Houston, We Have A Massive Healthcare Cost Problem

Paul Markovich – President and CEO, Blue Shield of California.

After decades of failed attempts and political contempt that’s kept progress at bay, healthcare costs continue to rise, with catastrophic consequences ahead.

U.S. health expenditures reached a whopping $4.3 trillion in 2021—triple the amount spent in 2000 and making up nearly one-fifth of the country’s gross domestic product (GDP). Both the Government Accountability Office (GAO) and Congressional Budget Office (CBO) project the nation’s public debt will continue to rise over the next decade, driven in part by massive cost outlays from public programs like Medicare and Medicaid, which are set to reach historic levels in the next 10 years.

As total healthcare spending (public and private) continues to grow faster than the economy, I find our country is on an unsustainable path forward. And yet, the healthcare industry and U.S. policymakers have seemed to accept the status quo. As we continue to borrow enormous sums of money to finance persistently large deficits to pay for healthcare, this complacency threatens to bankrupt the entire country.

Houston, we have a massive healthcare cost problem. So where is the desire and outrage from industry leaders and policymakers needed to spur major transformation?

No Rage Against The Machine

Instead of outrage, for example, we’re seeing publicly-traded health plans see huge financial gains and market opportunities in the shadow of the pandemic, with Deloitte citing that U.S. health plan revenues grew faster than both the rate of inflation and GDP in 2022. Hospitals and physicians continue requesting more funds from both federal and commercial sources, citing higher reimbursement rates as the solution to their financial challenges. And the entire pharmacy value chain seems indifferent to the fact that they have been, and will continue to be, the greatest source of cost pressure in the system, remaining steadfast that any changes may compromise the ability to innovate in the future.

Meanwhile, many of our elected officials are spending much of their time being outraged—mainly with one another. While both political parties may be convinced that shopping anger is the best path to win elections, I find it has impeded our ability to have a pragmatic, bipartisan dialogue on how we are going to solve our healthcare affordability crisis.

Leading By Example: Partnerships And Policy Advancements In The Golden State

In my opinion, the nation needs both significant policy changes and cross-sector collaboration to make healthcare delivery more affordable, accountable and sustainable.

Policy interventions and progressive partnerships are happening now in California and can serve as models to be replicated in other states and nationwide, including:

• Improving accountability and value: The launch of California’s Office of Health Care Affordability put in place a variety of policy mechanisms to address rising costs while simultaneously pursuing aggressive quality, equity and payment reform objectives. The program includes penalties and provisions to address high cost-outliers and curb unnecessary spending.

• Enabling information sharing: It’s often financial reasons that stand in the way of real-time data sharing across the industry. But the price of health-system recalcitrance is borne by patients in expensive and burdensome workflows, duplicative testing and procedures, billions in unnecessary costs, unsafe medical practices and inappropriate treatment. California’s data-sharing mandate, which goes into effect in January 2024, will accelerate the exchange of health information and make care delivery more targeted, efficient and cost-effective.

• Making drugs more affordable: One way California is combating high drug prices for diabetes patients is through a 10-year partnership with nonprofit drug maker Civica. The collaboration caps the price of insulin at $30 a vial, which can be a lifeline for the one in six Americans who must ration their insulin due to prohibitive costs.

How Healthcare Leaders Can Make An Impact

Financial sustainability in healthcare is predicated on the industry’s collective ability to control costs, which will only be possible if there is both a willingness to change and a willingness to work together from all actors in the system.

Healthcare leaders across stakeholder groups must forge new and novel partnerships, including those between the public and private sectors, in service of measurable, accountable cost control goals. In California, for example, a cross-cut of healthcare organizations and policy leaders came together to advance a cost control policy in 2022 that prioritizes transparency and holds individual sectors accountable for their role in healthcare cost growth. Only when sustaining the status quo becomes more costly than change will change happen.

Beyond cost control policy efforts, healthcare organizations—from health plans and health systems to consumers, employers and labor groups—need to seek each other out, find common ground and find new ways to work together. The focus of these partnerships must be to solve the issues that our industry is struggling with most, including paying for value, better supporting primary care, improving quality, addressing health equity and enabling a more digitally-driven healthcare ecosystem.

And at my company, we have been aggressively piloting major transformation efforts, several of which we will be scaling to our nearly five million members over the coming months and years. Importantly, none of these efforts would be possible without collaboration. This includes our new partners in the pharmacy supply chain, who are helping to demonstrate that system reinvention is not just possible, but required, to make medications more affordable and break through the forest of opacity in drug pricing.

The current healthcare cost trajectory in our country might bankrupt us if we don’t introduce some material changes soon. I want future generations, including my children, to see a transformed healthcare system—one worthy of our family and friends and sustainably affordable for everyone. But first, we need more outrage from the industry, action from our leaders and scalable examples of progress.

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