I haven’t published anything on here in a long, long time.. Thought it would be fun to start up again. I wanted to give some stream of consciousness thoughts on how I think we can “fix” the economics of healthcare.. Hopefully I make a lot of folks think and make a lot of folks in the industry think harder.
Healthcare is a very simple industry made complicated.
I’m not talking about the relentless search for better ways to care for patients. Whether its surgery robotics or better bandaids, the quest to improve care is vitally important.
What I’m referring to is the complication of the industry in search of margin dollars. I won’t go down the list of who is trying to grab what and how. The starting point is “What Should it Look Like ?”
What Healthcare Should Look Like
Hypothetically, It should look like 1955 (I picked this year because of Back to the Future :). Patients go to providers for care. Providers provide that care. Patients get a bill and if they can afford it, they pay that bill. That’s it.
The ONLY question in healthcare should be “How should care for people who can’t afford to pay for their care be paid?”
Before we start that discussion, let’s do a very, very simple back of the envelope discussion of the cost of healthcare in this country, but we will work backwards to the amount of money needed to pay for care for people who can’t pay themselves
The total cost of care by most estimates is around 5 Trillion dollars. How do we cut that number ? The following is purely my opinion. But I don’t think I’m far off, if we could get everyone in the industry to participate, which is unlikely, but not impossible.. So call me a dreamer.
- Transparency – I’m not talking about publishing the price of procedures and care like Cost Plus Drugs does with meds or that hospitals provide on their websites. That won’t work because everyone bundles and upcodes and plays games in order to extract as much revenue from whoever is paying as possible. The price is a function of too many variables
- Bill of Materials – Instead we need to publish the Bill of Materials, at cost, for every thing that is used when providing care. From consumables to doctors, nurses, or anything that is directly attributable to care, EXCEPT for items that are Capital Expenditures and overhead
- Any equipment, real estate, facilities, power, generators, personnel not providing care and their associated benefits will be segregated.
- Show the actual cost the hospital paid for the bandaids, the sterile water, the fully burdened with benefits doctor, nurse, PT, and anything else that is used specifically for the care of that patient, rather than being shared.
- We will save the how we deal with Cap Ex and Overhead for the end
- Gross Margins – Instead of providers including their gross margins in the pricing for consumables and direct costs, which creates a lot of distortions, like $20 aspirins, just have the provider show their margins. It is up to them what their mark-ups are, but the key here is that it’s really easy to compare the costs that hospitals pay for consumables, doctors, nurses, therapists. Those are efficient markets for pricing. You can make a phone call and get real costs. Reducing the variance between providers to the markups they choose to charge makes the market far more efficient and competitive.
- Publish Contracts
- Healthcare contracts with big providers are COMPLICATED. They aren’t just lists of terms and prices. They have equations in them that take a math major to begin to evaluate them. The only way these become simplified, and the only way the people paying for their care turn this into an efficient market is if those contracts are published for all to see
- Bill of Materials – Instead we need to publish the Bill of Materials, at cost, for every thing that is used when providing care. From consumables to doctors, nurses, or anything that is directly attributable to care, EXCEPT for items that are Capital Expenditures and overhead
- Remove Insurance Companies From the Equation
- All Payments are Cash Pay – The cost of administering and managing payments is astounding. Many estimates are 20 to 30 percent. Most of that is because of the never ending battle between Insurance companies and providers and patients to collect money We could add another 10 percent to account for fraud, overbilling and upcoding and upcoding. Across 5 Trillion dollars. That’s real money.
- Cash Pay Reduces Pricing – Almost every single provider offers lower pricing for cash pay. Multiple studies have shown savings anywhere from 20 to 70 percent. It’s astounding how much additional cost is added to the system because of the complexity insurance companies introduce. Which makes perfect sense.. If a provider can eliminate all the costs associated with collections and more by 20 to 30 percent, they can and should cost less for care
- Insurance Companies Remember, we are working backwards to who pays what patients cant pay for. It will not include insurance companies
- Lets Do the Basic Math So Far
- 5 trillion – Saving on Overhead – Savings on CashPay
- 5,000,000,000,000 – ((.25+.25)x 5,000,000,000,000) = $2.5Trillion Savings and Cost.
- This is before accounting for savings we can get on pharmaceuticals by doing similar things.. It won’t be 50 percent, but it could be more than 20 percent
- What About All the Overhead by Providers?
- In 99 percent of businesses in the world, companies mark-up their costs to generate gross margin dollars to cover all their overhead. This industry should be no different. The change of course, and one of the hard parts of implementing any plan like this is getting providers, particularly big systems to go along.
- My guess, and this is a guess, is that one of the biggest problems that our country has, that other countries do not, is that there is a CapEx arms race. Every system wants to be bigger than the next. They want the latest “Machine that goes ping“, they want to spend a ton of money on branding to compete. On the good side of the arms race, again, just my opinion, is that it allows Doctors who are great at their jobs to earn a premium. I’m in the camp that Doctors and Nurses are vastly underpaid. This approach would hopefully move margin from the owner to the actual care provider.
- I think that unless there is significant competition in a market, this inflates prices. All we have to do is look at facilities fees trends and site neutral issues to start to understand this.
- One other note. The starting number for total healthcare expenditures includes the current gross margins of providers.. So while we are asking them to publish those numbers, we are not assuming they are going to go lower
- Pharmacy – Pharmacy is about 11 percent or $550b. I think these can be reduced at lest 20 percent with this level of transparency. Down to $440b, but thats on a look back basis before considering GLP1s. So I wont include it in any numbers below
- Now for the Big Money Question.
- Who pays for the care patients can’t afford to pay themselves ?
- First we will assume that medicare and medicaid stays the same. No operational changes. We will be able to save money by going back to traditional Medicare across the board and using Third Party Administrators and Pass Through PBMs rather than the way its done now. But we will assume the amounts and programs generally stay the same. We federally spend 847b on medicare and 570b on Medicaid. Subtract those numbers from 2.5T and we are down to about $1.1 Trillion for non Medicare/caid spending
- Who pays for the care patients can’t afford to pay themselves ?
- I’ll open it up for feedback. How should be pay for the $1.1 Trillion that is effectively for everyone under 65 ? There are 160m employees who get insurance from their jobs. Divide that and its $6,875 per employee per year. But not all those people make a lot of money. But we also know that employers pay at least 70 percent of premiums.
- What if employers pay what would have been their share of premiums to the feds, who can now just use Medicare payment processing to cover the cash pay bills from providers your employees use ? And that money can also be used to cover the costs of the uninsured ? (We took the total cost of care and divided it into the number of employees with insurance).
- Is it smarter to have employers give raises to replace what would have been their share of premiums, and letting each individual pay more in taxes on their increased incomes and maybe a 1 or 2 percent premium, to cover the cost of care for the uninsured and contribute to medicare shortages ? Then like above, providers would send the bill to Medicare who would pay them.
- Should the government get in re-insurance business like they and states effectively are for flood and disaster insurance and let employers pay what would have been their insurance premiums into an HSA, and to the feds for reinsurance, and let employees use their HSA accounts up to their reinsurance amounts, with the employers paying amounts between the HSA and fed re-insurance ?
- Do we let employers stop paying for insurance, pay employees more. Leave it up to the employees to determine how to use that money ? What if they can’t afford the bills ?
- Just a reminder these options only work if the top changes are made.
- The whole point is that if you reduce the top line cost of healthcare expenditures in the USA by changing how we pay for care, making it truly transparent, and aligning the interests of providers, employers and patients, our options expand dramatically
- I did all of this in about 90 minutes. So its far from perfect. I just wanted to get my blog started again (thanks to a social commenter who asked), Feel free to rip it apart. That’s how change happens
Hi Mark, I get your argument here. Can’t providers pad cost data? They would certainly have an incentive to. It would set up a game theory problem for competitors in a market, which they wouldn’t like, and they would seek to remove themselves from that dilemma by tilting power their way through aggregating providers in their ecosystem.
When I was a CEO, I also moved to self insurance as the payer premium made no sense to me. I also liked the idea of all the employees being partly responsible for how much their premiums inflated.
That said, the knotted payment and incentive structures we have won’t change unless we reduce insurance complexity (number of benefit plans, rule variations etc) which drives our absurdly high (at 15 – 30% of spend we don’t even know the cost!) admin costs (why can’t we have one EHR database for each of our clinical data rather than scattered to the wind and subject to transfer taxes due to lack of interoperability? Why do payment systems extract tolls on billing data…etc).
Comment by Ted Ranney -
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Comment by Dahyoun Jeong (aquamassige) -
Thanks for the thoughtful analysis. I was particularly struck by your idea in (7) that employers could essentially get out of the business of paying for and often managing health care for their employees — a position they’re in uniquely in the US thanks to a quirk of WW II wage and price controls, made part of tax law by Eisenhower.
I was one of the lead Senate staffers on the ACA. As part of the process of writing the law, we convened major stakeholders to give us input into their hopes and fears for the law we were writing.
I asked the leading business stakeholder groups the same question you are posing: “Wouldn’t your CEOs want to get out of the health care biz? If their company makes widgets, why would they want to worry about health care — wouldn’t they rather spend their time on widgets?”
Uniformly, I was told that the CEOs did not want to exit and essentially outsource health care to government through a payment system along the lines of what you propose in (7). One lobbyist said: “You need to understand the psychology of most CEOs. Not only do they think they’re smarter than everyone else in their business — they think they’re smarter than everyone else in every other business too. They think they can do a better job delivering health care efficiently by paying for it directly than by leaving it to govt.”
To me, it would be simpler for them to outsource health management, but there was zero interest in even exploring that idea so it was non-viable in the ACA context.
It would be interesting to see if attitudes have changed in the 15 years since I had those conversations.
Comment by David Bowen -
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Thank you for this thoughtful and logical approach. I have many friends and family who work in healthcare and they are as frustrated as anyone else about our current complex system that is confusing, complex, and too expensive. The fact that the system values money over human life is just plain absurd and a sad commentary on our society. I look forward to sharing your post with anyone I know who works in healthcare and will encourage them to follow you.
Comment by Bill Ledbetter -
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Mark, are you still here?
Comment by linsant -
“Now for the Big Money Question. Who pays for the care patients can’t afford to pay themselves ? First we will assume that medicare and medicaid stays the same. No operational changes. We will be able to save money by going back to traditional Medicare across the board and using Third Party Administrators and Pass Through PBMs rather than the way its done now. But we will assume the amounts and programs generally stay the same. We federally spend 847b on medicare and 570b on Medicaid. Subtract those numbers from 2.5T and we are down to about $1.1 Trillion for non Medicare/caid spending.”
This is the big flaw in your reasoning. You have some good points but if examined more closely, the reason you chose 1955 (back to the future) might be true, or might be because it predates Medicare (by a full 10 years) and the acceleration, in so doing, of government distortion of healthcare markets and payments (on the back of the wage/price controls that pushed the establishment of employee based healthcare insurance as an employee “benefit.”)
You cannot have your cake and eat it too Mark. Keeping government insurance (medicare and medicaid) while dissolving others into a cash pay approach won’t work. To ape an often aped Princess Bride quote – “I don’t think that will do what you think it will do, Mark Cuban.”
I’m also skeptical when it comes to the cost-plus method of pricing in healthcare. Who determines the cost inputs into physician expertise? How does regional variation impact cost-plus accounting? How do patient demographics impact cost-plus care pricing?
Comment by Johann Ödermann -
Allowing healthcare to be based on capitalism is what makes it so expensive.
When my loved one had “incurable” “bipolar with psychosis” there were many psychiatrists and psych drugs involved, as well as ambulance rides to the ER, police, lawyers, judges and two commitments to psych hospitals. I did my own research and found approaches that cured him. That was about 20 years ago. He was tapered off his three antipsychotic drugs. Normally, patients have to take these drugs for life: there is no exit plan.
I called my congressman in Wash, DC to ask him to introduce a bill requiring restorative treatments for all mentally ill people but had to speak to his aide. She screamed at me at the top of her lungs, “The United States government will NEVER, EVER try to tell doctors how to treat their patients!” I wrote a letter to my congressman. His (local) aides checked with the Congressional Research Service, the top authority on what federal laws we have—or don’t have.
The CRS did their research and replied that NO law exists that says doctors must try to cure anyone: both the AMA and APA have 100% freedom to use whatever approach they like.
They COULD have chosen restorative treatments but, instead, chose the approach that brings in the most profits but cures almost no one: patented drugs and surgery. The drugs only “manage” symptoms until the patient dies, such as cases of “autoimmune” diseases and mental illnesses.
I’d like to see “Bio-Sanctuaries” (aka “sanitariums”) in every city and town, where people could be treated with these wonderful, restorative treatments and cured of their rheumatoid arthritis, schizophrenia, MS, ALS, etc, instead of being turned into lifelong “customers” of synthetic drugs. These illnesses have been curable for 200 years, just not with the junky drugs pushed by the AMA and APA.
(Mark, you have a company where people can pay less for these drugs but the fact remains: patented drugs aren’t designed to cure people, just suppress their symptoms.)
My “incurable” family member is well, has a job, pays taxes and leads a good life because I dumped the psychiatrists and found treatments that work. Total cost for the practitioner: $315. Cost of the medicine: about $1.50. (The entire bottle cost about $15 but I only needed 3 doses @50 cents each.) Natural medicine costs pennies because it can’t be patented. That’s a big reason why both the AMA and APA fight against this kind of treatment.
Millions (more like hundreds of millions of other Americans) could be cured if it weren’t for the profit motive.
Comment by linsant -
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The day we decided to move health insurance beyond catastrophic insurance, we started digging our own grave. After that point, it was just humans being humans for profit maximization.
To your question about how to address care that is currently employer-sponsored, my answer is – Have employers contribute their current healthcare spending budget towards a company-wide fund that provides interest-free loans for healthcare. Once people start paying directly for healthcare and we have the pricing/cost transparency you describe, the market should take care of itself.
If all this happens, then the only remaining question (and the hardest one!) is – What about future treatments (e.g. gene therapies) that cost millions of dollars?
Comment by 2catch -
Thank you, Mark, for creating this blog and opening it up to comments.
I think the crux of the problem is that Western medicine is not intended to cure people, just bring in as much profit as possible. Drugs are synthetic and designed to only sort-of suppress the symptoms of illness. When these drugs cause “side-effects,” another drug is prescribed to suppress them. While antibiotics are used to kill the offending germs they also kill the good bacteria we all need to digest our food, manufacture neurotransmitters, etc. (There are so many problems with this approach!)
Back in the 1800’s scientist Louis Pasteur saw that bacteria were present in all the diseases he looked at. He concluded these bacteria were the cause of illness and, voilá, his “Germ Theory” of illness was born. At the same time, his fellow scientist, and nemesis, Antoine Bechamp, said something like, “Not so fast, Louie! A seed (germ) won’t grow if it lands in a tar pit so what is most important is the terrain. Firemen are typically found at the scene of a burning building but that doesn’t mean they caused the fire—they’re the clean-up crew because bacteria are digesters. Like firemen, bacteria show up on weak flesh to clean up the problem by recycling it, turning it back into dirt. Bechamp’s is known as the “Terrain Theory.”
Toward the end of his life, Pasteur denounced his Germ Theory and admitted Bechamp was right. But it was too late. So much money was being made from going after the germs that the genie could not be put back in the bottle.
I think basing our healthcare system on Pasteur’s flawed approach is why we’re such a sickly country, physically, emotionally and mentally.
I’m 73 and my medicine is based on the Terrain Theory. It strengthens my body, making it inhospitable to germs. If one lands on me, I get the right (natural) treatment. I don’t make my body weaker with Western drugs so I’m much healthier now than I was in my fifties. I probably spend about $100 a year for practitioners and each dose of my medicine costs me between 10 and 50 cents. (However, if I’m unable to find a natural solution, I’ll use Western medicine to just suppress the symptoms— as a last resort—while I continue to search for an answer.)
American healthcare is a money pit. The AMA, APA, Pharma, insurance companies, manufacturers of medical devices, DSHS, etc have their hand out, always clamoring for more and more dollars, ad nauseum. That’s what happens when healthcare is allowed to be based on capitalism. The ONLY incentive is to bring in more capital, not make friends, not cure anyone—just bring in the dough.
Comment by linsant -
Separate employment and healthcare. Small business would be less burdened and more people could open them. Employees wouldn’t need to worry about where their healthcare would come from if they lost their job or wanted to leave it to start their small business or wanted to take a different job that might be more rewarding but has less or more expensive health benefits. Improve education and make it an actual aptitude and merit based system. We are short on producing doctors because there are many students out there who would have been great doctors but couldn’t afford it. If the entire education system was free but more rigorous we would have the skilled workers we need. If it allowed you to go as far as your smarts, skills, and work ethic can take you without turning you into an indentured servant we’d be producing the best again.
Comment by connorsemma1bacac1b47 -
Great start Mark on a tough topic…lots of good discussion as well. I have a colleague whose business is helping providers collect on the unpaid care they provide. It addresses the comments you made on your Jon Stewart podcast last month. His company offers interest-free, patient-friendly payment plans to cover one’s co-pay and out of pocket expenses. The service also enables the patient to get the treatment they need now rather than delaying it due to cost and the provider increases their revenue. This doesn’t address the overriding issues being discussed here but it is a step in the right direction for offering compassionate care. Go Hoosiers! Ralph T. Piercy
Comment by fortunately9b5e8a7b86 -
Lastly, the NIH also says up to 50% of all Americans are infected with Toxoplasmosis gondii and either have mild or no symptoms — yet. It has been shown in research studies that it can be passed from an infected pregnant woman to her unborn child. (And I doubt that’s the only way it’s passed to others but that’s just a guess.)
Comment by linsant -
Here’s an example of my comments above: the NIH says that 21% of cases of schizophrenia are misdiagnosed cases of Toxoplasmosis gondii, a protozoal infection that creates cysts. When these cysts grow in the brain they, of course, cause it to malfunction, often resulting in a “diagnosis” of “schizophrenia” or “bipolar with psychosis.” (The latter is what my relative had.) The NIH adds that the herbal extract, artemisinin, kills these protozoa. You might assume psychiatrists do a trial on all their psychotic patients to find that 21% (1 in 5) who are infected and might be CURED but, sadly, they don’t. According to my congressman’s staff and the Congressional Research Service in Washington, DC, there is no law saying psychiatrists must even TRY to cure patients. There’s no law against telling them their illness is “incurable” so at least 21% of patients are tricked into going back for more drugs and talk therapy until they die. That’s how the system works.
Comment by linsant -
That includes psychiatric drugs that cure no one because, again, they’re not designed to cure people, just “manage” these illnesses until the patients die. There is no exit plan because there’s no money in curing them. Mental illnesses have been curable for over 200 years, just not with synthetic drugs and yet these patients are not allowed anything but psych drugs. It’s “take it or leave it:” take the drugs or you’ll end up going to jail or living outgo out in the woods somewhere.
Comment by linsant -
Mark, I have top-notch insurance but I hardly ever use it. Instead, I pay out of pocket for natural treatments that cure me. Conventional drugs are designed to cure no one — so they don’t.
Comment by linsant -
I’m not one for government interference; but what would removing hospital systems and healthcare insurance companies from being publicly traded do to patient care and costs?
Comment by Steve Shane -
TLDR; Convert to cash pay? Yes. Use Medicare payment processing? No. Should healthcare transactions be simple? Yes. Is population health simple? No.
Suggesting cash pay with Medicare payment is an oxymoron. Providers offer cash pay discounts to avoid legacy billing and payment. Medicare might be the least costly legacy payer to deal with, but it props up legacy administrative infrastructure (ie putting bad process after good). We’ve seen vertical admin tech disrupt every other industry (retail, travel, food, etc.) and the same has begun in healthcare. Challenger admin systems replace legacy claims, streamline benefits, automate reporting, and enable same-day payment for providers. These systems make it easy for any pharmacy or doctors office or hospital to do what you’ve done with generic drugs. The winning system will enable universal healthcare while creating market efficiency. Falling back to Medicare payments would be a mistake and would deal a blow to the thousands of clinicians who’ve abandoned Medicare and legacy insurance networks to escape undue admin burdens.
What Healthcare Should Look Like: Treatment is requested. Treatment is approved and funded. Treatment is rendered and paid. End. Provider doesn’t need to submit a bill. Patient doesn’t need to pay a bill. This requires tech, but again, it’s happening today.
Transparency: The entire transaction should be transparent. Bill of Materials info for common procedures is publicly available. I’ve used it to negotiate pricing for bundled services with hospitals (I’m not the only one). This info should be agreed upon by the provider and purchaser for each treatment upfront, and funds should be prepared immediately upon agreement, so payment can be remitted immediately after treatment is rendered. Treatment (ie appointment) requests and plan requests (ie authorization) should be processed in one unified motion, and invoices (ie claims) should be automatically generated from those requests. Each step of this supply chain should be transparent like it is in every other industry. It doesn’t happen today because middlemen sit between providers and purchasers, incentivized to keep us in the dark ages.
Remove Insurance Companies From the Equation: Correct (see above re legacy billing). I agree with the 50% total savings estimate (I have the receipts!). Today, in the non-Medicare/Medicaid/Pharmacy market, insurance companies aren’t selling/providing insurance anymore. Over 100 million Americans are currently covered by health plans that are self-insured by their employer, and insurance companies have largely been demoted to glorified accountants that provide legacy administrative services (see above). Put another way, employers are collectively healthcare’s largest single payer, but they still rely on insurance companies for accounting services that can be replaced with a vertical admin system for cash pay. Replacing insurance companies with vertical administration software for employers would solve the problem without change friction, and it has already begun in a major way without getting much exposure. Scores of companies have introduced point solutions to streamline the stages of the transaction described above, but only one integrates the entire supply chain in a way that gives employers complete control without doing any extra work.
Basic Math: I agree with your conclusion, but take a slightly different approach. Using your numbers for simplicity: $5 trillion Total minus $847 billion Medicare minus $570 billion Medicaid minus $440 billion Pharmacy, we have $3.4 trillion in non-Medicare/Medicaid/Pharmacy spending. Apply 50% cash pay/admin savings to that $3.4 trillion and we’re at $1.7 trillion in savings. Use $700B of remaining $1.7T for to expand/enrich government sponsored benefits (with new admin infra), and save the rest of the country $1T. That’s 20%. We could use that money to completely eradicate medical debt.
Provider Overhead: Health systems have CapEx arms race, not the actual providers. The admin efficiencies mentioned above would preserve independent practice and limit the CapEx arms race. Providers want to be independent. If we can eliminate the non-clinical tasks from their plate then every single provider would choose to be independent. Then we’re back in 1955 like you suggest.
Great start!
Comment by Sidney from Mishe -
I have been on both sides- as a patient and as an employee of multiple health insurance companies. The focus needs to be on these items:
1. As you mentioned, removing the insurance companies from the equation. They add no value whatsoever. Over bloated administratively and 99 percent of what they do is only about saving themselves money, not patient care.
2. Combine Medicare and Medicaid into one federal program (Medicare for all) to save money and simplify process.
3. Better use of current technology to prevent the Fraud and abuse of Medicare. We lose billions every year due to the “Pay and Chase” approach. The government is not vetting new Medicare providers to ensure they are legit. They let any shmoe with a doctor credential create a business and start billing Medicare. By the time they find out its a scam, too late, they will never get that money back.
4. Take the burden of providing health plans off of employers. This is critical. It is ridiculous that the quality and cost of an employee’s health care is entirely dependent on the whim of the employer. Bill who works for Company A, may pay only 60 per month in premiums and have zero deductibles because his company is generous. Joe, working for Company B, pays 175 per month and has only plans with 2500 + deductibles offered. How is this fair?
Also, why should employees have to switch plans and doctors every time they switch jobs?? I have had to do this at least 15 times, such a hassle. Require that every company over a certain size or profit level pay a flat fee into the Medicare for All system. Period, that’s the end of their responsibility.
Then, everyone who needs coverage should be able to get a plan that costs them no more than 50 per month, it would be free if you have no income. No deductibles, co pays, etc. Also Medicare must be one simple plan that covers everything- no Part A, B, D, etc. That is insanity.
Comment by mphoenix88 -
I’ve been in healthcare over 50 years and watched the whole system be monetized, monopolized, and lose the focus on the welfare of patients. We have gone in the 60s from a system of non-profit, charitable organizations to a profit driven, private and public owned for-profit organizations. There probably is no going back but there is one missing element to creating an efficient, patient-centric health system and that is patient power in the marketplace. A strong patient “union” to fight the inequities, inefficiencies, unethical, and greedy practices of both provider organizations, insurance companies, and pharmaceuticals needs to be created. Anyone want to help?
Comment by destinyenthusiastically60296ac5d5 -
If we’re willing to think outside the box, this is truly a solvable problem!
In mental health “care,” for example, psych drugs aren’t designed to cure anyone, just “manage” symptoms until the patient eventually dies. I figured this out by spending five long years taking a family member for a monthly psychiatrist visit for his so-called “ADHD.” I knew something wasn’t adding up because none of the psychiatrists would even talk about the word “cure” so I did my own research, then dumped conventional psychiatry. Best thing I ever did. Total cost of the medicine to cure another family member of “incurable” “bipolar with psychosis” was about $300 for the practitioner and $1.50 because the medicine is non-patentable. (That was not a typo. The medicine cost one dollar and fifty cents.)
By comparison, psych drugs easily cost $1,000 per month or more—for life! — plus the cost of housing, food, utilities, medical care, psychiatric care, etc, also for life (!), most of it paid for by you and me, through DSHS. So we’re spending $1 million (and often much more) for each of the millions of mentally ill DSHS clients over the course of their lifetime. Does all this add up to a cure? No! Patients are never, ever cured.
According to my congressman’s office, there is no law that says doctors must even try to cure a patient. Like the AMA, the APA has 100% freedom to choose any approach they like so they have chosen the approach that cures no one but brings enormous profits to themselves and their business buddies, the drug companies. MY “incurable” relative was CURED very, very quickly. He has a job, pays taxes and leads a pretty good life, all independent of DSHS, psychiatrists and their miserable drugs.
Being CURED, not just sort-of suppressing symptoms, is what I want for all Americans— and I bet you probably do, too.
(I’m SO glad you care about this topic, Mark! Thanks for letting us weigh in.)
Comment by linsant -
Thank you for re-igniting the blog, Maverick! The straight-forward approach to healthcare is what everyone expects, yet unfortunately rarely receives. One of my clients is in laparoscopic access (MIGS), and watching the USA trail dramatically behind adoption of innovation, and I mean trail Globally by a mega landslide, it’s really disheartening. The red tape from every side needs a fresh look indeed.
If you ever jump in with both feet, I hope you’ll consider calling it Delorean Healthcare 😉 and hey, if you’re starting it from the future, anything goes, right? A world where NFTs can pay for a Specialist, perhaps? Or Under 5 years old healthcare is free – why not? $90 ear drops and $2,000 tubes surgery for a common ear infection are impossible. Needing healthcare isn’t utopia, but ACCESS to it is substantial.
Sincerely,
Social Media Commenter
Amanda H.
Atlanta, GA
Comment by gofibi -
Great thoughts. I’ll add 3.
1) *Price is the main problem, but quality still matters.* I agree- the top line is the main problem and price transparency is a tool that can help bring prices down by giving consumers price information to inform buying decisions. However, price isn’t the only thing that factors into patient medical decision making. Patients still can’t judge “quality” between providers very well- and this matters (especially with the increase in low quality for-profit health care systems with big marketing budgets). We need to improve access to accurate and comparable measures of quality and patient satisfaction information (likely leveraging technologies like LLMs to reduce the burden of quality measurement). Providers, patients, and data/measurement experts need to be involved constructing meaningful measures of quality.
2) *Labor market disruption when insurance companies go away.* If we did away with insurance companies that would put ~3 million people out of work. That will be a big implementation barrier. Many of those folks have incredible health data expertise which can be re-tooled into using data to find: 1) better treatment modalities or care pathways, 2) democratizing health care price and quality data, 3) identifying which people would benefit from various disease management programs or community resources, 4) figuring out how to accurately measure quality/value/satisfaction (e.g., quality measurement science), etc… Bottom line– their jobs could become less about denying people care and more about helping people get/stay healthy and informed.
3) *Tort Reform.* If we move back to more of a fee-for-service model, we are going to need to implement tort reform to reduce the practice of defensive medicine. The fear of malpractice lawsuits drives over-utilization of low-value services. This is going to require patient advocates, lawyers, patient safety folks, etc. coming to a consensus on how we strike the balance between patient safety/ protection and protecting health care workers.
Comment by Lauren Birmingham -
Pingback: A Few Words on Healthcare - CodeGurus
Returning the country to an age when physicians were all door-to-door entrepreneurs and salesmen—can you imagine??
Physicians, unfortunately, don’t learn business in medical school. The majority of doctors (the most important suppliers in the healthcare market) cast a blind eye toward billing, coding, contracting, PBMs and all the other moving parts of the system outside of their clinical domain. They do not fundamentally understand the economic utility of their labor in the $5 trillion healthcare economy. Instead, they become saddled with debt after a decade of training, and the idea of assuming more risk as an entrepreneur escapes all but a slim minority of them.
It’s a nice thought exercise to picture everyone who isn’t covered by public insurance programs to move into direct-pay relationships with physicians. But even direct primary care (the closest “Back to the Future analogy) hasn’t made it mainstream, and that should be the easiest to implement. Across specialists, the complexity of services offered abounds (there’s over 20 distinct billable codes for colonoscopies alone).
Insurance companies—really, any third party that’s bearing risk on behalf of the patient—won’t disappear overnight. People believe they have the right to healthcare—and they really don’t want to pay for it themselves, especially when they find out how much it costs. I used to believe more transparent healthcare system where the general public would definitely lead to smarter healthcare consumers. Healthcare’s veil of complexity—bolstered by new products and services added to medical practice every year, and the opaque payer-provider contracts that you mentioned—is simply not digestible for the average patient.
Uninformed principals must rely on trusted agents to navigate healthcare. We may not always be able to align all parties incentives. But we can strive to recreate trust from that lost era through education and through rules-based systems, enforced transparently and consistently.
For 15 years I’ve been building solutions for both payer and providers large and small. Would love to connect and discuss how to turn this vision into a reality.
Ryan Leonard Pei
http://www.linkedin.com/in/rlpei
Comment by Ryan Leonard Pei -
As someone who worked in healthcare for almost 50 years and saw the beginning of Medicare/caid and was in the accounting/finance part of healthcare, I can honestly say, bravo but you have only scratched the surface, Mr. Cuban. One thing I had to laugh when you said physicians and nurses are underpaid, maybe in some place but not in California. Educators are extremely underpaid across the U.S.
Employers, in my opinion, should be taken out of the healthcare business of their employees; the focus of healthcare providers, no matter their positions, must return to patient care. Patient care should never be based on one’s economic situation, the care a Mark Cuban gets should be the same for everyone,
I have held positions of Budget Director, Reimbursement Specialist, Director of Finance, accountant and CFO of hospitals, of blood industry and private practices of radiologist. We have a long way to go and many minds to change the latter being the hardest part.
Comment by arilemons43 -
I love what you’ve been doing to try to fix the utterly broken medical funding system in the US. I gave up insurance and am all-cash now….
….but the funding system suddenly stopped being relevant to me when my partner was infected with Covid *by* her doctors, *twice*, because the management and staff at the doctor’s offices refused to wear respirator masks (N95 or P100) and refused to use air filters (HEPA, CR boxes). I wrote a citationed handout about it.
https://whn.global/doctors-should-not-infect-patients/
So right now, >95% of medical offices in this country are recklessly infecting their patients even after being given the information on how to stop it (which is cheap). It means that it doesn’t matter how they’re paid, they *aren’t providing medical care*. It’s insanely dangerous to go to a doctor now. I’m now spending a fortune just trying to find doctors who will bother to practice infection control, which is *extremely cheap*.
If this isn’t solved, nothing else will matter.
Comment by Nathanael Caldwell Nerode -
I’ve thought a lot about healthcare, unfortunately I’m someone born with autoimmune diseases and have had to deal with the system a lot. A few things I’ve wondered throughout it all:
At one point I qualified for medicaid, with that literally everything was covered. I didn’t have copays, I didn’t have surprise bills or have to pay for medication. I even got gift cards to buy over the counter stuff. As we started earning more we fell off the program but for a while our kids were able to still have those benefits but with a premium.
So I wondered why can’t we essentially just have medicaid for all where nobody has to ever worry about any bills, copays, etc but everyone pays a premium into it based on income and family size? Am I stupid for believing something like this could work?
Then I want to understand why my insurance company gets to pay so much less to a provider than I would if I paid cash. I look at my EOB statements and it’s insane.
Right now it’s costing my family of 4 over nearly $1400 a month for just our premium, I just got a bill for almost $700 for a strep test for my daughter last year, like wtf? Every time I go to the dr I pay my copay and still end up getting a bill. I’m just so over trying to get healthy and dealing with insane costs and long waits.
These drug companies need to be put in check too, playing with people’s lives is messed up.
Comment by azlyn26 -
Love the structure of the note!
As I see it, the “healthcare funding” problem is an aggregation of three items:
(i) the operational side, which you describe very well and identify the problems (I’m not an expert, but your telling is coherent and self-contained so I’ll run with it);
(ii) the aggregate cost of healthcare, which probably stems from the above, plus litigation insurance and poorly constructed pricing mechanisms for some widely used drugs; and,
(iii) the old-school risk-dilution function that is typically taken by insurers and re-insurers.
For all the talk of medicare-for-all and single payer, the risk-dilution part is where the State is most useful. The administration is way to complex for a centralized solution, and besides some reform to add competition to the drug market (why not universalize approvals and accept EU, UK, Japan, Canada, Oz approvals on their face?) the government seems ill prepared to help.
But the government could be the re-insurer for rare conditions, financially catastrophic events, and birth. It’d probably be unnecessary to go all the way the common cold and a pulled muscle. But cystic fibrosis or long-term care for MS? it is perfectly reasonable that everybody picks a bit of the tab because we don’t know who’s getting the ticket anyway.
Comment by suitjoyous697b80447b -
Mark, thank you for your positive contributions to our politics, and for caring about our society’s problems and wanting to help improve our society for everyone. I really appreciate your support of Democratic politicians such as Kamala Harris.
I certainly don’t have the answers on healthcare. Cost transparency seems like a very good place to start, though. Right now, the costs of everything in health care are obscured, unpredictable, and a source of worry for consumers.
I will say that I am extremely skeptical that employers would voluntarily give anyone a raise if they no longer were paying for health insurance. I feel 100% sure the pressure to hold onto that money to increase profits would be too irresistible. I suspect it would be more feasible for employers to pay a certain amount per employee directly into the healthcare system.
Comment by Claire Cloutier -
I think you need a separate funding approach for the different types of care. Let’s break it down:
1 — Emergency Care: conditions where there is no possibility to shop or make informed trade-offs. You essentially choose your emergency care when you choose where to live. Therefore, emergency care should be funded by a tax on the hospital’s catchment. The tax should give the hospital a sufficient budget to provide high-quality care to all who need it, with the hospital held accountable by a board of trustees formed by the residents. For patients, there should be a $300 co-pay simply to incentivize people to go to not use emergency rooms as a replacement for going to their primary care doctor but otherwise there would be no charge.
2 — Rare and Extremely Expensive Long-term Conditions: conditions like beta thalassemia or total kidney failure that are so expensive that almost no Americans could pay for them, so a third-payer is inevitable. The “market” based outcome for these conditions is simply the patient would die. For these, the federal government should assign a czar for each disease. The czar is given an ample budget and a multi-decade dual mission to maximize total health, while also increasing the efficiency of total life years saved per dollar spent. The czar should do this by a combination of directly paying for patient care but also by sponsoring the development of new experimental treatments.
3 — No-brainer Preventative Medicine: includes certain vaccines, well-visits for children. The government should just pay for these outright and make them free for consumers.
4 — Conditions Where Consumers Can Make Informed Choices: this includes everything from an ACL surgery to giving birth. Here, I think you can make direct consumer pay work and work very well, with a few reforms. First, consumers should only be legally responsible for what they agree up front to pay — no more giving providers a blank check. Providers should charge a lump sum that is sufficient on average to cover all contingencies. If the hospital says a birth costs $25k, that should cost should include covering the small chance that the baby needs to spend a month in the NICU.
For consumers, the government should provide some sort of financing facility that allows spreading the payments over 10-years at very low interest rates. After spreading out the cost, if an American’s family total healthcare spending exceeds 10% of family income, the government will pay 80% for every dollar thereafter, and if it exceeds 15% of family income, the government will pay 100%.
The net of this is that no American will pay more than 15% of income for healthcare — healthcare becomes affordable to all. But at the same time, for most families and most conditions, the middle-man is excluded entirely. Patients will shop for care with skin-in-the-game. Patients will pay directly the list price with no haggling — there will be no more nonsense about hospitals trying to game billing codes or stealth bill for out-of-network providers. The patient simply pays for the overall service, and the provider — who has all the information — has to deal with the details.
Finally, in addition to the funding reform, there needs to be efforts to remove the supply bottle-necks that drive up costs, specifically: 1) Increasing medical school and resident spots to keep up with growth in population 2) Enforcing anti-trust law to prevent regional hospital consolidation for the purpose of driving up prices 3) making medical school shorter and cheaper by combining it with the bachelors degree, as they do in other countries.
Comment by Devin Helton -
That’s a lot of hand-wringing and words and effort to try and maintain as much capitalistic profit incentive as possible in a system that should be focused on care, not money.
The vast, vast majority of wealthy nations have figured this out.
We can too.
Comment by tonywrocks -
I like your thinking. I don’t think you can leave it up to people to pay. You need everyone in the plan to spread the expenses. I believe in some countries they charge the employer a tax based on headcount to cover the healthcare cost. You could have a variable rate based on revenue or headcount. Healthcare cost is difficult for small businesses so your plan could potentially help small companies retain workers.
Comment by Mike Starr -
What a simple world this could be with this sort of plan. Like a flat tax. Look at all the accountants, insurance companies and lawyers this would eliminate. GREAT IDEA! But how can we implement something so simple?
Comment by Richard M. Brenner -
A good start. At least someone is giving it visibility.
I offer one example of the problem from my end of the system: If I buy insulin through my insurance, it has a retail price of $147. per vial. My copay on that vial is $40. If I buy the same type and quantity of insulin at Walmart, I pay the full retail price of only $24.88. Less than the copay if I go through insurance. This is wrong, horribly wrong.
Comment by Allen Goodwin -
The catch is going to be “who can afford to pay”. A single individual who earns more than $100,000/year? $50,000? $30,000? $20,000?
I grew up in the 1950s and what happened was, with so many people without medical insurance coverage, people didn’t see doctors until they were seriously ill. No preventive care – that was a luxury only the wealthy would pay for.
No. Going back to 1955 will work for the wealthy, but unless affordability is set pretty high, many individuals and families will suffer worse health and shorter life spans. Our citizens are our greatest resource and need to be taken care of.
Comment by operablog711 -
Awesome Discussion! Thank you Mr. Cuban I now understand more about our Healthcare systems and some of the major issues that wasn’t clear to me before joining this discussion. It was very informative and I will definitely share this full discussion and information with my community. You have some very good ideas that have sparked others to give great input.
Comment by alwaysdifferent0ef2417f05 -
Mark, glad to see this blog back up. I just wanted you to know that I love what you’re doing with Cost Plus drugs & switched my meds there to support your efforts.
Comment by Mike Postma -
Much of this could be accomplished by removing the age requirement for Medicare eligibility. I also agree that moving to traditional Medicare and destroying the “Medicare Advantage” program would benefit the country, but that might be a bridge too far for our capitalist overseers.
Currently Medicare provides care for our oldest and sickest citizens, at a cost which is comparable to the costs employers (mainly) pay for younger and healthier people to be covered.
The good news for business owners is there would still be a role for employers to provide supplemental coverage to differentiate. And because their costs would be capped at deductibles and co-pays, things would be much more predictable.
This would also free up a lot of business employee overhead expense that could be instead used to pay Medicare premiums and raise wages (or absorbed by the companies, depending on how things are negotiated).
I’m glad we’re having a serious discussion about health care. The time has come to make some changes
Comment by tonywrocks -
Thank you for discussing this topic and trying to help find solutions. Any solution must address the root cause, which is why are people getting chronic diseases that are cash cows for hospitals and drug companies. Is it poor lifestyle choices, not getting adequate nutrition, etc. Currently insurance companies do not cover functional medicine, which aims to find the root cause of a chronic disease, address it and actually cure it. Why is this the case? Because there is no money in curing diseases. People would stop taking medications, hospitals will be empty, insurance companies would only issue policies to cover catastrophic health events. Why do insurance companies limit the number of blood tests that they will pay for? Why do procedures need to be authorized by people without the proper medical training? There is also the personal accountability issues, where a patient can not make idiotic life style decisions (alcohol, smoking, fast food diet, processed foods galore, lack of physical activity) and expect to take a magic pill from big pharma and feel better. Most chronic diseases are triggered at the cellular level because the body is starved of the proper nutrients and it can not function as it was designed to. Let’s focus on comprehensive solutions that include science not only economics.
Comment by daninflomo -
Thank you
Comment by winstone churchil -
A solution is new technologies that cure people, not just treat people. I did a Open Call for Shark Tank in 2017 to 2024, and was able to get accepted for further pitches in 2024, but no callback. I am going to sleep and will pitch again Jan 10 2025 for the Open Call for Shark Tank auditions. I live in Las Vegas. My new Experimental Invention repaired my heart from 2015 to 2020. I started using the invention, my heart was 30% EF ‘and the VA wanted to do a Open Heart Transplant, cause there was nothing else they could do. I drank the altered water for 5 years and my Heart EF is 55% to 60%, normal output, no need fo heart transplant. The invention does Cellular Regeneration and DNA repair, not 100% effective, not SciFi fast either.
My major problem is that you need a certain amount of money to have patent protection, and startup going. The AIA American Invents Act ruined the ablity of independent inventors from pitching to companies and having the company pay the burden of patents.
I will be there to pitch again in 12 hours, I doubt I make it through the rounds, as the producers that determine which product get pitched have rejected me in 2024, and previous years. IDK. I have not aged in 10 years of using the experimental invention.
Comment by loosejohnny -
As others have commented there is massive imbalance in the knowledge and information available to the consumer – so making healthcare a free market is hard – but should not be assumed to be impossible (as some here seem to think it is).
We are deep in the information age – we have access to staggering amounts of information, and increasingly those motivated enough can get quality information about their own health through devices and testing. That however is not sufficient to ensure the average consumer can make the right decisions (indeed there is the very real issue of “just enough information to be dangerous” – witness a certain tech billionaire who thought he knew better about treating cancer, until it was too late).
The key is to ensure that the right parties have the right incentives. The consumer paying directly is a good start, but they need information and advocacy to protect their investment in healthcare. As noted by another commenter the health insurance industry is the current arbiter of what is, and is not, necessary – not the right party, not the right incentive (shareholder value vs patient health).
So is the correct fix possibly to have Personal Heathcare Advisors – just like Personal Financial Advisors and to tie those expert resources income to outcomes? This is then a licensed field, and with current technology can easily be social monitored (ratings). So as a consumer you can choose to self-invest (represent) or pay the PHA to do that for you – they would presumably find suitable providers as options for the patient.
Perhaps AI is the key here. There was a study showing that AI was actually more effective on diagnosis (of certain types of already completed, fully diagnosed and treated health issues) than both doctors using their expertise alone AND doctors augmenting their diagnosis with information provided by AI. Obviously AI is not capable of interpreting all conditions at this time but overtime the coverage will improve. Perhaps the consumer should have right to all diagnostic information, and be able to push that into an AI ‘second opinion’ engine to verify the need for care and proposed treatment plan. This advisor would have (in theory) no agenda, and the incentive is only accuracy – not financial.
Mark makes the assumption that insurance is gone from the market. Having lived in other markets, and seen the horrendous pre-contract theoretical costs presented here in the US – simply to ensure the contracted rate is ‘reasonable’ – that game needs to stop. But the healthcare insurance industry lobby is very, very strong. How do you stop that massive engine which, according to the surgeon who operated on my newborn increased their costs of business by 100%. Insurance is at the center of what is wrong with healthcare here in the US, but having heavy regulation, and government control of the purse-strings just moves the problem from a shareholder incented behemoth, to a lumbering force spending OPM (other people’s money) – and nobody spends money more carefully than those who earned it.
Comment by nbrownjohn -
90 Minutes – Ha Ha Ha (After all “See the Sea” of Perspectives and I will comment about it in my “Hall of Perspectives too” on LinkedIn – Love to Daymond too!! -D (Dubai – UAE)
Comment by Deepa Abraham -
Love the discussion here. I’ve been thinking about whatever system replaces today’s Insurance Companies should just be a payment processor that looks for fraud and that’s it.
Patient sees Doctor.
They agree on treatment.
Patient pays Doctor via Insurance Companies or similar system.
This eliminates a lot of the AR AND AP battles and denying patient care after their Doctor approved it.
Obviously need more discussions about transparency, pricing of procedures and who pays etc but Insurance Companies inserting themselves between a patient and Doctor to make huge profits is NOT healthcare.
Comment by Soren Williams -
My own dreams to make things better/easier:
I’m a medical mom of a joyful, complex, almost 3 year old who relies on a ventilator/trach and feeding tube. The administrative battles with DMEs for supplies to use at home from tube formula to medicine syringes the stickers that hold on O2/HR probes are exhausting and absurd.
DMEs that are steered by VCs can choose not to work with patients if they don’t like the overall list of needs, and families have to scramble to figure out what companies have what they need, are willing to work with them, and take their insurance. (Often, families rely on other medical families for the supplies they need. There is a huge behind the scenes exchange of medical supplies, often at zero cost beyond postage.)
I’d love an online marketplace that receives prescriptions for supplies, processes insurance approval, and allows me to manage my own purchases, delivery dates, and inventory from whichever suppliers have what I need. Or, how about an IKEA style warehouse where I take my cart, find what I need, and self checkout at a computer that already has all my information loaded?
Comment by Katrina Noyes -
Great to see your brilliance in action in the sport of business—there’s truly no one better. Wishing you a Happy New Year, Mark!
SImplifying healthcare sounds like a utopian dream until you remember the entrenched players guard their margins like dragons hoard gold. The analysis is spot-on: transparency isn’t just needed, it’s terrifyingly overdue.
The real kicker? The system isn’t broken; it’s designed this way. Untangling it requires not just ideas but the guts to bulldoze through the status quo. Cash pay, margin clarity, and a CapEx reality check? Brilliant. But convincing every dragon to share their treasure? That’s the real sport of kings.
Comment by Kevin Flick -
Mark, these are great ideas, but I’m afraid they only scratch the surface of what ails our health care system and how to fix it.
As a physician working within our broken system what I see is a chaotic health care infrastructure with no effective oversight. We have a public system run by HHS, which is in turn overseen by POTUS. This makes the public system susceptible to political and lobbying pressures. On the other hand, we have a private system run by commercial insurance companies that answer only to their stockholders. The constant competition among the commercial insurance companies for patients and revenue and between commercial insurance companies with the public system has created a huge amount of redundancy and inefficiency. It also increases the costs without improving care or outcomes. This in turn has made it difficult for healthcare providers to work within the system and for patients to navigate through it.
What can we do about it?
Back at the turn of the 20th century, the US banking and financial system suffered from strikingly similar issues as our current health care system does today. Private banks had too much autonomy (and even printed their own money) and the department of the Treasury, that like HHS is part of the POTUS’s Cabinet, was too beholden to politics and lobbying. The solution- Congress created the Federal Reserve System. This created an independent board, run by experts, to oversee the entire US economy that eventually made our economy the best in the world.
Similarly, if Congress created a Fed-like board to oversee our entire healthcare system, it would put health care experts in charge of the US healthcare system, insulated from political pressures and special interest. This in turn would not only reduce the redundancy and inefficiency in our system but also make our system more “user friendly” for providers and for patients.
And, with several other innovations, this could also provide universal coverage and universal access using science-based guidelines.
If you are interested in finding out more, I discuss this in much more detail in my book, “Building a Unified American Health Care System: A Blueprint for Comprehensive Reform”
Comment by GIL -
THANKS!
Comment by lightsecret45d03dcb62 -
You need to leverage information more…and use it to discern best practices.
Comment by David Lilienfeld -
Mark, as a fellow stream of conscioussness writer, I appreciate your thoughts and willingness to dive into the morass that is healthcare. Your willingess to expand beyond Cost Plus and PBMs is admirable and welcome.
I agree that some form of cash pay is the most natural way to circumvent what has become an intentionally opaque and complex system. As you note, there are many challenges, not the least of which are how to make cash prices reasonable and tied to realistic numbers, how to avoid leaving behind those that can’t pay (or can only pay for basic services), and how to prevent growing healthcare related bankruptcies. I see it as some combination of expanded HSAs (instead of ever rising healthcare premiums), stop loss or catastrophic insurance (underwritten by the government), and Medicare-for-those-who-want-it.
One of the problems with the “cost plus” approach to healthcare (outside of pharmacy) is that many providers simply do not know what their actual cost of care is. Some GPOs are no better than PBMs or other middlemen when it comes to cost of goods. Transparency is a competition to see who will blink first, and many are afraid to show their numbers lest they be pitted against one another in a race to the bottom.
The biggest challenge, in my mind, is overcoming incumbency. Real change happens when there are credible threats to the status quo. Physicians are generally risk averse which (along with worsening economics of private practice) contributes to consolidation and spiraling costs. Developing the tools, resources, and business/practice models that support physician autonomy and allow providers to not just exist but thrive outside of the mechanisms of the current system is paramount. I believe we are on the verge of seeing the pendulum shift in that direction through direct contracting, narrow networks, and consortiums of employers working together to find the highest value (not the cheapest) healthcare.
Thanks again for your willingess to discuss these issues in a public forum. It’s not enough for the well resourced to offer platitudes about “fixing healthcare” or the impact their latest and greatest tech, portco, etc. will have on medicine while being unwilling to “get dirty” or have difficult conversations.
Comment by drbenschwartz -
They know the cost of their consumables. They know the cost of their direct costs.
That’s all it takes
Comment by Mark Cuban -
Good thoughts Mark. There are a few points not being considered. As someone that worked in a strategy lead position for a couple of the largest insurers, here are some quick thoughts on your post:
1. Bill of Materials, Gross Margins, & Overhead: A lot of this is already done in the RVU pricing. The RVUs are developed by doctors based the overhead, some margin, cost of supplies, etc. Those rates are almost always just approved by the government. Could there be a savings? Yes, but paying providers fair (or better) rates for treating patients in the office can help offset larger expenses later.
2. Inpatient pricing: most people think that insurance companies are really paying $20 for aspirin. Sure, there are times it likely occurs, but most inpatient expenses have DRG pricing which normalizes the expense based on the diagnosis. Is there opportunity for savings? Sure, but again, other low hanging fruit.
3. All cash payments: I can tell you for a fact that it doesn’t cost 20-30% to process payments. When it’s broken by these actuaries, that part makes up about 3-4%.
4. I see all the time people talking about what doctors or hospitals “charge” for their services. That charge is meaningless to insurance. Doctor A could bill $5,000 for an office, Doctor B could bill $150, all else being equal, they both will have an allowed amount of $100. Now Doctor A can do some fancy things on the back with tax write-offs, but a lot of that will self correct if we ever get to the point of forcing the price transparency rules agreed to years ago.
On #7, this would actually increase the expense (quite a bit). For those under 65 (commercial patients), nearly 80% of their plans are self-funded by the employer. Meaning, the expense to the insurance company is a pass through with some percentage points added for the insurer doing the administrative work. So, for these 80%, the high premiums and out of pocket costs are a result of the employer not putting more in funding the self-insured plans to retain their profit margin. You are spot on on the $6,875 per employee per year ($572 per employee per month), but that’s about 2/3rd of the Medicare cost (doesn’t matter if it’s Part C or traditional FFS).
There are large impacts to the cost of care by very seemingly innocent items that most wouldn’t even consider. For example, when the ACA first came out, more people had access to good healthcare (that’s a great thing), however, a lot of people used urgent cares & ERs like a PCP which caused expense to increase, premiums to increase, etc. Paying doctors (especially PCPs) will help solve the shortage, increase access to care, and reduce cost.
There are also hidden expenses that most don’t even know about. You’d be shocked how many dollars are paid because of operational & administrative neglect, but nearly no one ever sees these because how they are presented in the data.
Now, there is always going to be increased shareholder pressure to maximize profits. However, no one considers that medical expense is like golf, you’ll never get to zero. The added pressure to find ways to reduce expense, and do it quickly (before the next quarterly call), causes a lot of costly administrative mistakes to occur which add to the cost of care. This push for profits also prevent really meaningful investments from happening in advancements that could save money. I’ve had business cases turned down that offered double digit ROI returns because of the initial cash outlay (less than $9-10M, but remember, I worked for fortune 20 companies). Value Based Care has the potential to make meaningful change, but we miss the mark on achieving half of the potential it has the possibility to do. If these large payers for forced to go private, you’d see changes happen quickly.
This is an area I could discuss for days. Having done this work for insurance, and most recently provider orgs, there really is potential to make huge impacts, relatively quickly, if we can get the right people to listen that know how to do it. Unfortunately, unless you are a senior executive yourself, it’s nearly impossible to get the attention of those other executives to bring the needed solutions to light. So, people go out on their own, get PE funding, have great ideas & intentions, but often times just don’t have the juice to drive meaningful change.
I’m hopeful we’ll get there one day. Tackling this issue is a huge passion of mine, and why I’m in this industry. I think there needs to be more people like you working with those of us that deeply know how to make changes to start getting traction.
Comment by creationbriskly1d2b56be3a -
1.RVUs are the problem. There is zero transparency.that reduces efficiency in the market for employers. Even using Medicare rates are a better benchmark
2. DRG codes can be and are manipulated. Often. But the bigger point is that to make the market efficient for people who negotiate contracts with providers, there needs to be transparency at the cost level. Diagnosis is subjective. Costs are not.
It’s not that they pay 20 for aspirin. It’s that the entire bill ends up being negotiated. It doesn’t cost 20 PCT to Process a payment. But hospitals have wings full of administration people to deal with insurance companies. The renegotiated bills may only lose 2 to 3 pct, but that doesn’t account for all the real estate, admin people, their benefits, doctors time to deal with insurance companies etc. 20 PCT is probably low. I think you allude to this when you talk about all the mistakes
As far as cash pay. Hospitals say they need to charge 250pct or more of Medicare to insurance companies because they lose money on the mediX care. Yet they charge walk in cash pay a fraction of that. For more complicated, extended inpatient they will still reduce charges considerably. We negotiate these all the time for employees
They can do this because it’s not transparent. We will change that by publishing our direct provider contracts
These examples are from our experience. Cash pay with no insurance company involved can be 80 to 150pct of Medicare. The reality is that providers would love to extract insurance from the mix and do all cash pay. The only value of the insurance companies are to be a sales funnel. They complicate everything else. (As do hospitals to compensate for dealing with insurance companies )
That’s my mission. To bring ground level transparency to the healthcare side
And as a self insured employer myself , I can tell you that the insurance companies are the issue. We now direct contract as much as we can. it’s cheaper for me to give employees my credit card than to run it through the insurance company. And the way the insurers game out of network with Multiplan is criminal.
All of this transparency, along with removing insurance companies from the mix and replacing their network aggregation, care navigation and TPA with independent companies that focus on these services, can push total costs in the country down to hopefully that 6875 number
At that level, companies, cities ,states and taxpayers can decide what they want to pay for and what can be covered by patients
Comment by Mark Cuban -
My uncle, who went into private practice as an OB/GYN in the early 1960s, once told me that insurance originally didn’t cover childbirth. Once that became the standard, costs skyrocketed. Anyway, you have some good ideas but I think there is one other key variable — increase the supply of doctors by expanding residency slots and making it easier for foreign-trained doctors to practice here.
Comment by donnaberr -
Spot on analysis. I would add that we need to prioritize awareness and education to lift body and health literacy, which is proven to decrease reliance on ED visits, urgent care and enables better self-management and adherence to interventions.
I find it ludicrous that physicians are responsible for education patients 1-on-1, without knowing their base knowledge, and in an appointment that lasts about 6 mins.
We know jack about the complex system we inhabit, which keeps us alive. That seems absurd. And it ends up costing billions in female healthcare due to years-long delays in formal diagnoses, resulting in progressive conditions requiring more costly interventions for both the patient and the system. Thanks for writing this up, Mark. And thanks for not using AI 🙂
Comment by carol7d48620d3f -
I feel I am qualified to weigh in here. I am a management consultant that works with both payers and providers. I was inspired by the ACA to get into this industry and change it for the better.
I will post a longer response to this, but you have to understand that the only one with the power to change the system is the federal government. HOWEVER, the public is VERY change and risk-averse to anything in healthcare, regardless of whether it is in their ultimate interest. Additionally, one man’s waste is another man’s revenue. THAT IS EXTREMELY IMPORTANT HERE.
Ultimately, everyone in the system – insurance companies, physicians, hospitals – is acting rationally according to their interests and they point the finger at each other as the problem (like the spiderman meme), but they are all responsible, also, they are all RIGHT!
Comment by technicallydolphin0666f93a5a -
Self insured employers can change the system. Right now they are uninformed in their negotiations because of the complete lack of transparency. There is no place to see what other companies are doing.
We will change that when we start publishing our provider contracts at my companies
Comment by Mark Cuban -
Mark you make the same mistake as everyone else
Top 40% of Doctors care for the top 60% of patients – they get PPO rates.
The top 60% ALSO PAY FOR THE bottom 40% who go to Medicaid rate doctors.
FORGET the top half. Leave them alone.
Call the bottom half BASIC CARE. Make it a global budget (just like the VA). Cover everyone who doesn’t have care. AND THEN MEANS TEST THEM with IRS to catch free riders. This is what Obamacare should have been from the beginning.
You focus on Pharma.
Comment by Morgan Warstler -
Morgan if you actually read what I wrote, effectively it would accomplish the same thing.
The challenge is getting costs out of the system so taxpayers can afford to pay for the care of people who can’t afford to pay for themselves
With your approach, payers and providers would just game the system and push up costs to their own benefit. Like they do today.
Comment by Mark Cuban -
Mark, former Hoosier here. One thing not proud of is healthcare prices in Hoosier land. Many say the way to reduce cost is preventing chronic diseases aka get people healthy. For sure we would reduce cost if smoking, obesity, type 2 diabetes rates dropped. But that takes serious change and I don’t have the time or energy to convince my family members who’ve smoked for 30 years to give it up.
Here’s what I want you to dive into – healthcare charges change based on type of patient. Healthcare facilities bake their financial models to lose money on Medicare and Medicaid. Where do they get their margin? “Good” commercial insurance. Man this sucks as a W2 employee, I get taxed, darn near $30k in premiums for a family plan, deductible, out of pocket max, networks. This “good” commercial insurance sucks alright on my finances. And it sucks even more knowing the same exact care other patients get for double digit percentage less because their type of insurance. How is this ethical? It’s bullshit. Bring some sunlight into wealthcare charging different rates across Medicare, Medicaid, and the private insurers. Keep balling Mark!
Comment by maximumpleasantly25f17b66a4 -
Excellent breakdown Mark and thought provoking. I’m reminded of A.I. in the disintermediation of jobs which this would disrupt and eliminate many jobs within healthcare. The cut in admin costs alone would be significant. I do like the elimination of the in-network vs out-of-network debacle which many people deal with in fighting claims (additionally pre auth delays too). This sounds like Universal Care, right? What if providers opt out and don’t like medicare rates for reimbursement? I guess the increase in volume would suffice for revenue. Quality of care would go up and procedural result outcomes would be the competition (which should be the competition anyway). Big business that self-insures might not like it. TPAs would shine. I think it starts with transparency which is where we are headed with impending lawsuits and phases out into what you say could be. We all know this transition would be highly complex as the healthcare industry is now, but change starts with a step and then a leap. Glad you’re back Mark.
Comment by wynnefi -
Excellent idea. What are the first 3 steps, if there are any, that the government should take to put this in motion?
Comment by Judson Traphagen -
This is GREAT – welcome back!
Comment by Danielle Garofalo -
I think this is where government comes in to help those who are short and can’t afford it. There’s plenty of pork out there that we can pull from other areas (think defense spending as we don’t need to be paying the combined sum of the next 15 countries in the world). In fact, I think spending on those who cannot afford health care for themselves, is something that we all can agree on across party lines.
Really wish people like you were running for office instead of the clowns we have there already. These are the kind of issues I would wish that existing and new administrations would focus on rather than the current discussions on populist and emotional issues, but not relevant to our country (we’re really talking about UK rape scandals??).
Comment by Khaled Helmi -
Thanks, Mark. I’m glad to see you back here.
Comment by KT Banks -
Appreciate you sharing this with everyone. I agree wholeheartedly with your insights. In my experience, we could also eliminate a significant portion of the $1.1 trillion by addressing chronic diseases, which account for about 85% of healthcare spending according to the NIH and CDC. The big 3 contributors in America are cancer, heart disease, and autoimmune disease. I personally underwent more than 20 surgeries and incurred $4.2 million in healthcare costs over three years due to ulcerative colitis, culminating in the removal of my colon. Then, I learned how to address the underlying causes (physical, nutritional, organ health, and emotional factors) and turned things around. The most empowering realization? This kind of transformation doesn’t require external intervention. Each of us can take control of our health and achieve incredible change. And thank you for what you do to alleviate the financial burden of people through cost plus drugs.
JT Boone
Comment by JT Boone -
Unfortunately, this starts from a faulty premise, from where you declare that healthcare should look like a simple transaction where a patient visits a provider, gets a bill, and pays the bill if they can. Kenneth Arrow won a Nobel over 60 years ago in part for a paper explaining why healthcare doesn’t function like a normal market.
In relevant part, it’s the vast asymmetry in information. Because, unlike the couch market, patients can’t determine what they want or need, and, even after the fact, they can’t determine if what they received was necessary. Studies show that patient surveys of doctor effectiveness don’t at all correlate to medical outcomes— they correlate to bedside manner. Which means that patients are exceptionally easily influenced to believe that they received care they needed, when in fact, it wasn’t at all needed.
And the type and amount of care drastically varies based on providers’ incentives. For instance, if doctors’ practices have MRI machines in their offices that they can bill out to insurance, they order more MRIs for their patients. It’s probably not because their patients require way more MRIs than doctors who have to refer their patients out to their party providers for MRIs. And billing patients directly won’t control costs because, as Arrow noted, patients have no clue and cannot have a clue if they need an MRI or are being upsold.
So the question becomes how we do go about rationing our care. Currently, it’s private health insurers doing it, mostly. Medicare and Medicaid do it somewhat, though Medicare has been doing a far worse job since the government started outsourcing plans to private insurers that skim off the top via the Medicare Advantage program.
So the question is how to align incentives such that people receive care that they need, providers are compensated for good outcomes rather than doing more and more expensive procedures, and the care is adequately and justly rationed. Those are devilishly difficult questions. They require smart regulation, a heavy hand for market structure, and a lot of deference to medical and technical expertise.
Just unleashing markets isn’t a solution here, not just because of fairness concerns, but because markets require bargaining power and informational symmetries that just don’t and, plainly, can’t exist.
Comment by aleximasf73410182b -
That’s why trying to use consumer choice won’t work. That’s not what I’m suggesting. What I’m suggesting is that those that can negotiate for patients , like self employed insurers and the government, need transparency at the cost (not price) level in order for the market to be efficient and for them to be able to negotiate with full information
Today, insurance companies and hospitals do their best to hide data to try to get an edge. As a result taxpayers, patients and employers pay more and get less
This is not about patients not being able to make choices because when they need care during an emergency and are price insensitive.
This is about all the negotiations that take place to set the rates that will apply when that emergency happens
Back in the 60s when he published, these complexities didn’t exist.
Comment by Mark Cuban -