American healthcare system is in a crisis. We have one of the best healthcare technologies in the world but the delivery system is completely broken. Among the developed countries of the world, US spends the highest on healthcare as a percentage of GDP, 16.9%. This means, for every dollar spent, about 17c is a healthcare spend. In contrast, all the other developed countries of the world spend close to about 10c per dollar spend in the economy on healthcare
Figure 1: Healthcare spending as a % of GDP, 2015, among a sample of developed countries (OECD.org Data page)[1]
Has all this spending on healthcare resulted in better health for the people? On the contrary, Organization for Economic Co-operation and Development (OECD) health data (2013) shows US actually has one of the lowest life expectancy at birth among developed nations (Figure 2: Life expectancy at birth among developed countries). It also has one of the highest disease burden i.e., years of life lost due to disability and premature death (Figure 3: Disease burden among developed nations).
Figure 2: Life expectancy at birth among developed countries
Figure 3: Disease burden among developed nations. Source: Institute of Health Metrics and Evaluation. Global Burden of Disease Study 2010. Data available here: http://ghdx.healthdata.org/global-disease-study-2010-gbd-2010-data-downloads
US has higher than average mortality rates among leading causes of death compared to its peer developed nations group (Figure 4: Mortality rate for leading causes of death), the only exception being cancer. Compared on various other parameters such as medical errors, physician consultations per capita, hospital stays, price of various medical procedures and drugs, US scores much lower than its peer group. Increasingly, Americans are paying more for their healthcare every year but receiving much less access and care than any other country in the developed world.
Figure 4: Mortality rate for leading causes of death source: Kaiser Family Foundation Analysis of OECD (2013). “OECD Health expenditure indicators”. OECD Health Statistics (database). doi: 10.1787/data-00349-en
What has gone wrong? The causes are not far to see. Average time a Primary Care Physician (PCP) spends with a patient, for example, is between 8 to 12 minutes of actual face time regardless of the complexity of the health issue [2]. In this limited time, trust and true healing cannot happen. PCPs are forced to send patients off to tests or specialists [3], leading to unnecessary referrals, procedures and prescriptions. There is an overall dissatisfaction both for the physician and patient. The same state of affairs is true with specialty care as well.
American healthcare system was conceived with primary care as its bedrock. PCPs can treat almost 80% of health issues with only the other 20% requiring specialist treatments or hospital visits. PCPs help the patients navigate the system connecting disparate specialists who do not have the whole picture of the patient’s healthcare needs. Such a system needs the PCPs to be patient-centered and spend enough time to understand them and be their advocate in the system. It has been established that as the ratio of primary care to the population increases, the relative health and mortality of the population improves significantly [4].
At the root of our current healthcare issues is the lack of physician–patient relationship, a lack of time and trust. But why do physicians have no time for their patients? One word – Insurance.
Employer based health insurance started to be offered during World War 2 after there were wage freezes and employers were looking to attract employees through other benefits. Until 1954, only a minority of Americans had health insurance. Congress changed the tax code that year which made all the employer contributions to employee health plan tax deductible, without it being taxable benefit for the employee. This change in the tax code made employer funded health plan the lowest cost method of financing any type of healthcare. By 1965, employer funded healthcare had become the default way for employed Americans [5]. The problem started when health insurance was no longer being used as an insurance.
The basic idea of an insurance is to spread the cost of risk among a group who each face the risk of loss. As long as it is used for truly catastrophic events (low probability, high impact), health insurance acts like any other auto or home owners insurance. But today, health insurance is used for every healthcare event, catastrophic or otherwise. Imagine what the home owner’s insurance premiums would be if it is used for such small events as crack on the door! Since health insurance began to be used for non-catastrophic events, it has turned into a big payment system rather than a true insurance against risk. Today, health insurance is a mechanism to pay for healthcare, a giant system that acts as an intermediary between patients and healthcare system, negotiating the prices with physicians. This has resulted in the loss of consumer efficiencies in healthcare [5]. Physicians no longer work for the patients but are answerable only to the insurance companies who are the actual pay masters and thus determine what tests or procedures are authorized. What has resulted from the absence of consumer facing system is the total lack of price transparency for the patients. Without price transparency, all the efficiencies of free market are lost as patients can no longer shop around for price, quality or any other parameters that interest them.
What has all of this got to do with physicians not getting the time to build trust and truly heal the patients? Over 40c per dollar revenue is spent at the physician’s office on administrative costs related to insurance. These include negotiations over capped reimbursements, billing and collections from patients who need to pay out of pocket. Of the remaining 60c, the typical reimbursement rates from the Insurance is less than 60%. This totals to about 64% of every dollar revenue lost to insurance companies. Only 36c on every dollar is available for other overheads and physician’s pay. Due to the high overhead costs, physicians are forced to go for volume in order to make up for low margins. This is really the root of why physicians spend only 8 to 12 minutes per patient, and why there is a crisis in healthcare today. Providing insurance coverage to more people through Affordable Care Act (ACA) is not addressing the main issue.
[1] https://data.oecd.org/healthres/health-spending.htm, OECD (2017), Health spending (indicator). doi: 10.1787/8643de7e-en (Accessed on 18 January 2017) [2] Solving the crisis of primary care – Medical Economics 2014 [3] What’s Keeping Us So Busy in Primary Care? A snapshot from One Practice – The New England Journal of Medicine, 2010 [4] Contribution of Primary Care to Health Systems and Health – Barbara Starfield, Leiyu Shi, and James Macinko. John Hopkins University; New York University [5] Catastrophic Care: Why Everything We Think We Know About Health Care Is Wrong – David Goldhill