Healthcare is the only industry where we tolerate sky-high prices, ancient technology and endless waiting … and then call it compassion. We say it's either a human right or a business. Truth is, it's both.
Healthcare is an essential service. Because we value it as a safety net, we tolerate costs and inefficiencies that would bankrupt any other industry. But our tolerance has gone too far, and we've let regulation crush the thing that drives low pricing and innovation: competition.
Take drug pricing, for example. The Affordable Care Act requires most insurers to cover prescription medications. This sounds like a great benefit on the surface. But when every drug is covered, there’s no incentive to compete.
If insurers could choose which drugs they covered, pharmaceutical companies would price their products competitively as an incentive to be selected. Instead, average drug prices are now more than five times higher than they were 40 years ago.
In a perfect world, I’d vote we burn down two key parts of the healthcare system holding us back: the Anti-Kickback Statute and the Employee Retirement Income Security Act of 1974 (ERISA). Without these acts stymieing innovation and impeding competition, the data sharing that’s key to value-based care at scale would be much easier to achieve.
Reforming the system isn’t all about destruction. We can also build on all of the valuable health data we currently have by increasing connection among providers, which will ultimately lead to lower costs and better patient care.
Burn it down: Anti-kickback law stymies innovation
Today, our healthcare system's data are painfully siloed. Providers struggle to access patient records from outside their systems, which makes it hard to deliver care efficiently.
The culprit? Anti-kickback laws.
When I say “kickback,” I don’t mean under-the-table bribery. I’m talking about referral fees.
Kickbacks exist in nearly all supply chains but healthcare. Travel aggregators like Kayak deliver consumers to airlines in return for a small cut of the profits. Uber finds people who need rides near a driver’s location in exchange for a fee. Kickbacks motivate people and businesses to connect with each other.
In healthcare, kickbacks are illegal. The Anti-Kickback Statute makes it a crime for anyone to give or receive kickbacks meant to generate healthcare business. The statute aims to ensure that medical decisions are made based on need, not profit. That’s a good thing.
But the law also has unintended consequences. One of them is that companies that would connect data between healthcare systems can't receive compensation for that work because, under the law, the payment would constitute a kickback.
This makes it difficult to share data between providers and payers and makes it harder for companies to build viable business models for their data solutions. That's preventing all of us—providers and patients—from benefiting from freely flowing data.
More solutions could be funded more quickly if businesses had more incentive to innovate in the healthcare system. These innovations could greatly simplify the transition to value-based care.
Burn it down: ERISA impedes competitive insurance pricing
ERISA is meant to protect participants in employer-sponsored health plans by setting standards for how the plans operate. As a federal law, ERISA preempts state laws relating to employer-sponsored health insurance, which prevents states from enacting cost-control reforms. It also numbers the cost saving imperative by making healthcare payment pretax.
Essentially, this means healthcare coverage is a form of compensation that is 40% cheaper than salary to the employer!
Without ERISA, states could design health insurance systems that meet their residents’ needs. Insurance providers would then price their plans more competitively, and exchanges would have a more varied range of products for selection.
Right now, the insurance plan options for most employees differ very little from each other. Competition would drive differentiation. Employees could scale their coverage to arrive at a premium that meets their budget.
We’ve already taken a couple steps in the right direction. The Individual Coverage Health Reimbursement Arrangement (ICHRA) lets employers give their employees a certain amount of tax-free money to purchase healthcare plans of their choice.
Recently, Sen. Bill Cassidy, M.D., La., also proposed a refinement to ERISA, which would give independent and self-employed individuals greater access to benefits.
Rolling back federal regulation and increasing competition for health insurance would lead to lower costs for consumers.
Build it new: Data accessibility is the first step toward value-based healthcare
But this isn’t just about burning. The rebuild is right in front of us: Let data flow. Make data accessible.
Right now, providers don’t have access to their patients’ data if they exist outside their own EHRs. They have to piece together a patient’s history from incomplete data and rely on the patient to fill in the gaps.
Accessible, free-flowing data would let providers see the whole picture of a patient, essentially letting them collaborate with their patient’s other providers through the sharing of information. These data could be used to inform preventive care and more thorough treatment plans.
There are many changes that could lead to better, less expensive healthcare, but making data accessible is the shortest putt.
Incentivizing innovation will lead to value-based healthcare
Consider this scenario. A clinic is receiving fewer and fewer patients, but closing the clinic to reflect the realities of the market feels like a moral failure. To pay for clinic operations with fewer patients, the clinic’s owner instead raises costs for all patients throughout its entire system.
This thinking—that healthcare is a moral issue despite operating as a business—has led to inefficient processes, rising costs and regulations that impede competition.
Oh well. It already happened. What we must now do is find ways to “trick the system” into working on the demand curve. Anti-kickback and ERISA are good starts.
Jonathan Bush is founder and CEO of health data platform Zus Health. He sits on the board of Innovaccer and is the co-founder and former CEO of athenahealth and former executive chairman of Firefly Health.