Here’s a health care solution. Not the only solution but one – one that works toward more of a market-driven system that would drive down health care costs. National Public Radio last week reported on a New Hampshire company called Vitals that runs a service called SmartShopper. Vitals partners with insurance companies and employers to provide a call center where their insured can shop around their area for tests and medical procedures to find the best prices. People can go where they want for their health care, but Vitals pays them if they do choose the low-cost provider. The company pays “rewards” of from $25 to $500, depending on the service. Insurance companies and employers can afford these incentives because the price of medical services can vary widely. This is smart business. And would make for good health care policy for a country that can’t figure out how to reform its health care system when the successful business model is right before its eyes. The problem with America’s health care system is it has short-circuited the usual business-consumer relationship.
Health plans, employers, and state governments increasingly expect Americans to use information about pricing when making health care decisions. After all, the more consumers know about pricing, the better they can budget for out-of-pocket expenses and for routine costs related to chronic conditions, the more intelligently they can choose among providers, and the more easily they can bring pricing information directly into conversations with those providers. Those conversations can lead to more sensible decision making about care, avoiding costly tests and procedures that are unlikely to improve health outcomes. Consumers who are especially knowledgeable and motivated can even negotiate what they will pay for services at their preferred health care facilities, as some anecdotal evidence has shown. The reality, however, is that most health care consumers are not using pricing information consistently.
Five years after the Affordable Care Act helped set off a health-care merger frenzy, the pace of consolidation is accelerating, transforming the medical marketplace into a land of giants. The trend is under a new spotlight now, as Congress zeroes in on the competitive and cost impact of proposed deals that would collapse the health-insurance industry’s top five players into just three massive companies, each with more than $100 billion in annual revenue.
A Black Swan event is thought to be a surprise and without precedent at the moment it occurred. However, after evaluating the surrounding context, it becomes obvious that the event was bound to happen. The originator of the concept, Nassim Taleb, states that whether a black swan event is surprising depends on the observer. For example, what may be a black swan surprise for a turkey is not a black swan surprise to its butcher. Naturally, the objective is to “avoid being the turkey” by identifying areas of vulnerability in order to “turn the black swans white.” Oliver Wyman’s healthcare practice advises incumbents they should be playing 70% offense and 30% defense (i.e., shoring up existing operations). Many observe incumbents to be playing 5% offense and 95% defense. That Zero Sum Game mentality will be the cause of great regret when they miss out on major new opportunities following in the footsteps of their local oligopoly brethren (newspapers).
One of the criticisms of the Patient Protection & Affordable Care Act, better known as Obamacare, has been how complicated some of its provisions are. When it comes to the subsidies that many Obamacare participants receive, that complexity could cost the government $345 million -- and much of that money could go to the same taxpayers who did the worst job in complying with the healthcare reform law's subsidy provisions in the first place.