A Warning Hidden In Spending

David 0:00

What if slower growth in healthcare spending isn't evidence that we're finally controlling costs, but a warning that more Americans just can't afford to use the healthcare they have? We'll find out on this episode of Shift Shapers.

Announcer 0:14

Change either energizes or paralyzes. The choice is yours. This is the Shift Shapers Podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry's shifts. And now, here's your host, David Saltzman.

David 0:31

And to help us answer that question, we've invited Ken Terry. Ken is an award-winning healthcare journalist and author who's covered healthcare policy, economics, Medicare, and physician practice as well as healthcare reform for more than 30 years. His latest book, Beyond Medicare for All, Cracking the Code of the Healthcare Affordability Crisis, is a must-read for anybody. It offers a market-based approach to reducing waste and making quality healthcare more affordable. Ken, welcome to Shift Shapers. Well, thanks for having me.

Why Slower Growth Is Bad

David 1:01

Now CMS projects that healthcare spending is going to continue climbing from $5.6 trillion in 2025 to nearly $9 trillion in 2034, but at a somewhat slower rate. Why isn't that good news?

SPEAKER_02 1:14

Well, it it isn't good news that it's slowing down in the second part of this decade, because the big reason why it's slowing down is that people can uh are less able to afford health care. The CMS, the Centers for Medicare and Medicaid Services, that released the report on the projections in health care spending talked about a slowdown in the growth of disposable personal income, which has declined for each of the past three years, and they expect it to continue declining over the next several years. And what that means is that people will have less money to spend on health care. They have less money to spend on tests, on procedures, on office visits, and they will skip more of the care that they need. So we we really need to do something about making health care more affordable.

David 2:07

You know, I think that distinction is really critical because spending less and needing less care are two very different things, aren't they? Aaron Ross Powell That's right. We never need less care unless we get healthier.

Insured Yet Unable To Pay

David 2:20

So for most families, where does health care fall in their priorities when housing, food, utilities, and taxes consume even more of its income this year than last?

SPEAKER_02 2:29

Aaron Ross Powell Well, it it in all of the uh surveys uh that have been done recently, health care uh is at or near the top of people's priorities, because it's something that everybody needs. And only about half of the people in the country feel that they can afford health care right now. When you compare that to the fact that 90 percent of the people are uh have health insurance, that means that the insurance they have is getting thinner and thinner. They can afford less with that insurance.

David 3:04

Aaron Powell Is Is there a correlation between particular groups of people who are most likely to postpone first and that and these economic factors that we've been talking about?

SPEAKER_02 3:14

Aaron Ross Powell Well, I mean it's it's directly related to their income. Uh you know, there was recently a study that showed that the uh health care spending by those higher on the income scale uh greatly uh exceeded that of people on the lower part of the scale.

David 3:30

Aaron Ross Powell So does it take an awful lot of time between postponed care and more serious health care conditions and obviously more expensive

Deferred Care And Chronic Disease Costs

David 3:38

care? Aaron Powell Absolutely.

SPEAKER_02 3:39

I think that uh you know when people have minor acute conditions, you know, they they sprain their ankle or um they have a rash, they they'll they'll tend to go to the ER and they'll get it taken care of. The real problem is chronic diseases, which uh generate about 75 percent of health costs. And uh if if you ignore your hypertension or your diabetes, or you don't even know that you have them, chances are you're gonna get sicker and you you probably will need some seriously expensive care.

David 4:11

Trevor Burrus, you know, you you've mentioned that 90 percent of Americans who have health insurance, but only 49 percent believe they can afford the health care and the prescriptions they need. What does that tell us about the difference between being insured and having access to care? I mean, somebody on the podcast a couple of years ago called these folks functionally uninsured. Would you agree with that?

SPEAKER_02 4:34

Well, you know, it depends on the individual case. But uh you know, just to give you one data point, in the last several years, the uh percentage of uh large companies that have high deductible plans jumped from 18 percent to 34 percent. So if you have a high deductible plan, basically your insurance is not going to cover anything until you get really sick. And that's you know one reason why you might skip care uh at the at the lower levels of the health care that you need.

David 5:04

Aaron Ross Powell Are the traditional coverage statistics that we look at giving us a false sense of progress?

SPEAKER_02 5:10

I I don't really know that there there's any good news in the traditional statistics. I mean, there there was a period of time after the introduction of Obamacare for several years when the percentage of the national gross domestic product that uh was devoted to health care hardly rose. But there were a whole bunch of different possible explanations for that. And then uh you know, after the uh the COVID uh crisis, there was a big jump in the annual growth in in health care spending. And uh I think uh last year it was 8 percent. This year is expected to be 9 percent. So these are clearly uh you know unaffordable uh increases in health

High Deductibles And Functional Uninsurance

SPEAKER_02 5:56

care spending.

David 5:56

Aaron Ross Powell We we've talked about patients, but they're not the only ones reaching a breaking point. Before we get to talking about employers, how does this impact the medical side? Because it's something we don't always think about on the health benefits advisory side, but there's obviously that pressure there as well. How does that affect the uh the practice of the physicians that we go to see?

SPEAKER_02 6:15

Aaron Ross Powell Well, the the the biggest change in physician practice uh has been that over the past 10 years, nearly 80 percent of doctors have become employed. You know, before that, the majority of doctors were independent. So now they're they're working for big health care systems or uh insurance companies or private equity firms or other types of corporate employers. And uh they're basically expected to uh contribute to the bottom line, which means they have to see a certain number if you're a primary care doctor, you have to see a certain number of patients per hour, uh, you have to follow certain guidelines, and doctors

Physician Employment And Burnout

SPEAKER_02 6:54

feel that their autonomy has been reduced. They feel a kind of moral injury because they can't do what they really want to do for some patients. So I I'd say, you know, and and you know, that's been reflected in increases in a percentage of doctors who say that that they're burning out. It was uh I think before COVID it was about 40 percent, and now it's about 60 percent.

David 7:18

Aaron Powell Did they did they trade the cow for a handful of magic beans? I mean, you know, there was a time when the not too long ago, when, as you mentioned, the physicians were independent, and then all of a sudden the hospital started buying up physicians' practices. There must have been some enticement or some reason that they thought that that would be a better model for them.

SPEAKER_02 7:36

Aaron Powell You know, I mean, there have actually been a couple of waves of possible purchases of uh practices. You know, the first was back in the uh the first managed care era of the 1990s, and uh you know, then hospitals found that it wasn't a good business, and they let a lot of doctors go back into private practice. This time, I think uh it's uh it's a whole number of different reasons, including higher costs, lower compensation from insurers, the expense of um of buying electronic health records, and tremendous uh increase in the administrative burden. And uh all of that has just, along with in some cases, attractive um buyout offers has been too much for many doctors to remain in private practice.

Employers Hit The Breaking Point

David 8:22

Aaron Ross Powell So the other groups that are affected, obviously, are employers. Most of the folks in the country who receive health insurance receive it through their employers. What's happening to those folks as as health benefits costs consume an increasingly large share of overall comp?

SPEAKER_02 8:36

Aaron Powell They're tearing their hair out. I mean, to really uh put not too fine a point on it. Uh the uh the larger employers are are hanging in there, but many of them say that uh, you know, the the cost of health care is unsustainable, and you know, they expect uh not to be able to uh keep offering benefits in five or ten years. A whole bunch of them recently went to Washington, represented by some large uh employer coalitions to to beg both Democrats and Republicans to do something about health care. The the smaller employers, a lot of them are bailing already. There's been a you know significant increase in the number of uh small firms that uh no longer offer health insurance. And if they do offer it, it's uh you know pretty thin. You know, maybe they're sharing 50-50 uh with employees on the uh the premium costs, and they tend to be high deductible plans.

David 9:32

Aaron Powell Interesting. You know, I I know a lot of employers have in the past been responding with higher employer contribu employee contributions, rather, bigger deductibles, skinny networks, reduced benefits. Uh are those responses controlling costs, or are they just shifting them over to the employees?

SPEAKER_02 9:49

Aaron Powell Well, they've been shifting them over to the employees. Uh they're they're they're not controlling the costs in the system, which are basically being passed on to the employers by the insurance companies or are directly going to the employers if they're self-insured. But you know, there there's a limit to how far employers can push their workers in this in this regard. I mean, the uh there was some uh research done a couple of years ago that showed that uh the the median household in terms of income was spending about 12 percent of their earnings on combination of their share of the premiums and their out-of-pocket costs. You know, that's just way too much. I mean, that's like you're talking about nearly $10,000 for a family that is making around, say, $80,000 a year. Trevor Burrus, Jr.

David 10:46

And yet on the employer's side, Ken, do you see a point where traditional employer-sponsored coverage just becomes financially unsustainable?

SPEAKER_02 10:54

Aaron Powell Yeah, I do think that that's you know eventually going to happen, but you know, it it's a little bit like the you know, the the frog slowly boiling in in in the water, right? The uh what will happen is that little by little, um you know, the companies that are better off uh they're they're you know making more money will continue offering benefits, but at such a high uh cost to their employees that only their better paid employees will take them up on the offer. And you know, more and more people will will uh will go bare. That's what I predict. And you know, at some point, I think there will be few enough people who are who can afford health care that providers will really start to feel the pinch and they will not be able to keep their doors open.

David 11:43

Aaron Ross Powell And you know, the other side of the coin, I know you speak to a lot of doctors' groups. When people delay physician visits or leave prescriptions unfilled or postpone screenings and procedures, what are your doctor groups that you in that you interact with telling you they're they're seeing in terms of more expensive care because of deferred care?

SPEAKER_02 12:00

Aaron Powell Yeah. Well, um you know what what happens very often is that you know people end up in the emergency room, they they're you know a catastrophic case. And uh, you know, they they may end up in the ICU if if they're in bad enough shape. And you know, it it doesn't even have to be uh you know that catastrophic. I mean, let's say that you're a person with diabetes who hasn't taken care of yourself, right? And uh you you can reach a point where uh you notice that your uh your big toe is turning uh purple. And uh you know, you you go to the doctor and he he rushes you off to the surgeons, you know, that you have to have your toe amputated. You know, I mean that's that's the kind of thing uh that'll ha that'll happen. And and you know, it doesn't have to happen. It doesn't happen to nearly the same extent in other countries. A large part of that is because they have more primary care than we do. I mean, in this country, around 100 million people have no access to a regular primary care provider. You know, that's uh unheard of in European countries. And so, you know, if people go regularly to a primary care doctor, you know, some of these things are gonna are going to get picked up at a point where they can be dealt with before they become catastrophic.

Basic Care As The Fix

David 13:14

Aaron Ross Powell Wasn't that the selling point of HMOs quite some time ago? I mean, that was the the whole deal was you had what we called a medical home, and it was more accessible and and uh and maybe Trump was trying to solve some of these problems before, I guess before the accountants got involved.

SPEAKER_02 13:30

Yeah. Well, I mean I mean I I think it that it has helped a lot of people. I mean, uh, you know, big HFOs like Has Provenente, you know, have well uh designed systems to make sure that people get, you know, the the primary care uh that that they need, as well as, you know, let's just place primary care in in the larger context of basic care, which is a key concept in my book. Basic care is the care that most people need most of the time. And that includes preventive care, chronic care, and minor acute care. And it encompasses both primary care and lower levels of specialty services. Okay? And if people get those that kind of care regularly, they're much less likely to need expensive specialty or hospital care. And uh, you know, and under my model, primar primary care groups of a certain size would take financial responsibility for all basic care. And they would compete with each other, and people would, you know, choose a doctor in in a group that had high quality ratings and that didn't charge too much. And uh that would make an enormous difference. If we had that in our system, it would completely change the nature of the conversation. Is that what direct primary care docs are trying to provide today? Well, direct primary care docs are just trying to uh operate outside the of the insurance system. That's all. And and they they only provide primary care and they um you know charge a subscription fee for that. And uh my assist model also is based on a subscription model, but as I say, it would cover all basic care. And uh instead of just being based on one doctor operating by himself or herself, it would be uh you know a whole care system that uh would have the infrastructure needed to make to improve population health.

David 15:28

Aaron Ross Powell So we focus on let's go back to the to the economics of this. We focus on the rate of medical inflation a lot in conversations our groups have. I'm sure groups that some of the doctors have. You argue that affordability may be the more important measure. What's the difference and why why is it more important?

SPEAKER_02 15:46

Well, the as I said, if health care is not affordable to everybody, you know, the the costs of the entire system will will just keep going up at an accelerating rate because people just won't be able to get the care they need when they need it. And uh, as we discussed, uh that leads to uh worse health and uh more high-cost care. So it I think it really is a question of looking at this from a societal point of view. I mean, the the reason why other advanced capitalist countries have much better health systems than we do is because there's a social solidarity in those countries where people believe that everybody deserves good health care and they're all in this together on that. You know, it's not that you know uh peep, you know, healthcare providers don't earn money in those countries. Of course they do, and they earn good salaries. But you know, the the important thing to those nations is that everybody has access to high-quality care, and they can and they can afford it because you know it's a national system.

Why Medicare For All Stalls

David 16:54

So let's let's spend the rest of our time looking forward. Your your book is titled Beyond Medicare for All. What do you believe the usual debate between the current system and a single government program misses? Um what's the central problem that it just doesn't seem to get its teeth into?

SPEAKER_02 17:09

Yeah. Well, uh I think that Medicare for All is an improvement over what we have now because it does provide universal coverage. And it it uh would lower costs by cutting administrative spending and paying Medicare rates to providers. But that's one of the reasons why it will never be adopted, because healthcare providers in this country would not stand for their rates, their their compensation being reduced to the level of Medicare rates across the board. It would be way too hard a uh an economic uh uh cut to them. And and uh also it it would uh result in in insurance companies being put out of business en masse, which is something that they would not stand for, right? So between those two alone, and and of course, drug companies would not want their uh the government to negotiate all uh drug prices with them. So the the entire health care system would be dead set against Medicare for All, and that's probably the reason why, although Medicare for All bills have been kicking around in Congress for the last 20 years, they've never gotten anywhere. And they're not going to get anywhere. It's you know, it is it's basically it's an imposition of a socialist approach to health care on a capitalist society. And it's okay if it if it grew organically out of that society, as the National Health Service did in England out of World War II. But it can't just be retroactively uh, you know, retrofitted into the system. And uh I think that we have to just remember that for any health care reform to be effective, it has to take into account the interests and needs of the major players in the system. So we have to find a way to improve our system without making it impossible for health insurers to stay in business, for example, or by cutting uh so much money out of the system that half the hospitals in the country would have to close their doors. I mean, we can't move forward on that basis. We have to move forward on the basis that we're all in this together, and and that includes the major players as well as the consumers. And that's basically what my book sets out to accomplish.

David 19:33

And in in a country that prides itself on rugged individualism, how do you get over that hill?

SPEAKER_02 19:41

I I think you simply have to restructure the healthcare financing and and care delivery system in such a way that people do not see such a major change that it turns their lives upside down. You have to the the the important changes have to occur behind the scenes, and you have to make sure that that people feel comfort at comfort level in in what's going on.

David 20:08

You you just mentioned a few minutes ago, I'm I'm just kind of curious about all the hills that you have to get over to get from point A to point B, which maybe is why this has been been being discussed for 20-odd years. If if you've got all of the provider community arguing for their enlightened self-interest, what's going to give?

SPEAKER_02 20:25

Aaron Powell Well, what's going to give is that the system is unsustainable. And at some point, you know, providers will start going bankrupt, insurers will be raising their prices so high that employers will have to stop offering coverage. Consumers will no longer be able to accept the insurance, and even if they have it, they still won't be able to afford health care. I mean, all of these trends are starting to happen. And uh my prediction is that within 10 years they will really reach crisis point. But we don't have to, you know, wait until that happens, until the wheels start to fall off the bus. We can sit down and and and uh look at a solution that could find support across the political aisle.

David 21:09

And I believe that this is that the wheels are pretty darn wobbly right now.

SPEAKER_02 21:13

Aaron Powell Yeah, they they are wobbly, and for a lot of people, they have fallen off the bus. But there still are enough people who can afford insurance that you know the current system can stagger on for a while.

A Market-Based Two-Part System

SPEAKER_02 21:25

Do you think that market competition has a role or absolutely. You know, my entire system is based on market competition. I mean, just to quickly go off into the basic nuts and bolts, I call it a two-part system because it would divide the financing of health care into two parts. Competing primary care groups of a certain size that I mentioned before would charge subscription fees for basic care, which include primary care and lower levels of specialty care. Consumers, employers, and the government would share the cost of these basic care subscriptions. Now remember what I said here. These are competing groups. They would compete with each other on the basis of cost quality and patient experience. So that is very much part of the market solution. Consumers, employers, and the government would bear the cost, and uh the federal government and the states would pay the insurance premiums on behalf of Medicare and Medicaid beneficiaries of the poor. A choice these these insurance plans would compete on marketplaces similar to what we have now with Obamacare plans marketplace. Would would both parts of the equation be at risk? Care states. And uh if they came within a given year, they they uh their spending fell below their budgets all insurance companies. There would be no negotiations with the insurers here.

David 22:46

Trevor Burrus, Jr. Interesting. So fast forwarding, as you know, we've got a few

What To Watch And Save Primary Care

David 22:50

more minutes left here. If if CMS projections are directionally correct, what should employers, advisors, and policymakers be watching over the next five to ten years? On insurance.

SPEAKER_02 23:01

So I if you know, if I were an employer right now, especially a large employer that's part of a coalition or something, I would be redoubling my efforts to pound some sense into their representatives in Congress. Now, this, you know, I I agree might not happen for another couple of years, you know, they have to hold on for another administration. But at some point, people have to prioritize health care just as they did back when the ACA was being passed. They have to, you know, come to a meeting of minds on the left and the right and say, look, this is something that affects all of us. We have to come up with a better solution than what we're offering right now. And right now, they're not offering much of anything. Trevor Burrus, Jr. There was no meeting of the minds on ACA. There was no meeting of the minds, and and that that is very true. And I don't think that a more extensive reform restructuring, as I'm talking about, is going to get passed unless there is a meeting of the minds. But I think that if there is enough yelling, especially by businesses, because don't forget that businesses are huge uh you know campaign contributors and and they employ the people who vote uh you know for these congressmen. So um I I do think that the business community ha has a huge role to play in in trying to turn this around and rescue healthcare.

David 24:25

One last question. But what is the single most important change you would make now, or is there one, to put the system on a better path?

SPEAKER_02 24:32

All right. The the thing that has to be done right now, probably before any of the changes, other changes I'm talking about, is we have to stop the bleeding of primary care. If primary care continues to uh decline, and the percentage of doctors in primary care has dropped from a third to a quarter just in the past 10 years. If that doesn't happen, then our system will collapse because we cannot have an effective health care system without primary care.

David 25:02

To end our conversation today, Ken, thanks so much for being on the podcast. If you get a chance to pick up his book, Beyond Medicare for All: Cracking the Code of the Healthcare Affordability Crisis, we need all kinds of points of view if we're going to solve this problem, and we can't keep going. I think the one thing everybody agrees on right now is that we can't keep going in the direction we've been going. So, Ken, once again, thanks so much. Thank you.

Announcer 25:24

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