The American healthcare system is broken. Its biggest problem is the ridiculous cost that makes health care and coverage unaffordable, even inaccessible, for many Americans.
The numbers are staggering: healthcare spending has risen 50%, adjusted for inflation, over the past decade and now accounts for almost a fifth of the US economy. Routine care routinely costs five figures. Premiums for employer-sponsored family health insurance average $22,463 per year. As a result of these expenses, approximately 100 million Americans have medical debt. The financial burden for patients with rare and chronic diseases is particularly heavy.
There is a bipartisan consensus that reform is needed to make the system affordable. And yet, year after year, nothing meaningful is being done to reverse the costs. Washington’s inertia and massive industry lobbying are blocking substantial policy change. According to data from Open Secrets, seven of the 20 highest spending special interest groups in 2022 were health lobbies, collectively paying $146 million to maintain the profitable status quo.
Fighting for policy change remains essential, but the best opportunity for effective reform comes from spoilers outside Washington. Healthcare requires the same kind of creative destruction that has revolutionized other high-cost industries. Think about what Uber has done to the taxi industry. What streaming did to cable. And (for older readers) what cell phones have done to long distance phone plans.
Nascent healthcare disruptors, including providers, insurers and pharmacies, already exist. They offer more hope than the Beltway bureaucrats for making health care affordable and accessible. If they can scale and grow before lobbyists demand new regulations that bankrupt them, they have the potential to fix American health care.
Supplier Disruptors
Consider healthcare providers who bypass the traditional inflationary payment model and offer direct patient care at a fraction of the price. These include independent medical, surgical, imaging and laboratory centers that charge affordable prices and operate outside of expensive insurance networks and adjusters.
For example, direct primary care physicians provide families with all of their primary care needs for approximately $100 per month – no insurance required. Some specialists, such as obstetricians, adopt a payment model similar to that of Netflix.
Independent surgical centers such as the Oklahoma Center for Surgery offer procedures for about half the cost of what major hospitals charge. SCO provides knee replacements for $18,000 compared to around $40,000 at hospitals. Cash-based imaging centers such as Express MRI offer MRIs for $500, up to ten times less than what hospitals charge.
How can these providers offer care at such affordable prices? Because they avoid the healthcare industrial complex characterized by inflationary kickbacks, secret deals, high administrative costs and aggressive pricing.
Of course, some patients cannot afford care even at these reduced prices – for example, those with rare and chronic conditions that require frequent treatment. Yet these costs can be made even cheaper by health insurance disruptors who offer coverage based on these reduced fees.
Insurance Disruptors
Check out Sidecar Health, an innovative health insurer that reimburses policyholders for care at a fixed dollar amount per treatment, regardless of the fees charged by the provider. Contrast this straightforward approach with the complex insurance claims model based on a secret percentage of inflated rates from “in-network” providers.
This model incentivizes patients to buy at the cheapest price, exposing providers to the same market pressures that all other companies face. Sidecar issues policyholders with a debit card to pay directly for care in order to eliminate administrative costs. There are no networks, open registrations, continuous employment requirements, deductibles, co-payments or coinsurance.
Monthly premiums cost $300 per month for annual coverage of up to $2 million, a huge savings over the four-figure monthly premiums most Americans pay.
Most Americans under 65 receive their health coverage through their employer, and some companies are disrupting this expensive coverage model. They refuse to give their plan administrators a blank check in exchange for complicated coverage plans that cost more and more while offering less and less.
Employers like Schaefer Autobody in St. Louis, Kenny Pipe and Supply in Nashville, and John Soules Food in Tyler, Texas, are creating their own networks of direct contracts with local suppliers, from primary care to hospitals, without conflicting intermediaries who drive up costs. price. .
This disruption has resulted in significant cost savings for health plans and employees. For example, Shaefer Autobody went from about $2 million a year under its old insurance plan to $1 million on its direct contract model without skimping on coverage. Kenny Pipe and Supply saved 27% in the year after the switch.
Skyrocketing health plan costs are forcing more and more American companies to follow the lead of these disruptors. Workers and their families will benefit from lower premiums and better coverage.
Pharmacy Disruptors
Disruptors are also revolutionizing the prescription drug market. Due to anti-competitive drug supply chain intermediaries known as pharmacy benefit managers, about one in four times we visit the pharmacy counter, prescriptions cost more paying with insurance than paying with insurance. just paying in cash.
I recently experienced this bizarre drug pricing dynamic when I went to my local CVS to pick up a prescription for my son’s generic ear medication. My co-pay with health insurance was $210.57 against a cash price of only $80.17. (Walmart offered a spot price of just $70.25.)
Disruptors like Mark Cuban’s Cost-Plus Drug Company circumvent PBM rebate programs and price splits that drive up drug prices and buy drugs directly from pharmaceutical manufacturers and then resell them to patients at the price of big plus 15%.
This efficient arrangement allows the Cuban pharmacy to offer the imatinib leukemia treatment, which has a retail price of $2,503 per month, for a cash price of just $12 per month. It provides the ulcerative colitis drug mesalamine, which sells for $767, for just $27. And he sells the high blood pressure drug lisinopril, which sells for $24, for $4.
A Harvard Medical School study reveals that Medicare could save $3.6 billion (37%) by buying generic drugs from the Cuban pharmacy. A study from the University of Southern California finds Medicare could save $2.6 billion by buying generics from Costco, which along with many direct primary care physicians also buys directly from drug companies and offers drugs at very favorable prices.
Employer and private insurance plans can reduce drug costs even further by ignoring the discount-laden PBM model and offering coverage based on the affordable prices offered by these pharmacy disruptors.
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Patients who are fed up with ridiculous health care costs should continue to fight for reform in Washington and state capitals. But political victories will likely only help at the margins – like trying to improve taxis by forcing them to accept credit cards or turn off their radios. They are band-aids on a bullet-riddled American healthcare system.
To achieve meaningful change, massive disruption and creative destruction is needed. The immense costs of America’s health care system are depressing, but the provider, insurance, and pharmacy disruptors that are making health care affordable and accessible offer significant reason for optimism.
Terry Wilcox is the Executive Director of Patients Rising and host of the Patients Rising podcast.
