Health care is changing so fast that it's easy to lose sight of where this $2.7 trillion train is heading. In this article, I ask that you to stop for a moment to consider a simple but scientific-minded question: what do we know, for sure, about health care and its future? And, conversely, what don't we know?
First, we know that health care has certain moral and ethical imperatives. It's not just any business. Second, we, as citizens, believe that health care is a right, not a privilege. The real question is how medical care is made available to the population.
On this question of health care delivery, here's my list of important things we do know:
- The population is aging. Medicare's actuary predicts enrollment will rise from 39.7 million in 2000 to 64.3 million in 2020. This will drive where resources are spent.
- We get sicker as we get older. This fact can be too easily glossed over when we lump seniors into a single group. An 85-year-old has a higher cost profile than a 65-year-old, not to mention a 35-year-old. Baby boomers are getting older and will soon become the "old-old," as demographers put it.
- Innovation is not going away. Entrepreneurship is one of our society's greatest strengths and innovation improves health. But there are unavoidable costs. First is the cost of the innovative treatment itself. Less recognized is that helping people live longer results in additional long-term costs for treating aging survivors and chronic conditions.
Modern health care is a two-edged sword. The more we succeed, the more it costs financially. It's a joy to work in an innovative industry dedicated to keeping people alive and healthy. When I was born in the 1950s, a person who turned 65 had a life expectancy of 13 years. Today, a 65-year-old life can expect to live 19 years.
The intellectual and business challenge of the health care industry is to mitigate this cost problem. Health care costs are going to rise for the reasons stated above, but we must limit this inevitable ascent while also improving care.
So what we don't know about health care? Solving these mysteries can pay big dividends:
- What's driving costs? You'd think we know this, but we don't. Standard economic theory says the primary problem is perverse economic incentives, such as fee-for-service driving volume. But my research and that of others shows this doesn't appear to be the case - or at least it's a lot more complicated than providers running to profit. In reality, salaried doctors behave pretty much like fee-for-service doctors.
- Why such enormous regional variances? The Dartmouth Atlas of Health Care shows health care can cost three or four times as much in one part of the country as in another. Why is Miami so much more expensive than Portland, Maine?
- Will electronic health records lower costs? I hope so. The truth is, we don't know. EHR may even raise costs. The lack of a uniform structure for records and architecture make EHR a considerable technical challenge in efforts to improve efficiency and drive down costs.
Having spent my career trying to bend the cost curve while improving care, I now realize that we must understand cultural drivers - not just economic ones - to pull the right levers. We must think deeply about, for example, why residents of Vermont, New Hampshire and Maine have lower rates of obesity and visit doctors less than people elsewhere. Likewise, we need to understand what motivates physicians, patients and insurers - beyond just money - so we can create collaborative situations that improve cost-effectiveness.
I know win-win collaborations can be created because Cardinal Health Specialty Solutions helped do it through an oncology clinical pathways program for CareFirst BlueCross BlueShield. The program reduced overall costs 15% by creating physician-designed pathways to treat breast, lung and colorectal cancers. Variations in treatment declined, for the better. Hospital readmissions dropped. Physician reimbursements grew nearly 20%. You can read peer-reviewed results or this Reuters story.
Containing costs is about more than duels between payors and providers - with patients stuck in the middle. The key is being open to alternatives to systems and paradigms. At Cardinal Health, we're looking at alternative delivery systems, alternative reimbursement models and new payor-provider collaborations. Other forward-thinking companies and researchers are doing the same. I hope to talk about this in detail in a future post.