Disruptive Innovation in Healthcare- A Better Healthcare Roadmap for President-elect Trump

Hal Scherz
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Posted: Nov 16, 2016 8:50 AM
Disruptive Innovation in Healthcare- A Better Healthcare Roadmap for President-elect Trump

In the waning days of the presidential campaign, healthcare once again became an issue. The latest insurance premium hikes announced just days before the election may have played into the Trump victory. His promise to repeal and replace Obamacare resonated with an electorate fed up with healthcare costs that have been rising at an unprecedented rate.

Since his historic triumph, Trump has reiterated his pledge to overturn Obamacare, with the promise to keep what he has stated are the “good parts” of the law; keeping kids on parents’ insurance until age 26, and finding ways to cover individuals with pre-existing conditions. He has previously expressed his desire to open up insurance sales across state lines and to make health savings accounts more available.

A number of articles have been produced advising President-elect Trump how to proceed with healthcare. And there is the GOP House plan, prepared by Speaker Ryan entitled “A Better Way,” which outlines market based approaches designed to transform healthcare.

What all of these plans have in common is that they all address high insurance costs, coverage issues, tax considerations and mandates, but fail to consider the major problem – the high cost of healthcare. Insurance is only a part of the problem.

The major reason for the high cost of healthcare is the fact that a majority of care has been redirected into the most expensive place to deliver it- the hospital. The Affordable Care Act is in part responsible for this, by encouraging the creation of large hospital systems that are termed “Accountable Care Organizations,” in an attempt to consolidate care and to control costs. To accomplish this, hospitals have been given extraordinary leeway bordering on anti-trust, to consolidate and to purchase physician practices to control market share. Furthermore, the ACA stifled competition by prohibiting the creation of new physician owned surgery centers. Instead of controlling costs, these concessions to hospitals have created monopolies, allowing hospitals to charge ridiculously inflated prices.

The only way to drive prices down is to take away these special privileges granted to hospitals and to allow entities to compete against these powerful institutions. Thirty-five states have Certificate of Need laws which exist to protect hospitals and to restrict competition against them. CON laws require an entity, such as a surgery center, to first obtain permission from the state before they can open. Existing facilities can challenge and block this process. President-elect Trump can reward states that repeal these laws which will create opportunities to compete against hospitals and drive healthcare prices down.

The “Cadillac” health insurance policies prior to Obamacare were essentially “prepaid healthcare plans”, which covered everything and paid first dollar coverage. The new healthcare reality with high deductible plans, has transferred a great deal of financial responsibility to the patient, but because the law requires basic minimum coverage, costs an average of $16,500 for a family of 4.

Healthcare does not need to cost very much and in fact, it does so because of artificial market manipulation. Eighty percent of healthcare can be delivered by a primary care doctor, and a new model of healthcare delivery called Direct Primary Care is proving that for as little as $50 per month, a patient can get routine care for the majority of their needs. When outside testing or specialty care is needed, steeply discounted outsourced services have been pre-arranged by the direct primary care doctor. In this setting, a patient only needs a catastrophic healthcare plan, which is not currently offered because of ACA requirements. This could be rectified immediately by President Trump by lifting the mandate on insurance companies.

The gap between primary care and catastrophic care would be easily covered by the health savings accounts that Trump has been so enthusiastic about; accounts that could be funded by tax credits or tax deductions, depending on income.

Other ways to make an impact on the high cost of healthcare would be to support states that enact meaningful medical malpractice reform. Defensive medicine is when doctors order tests to protect themselves from frivolous lawsuits, and this accounts for between $250-600 billion annually.

Prescription drug costs are another cost driver that can be tackled during the Trump presidency. Americans are paying the highest drug costs globally because most other countries are socialized and tell the drug companies what they are willing to pay. These companies know that they can recoup losses on the American market. By allowing patients to purchase drugs on secure web sites internationally, the drug companies would be compelled to reduce domestic prices.

Instead of focusing entirely on the insurance aspect of healthcare, President-elect Trump would be advised to implement measures that also tackle price. Healthcare does not need to be expensive. Only by taking on the special interests that are profiteering at the expense of patients, will we truly be able to bend the healthcare cost curve down.