescue our health care system. From this viewpoint, government involvement is inherently destructive, except in rare circumstances. Many opponents of the Affordable Care Act share this opinion.

The other side believes that health care markets are deeply flawed and that government must play a major role in achieving a higher-performing health system. These people point out that markets make no claim to ensuring equity in the use of health care resources, only improved efficiency. Supporters of the ACA tend to hold this view.

Given this fundamental divide, it’s worth considering the conditions underlying the effective functioning of market economies, whether those conditions currently prevail in health care and, if not, what changes would be required to establish them.

Students learn in Economics 101 that several assumptions must hold for free markets to achieve their potential:

  • First, consumers and suppliers of goods and services have perfect — or at least sufficient — information. They know or can find out the price and quality of available products.
  • Second, consumers and producers are rational. They make reasoned decisions about what to purchase and supply. These decisions maximize their welfare as consumers and their profits as businesses.
  • Third, it is easy for producers to enter markets, thus assuring that monopolies don’t form, and that increased competition occurs where prices are excessive, reducing prices to efficient levels.
  • Fourth, in any market, there are large numbers of firms selling a homogeneous product.
  • Fifth, individual firms cannot affect market prices.

Practically speaking, these conditions rarely exist in pure form anywhere in our economy. In the case of health care, there are a variety of different types of markets. For example, employers purchase insurance, large hospital systems purchase medical supplies, and individuals purchase insurance plans. These markets may embody these conditions to varying degrees, but the most basic health care markets, in which consumers or patients directly buy health care services, depart from this ideal dramatically, as the following examples illustrate.

To begin with, health care consumers not only lack perfect information, but often any information at all.   At present, prices in the U.S. health care market are virtually unknowable. Quality data are scant, imperfect, and often confound even experts.  Further, medicine is a complex science-based service: even highly trained health professionals struggle to stay current. As a result of social media and the internet, consumers are better informed than ever before, but most depend on advice from health professionals to make informed health care purchases. This kind of imperfect information may help explain why consumers in high-deductible health plans are equally likely to reduce their use of high-value or low-value health care services. They are just as likely to forgo their blood pressure treatments as unnecessary back surgery.

Health care consumers also face unusual challenges to making rational decisions. In medicine there is a saying that any doctor who treats herself has a fool for a patient. Even the most informed individual can have difficulty acting rationally when confronting the emotional turmoil that accompanies their own illness or that of a loved one. Beyond this, there are clear situations where patients’ cognitive abilities are compromised, for example, in cases of stroke, dementia, intoxication, loss of consciousness, delirium, or mental illness.

Competent patients have the inherent right to make their own medical decisions, and many do so wisely and well. But market advocates also must recognize the special obstacles to rational decision-making that face health care consumers.

Consolidation among insurers and health care organizations has radically reduced the number of providers selling health care and health insurance in many U.S. health care markets. Recent work shows that providers in 90 percent of U.S. markets are highly or “super” concentrated.

This consolidation and resulting lack of competition has enabled individual providers to charge excessive prices in many markets. Similarly, government-granted patents create monopolies that enable drug manufacturers to set astounding prices for new drugs and raise them almost at will.

These and other departures from the conditions necessary for effective market functioning suggest the dangers of uncritical reliance on free markets to improve our health care system. At a minimum, advocates of market solutions would be wise to consider three interventions that could increase the probability that markets will function as desired.

  1. Develop better information on prices and quality. Consumers need information to make informed decisions. Publishing raw data on the prices of care — often referred to as price transparency — is insufficient because it rarely reflects the actual cost consumers face during an episode of care. The price of a chest x-ray that diagnoses pneumonia, for instance, is a poor indicator of the costs of a subsequent hospitalization, not to mention the downstream costs for any previously undetected lung disease. To make health care markets work, advocates must develop approaches to price transparency and quality measurement that are meaningful and understandable to consumers.
  2. Foster markets for health services that pose the smallest challenges to rational decision-making. Certain health services — often referred to as “shoppable” — involve tests or treatments that are either elective, relatively simple to understand, or nonurgent, which allows patients time to learn and think about them. Examples include screening tests for generally healthy individuals (e.g., colonoscopies, mammograms), elective surgeries (e.g., hip and knee replacement), or necessary but nonemergent care (e.g.,whether to add insulin to a diabetic regimen). Fostering competitive forces in these areas could improve the functioning of the health care market overall. But reformers should be aware that these services are likely to account for a minority of health care activities and, frequently, are not the most expensive ones.
  3. Promote competition. Unless government finds ways to restore competition among providers where it no longer exists, markets can’t succeed. This is true both for health care services generally and pharmaceuticals in particular.

Given our desperate need for health care reform, the appeal of market solutions is understandable. But it is naïve to assume that they will work in health care just like they do in other sectors. It is time for a frank, open, and nonideological discussion of the problems markets can address in health care and how we can create conditions that will enable markets to function as intended.



USA Today editorial board: Amazon, Berkshire Hathaway, JPMorgan can’t ‘fix our nonsensical health care system’


Monopoly Medicine - How Big Pharma Stops Competitors Monopolizes Health Industry 1

While health insurers and benefit managers saw stocks tumble on news Amazon, Berkshire Hathaway and JPMorgan Chase & Co. will enter the healthcare arena, the editorial board at USA Today isn’t convinced the move will be as disruptive as some think.

In an opinion piece published Feb. 20, USA Today editors wrote, “To BBD [Jeff Bezos, Warren Buffett and Jamie Dimon] we say: Go for it. If you can come up with ways to provide your employees with better health care for less money, more power to you. To the rest of the country we would say this: Don’t get too excited. Not even a company as crafty as Amazon, or a bot as all-knowing as Alexa, can fix our nonsensical health care system.”

USA Today said the reason an Amazon-Berkshire-JPMorgan company won’t create overarching change is because U.S. healthcare is built upon an “upside-down” architecture. They wrote providers and drug companies “have monopoly or near-monopoly powers” to set prices, while employers and payers are much more fragmented.

“The three companies — particularly Amazon — are known for their ability to disrupt industries. But in health care, they aren’t up against an old-school industry fallen behind the times; they’re facing powerful monopolies or near-monopolies brimming with technology of their own,” according to the report.

To view the full opinion piece, click here.