Get the Health Incentives Right

Fixing our broken healthcare system, reducing costs, and improving care all comes down to getting the objectives and health incentives right.

Motivation - Fixing our broken healthcare system, reducing costs, and improving care all comes down to getting the objectives and health incentives right. This post is based on a comment I made when Pritpal Tamber called for “Creating a parallel system to health care” in MedCity News back in 2014.

At least for consumers, Modern Health Talk ( can already be called the “Institute for New Health Thinking,” with well over 100 articles on Legislative, Public Policy, and Health Reform topics written for consumers, and over 700 on modern health topics in general.

I personally think fixing our broken healthcare system all comes down to agreeing on objectives and getting the INCENTIVES right, as I wrote five years ago when proposing a hybrid, public/private model of health care. The goal then was to exploit the different incentives of (1) capitalism and private sector organizations that measure success in business terms such as profit, ROI, and payback period, contrasted with (2) the public sector, which measures success quite differently and over much longer time periods. 

Given the fact that Americans spend twice as much as other advanced nations but still live sicker and die younger, we “should” be able to cut our spending in half (now over $3.5 trillion/year). But with annual revenue loss of over $1.5 trillion at stake, entrenched incumbents in the medical industrial complex spend three times as much on political lobbying as the military industrial complex. Still, meaningful reforms have been forced upon them by a shift in incentives that they can no longer control or ignore — at least not unless all of the progress made so far is undone by political revengefulness.

Mixed Signs of Progress

The Patient Protection and Affordable Care Act (Obamacare), in many ways, caused market forces to work toward addressing issues of our “sick care” system in favor of real health care. The insurance exchanges created new competition among payers by allowing consumers to comparison shop for the best gold, silver or bronze plans and find better value as a result.

Promoting progress is not just about competition. Under Obamacare, Insurers can no longer cherry-pick the healthiest and most profitable customers, or cut off coverage when care gets expensive, and that’s encouraging them to invest in health & wellness programs – a parallel system if you will. Many of those wellness programs already existed and were developed for self-insured corporations to keep employees healthy and improve worker productivity. So extending those programs to individual consumers should not be difficult. The problem is that consumers with private insurance can easily switch plans each year, and that leaves payers with less incentive to promote wellness. Besides, private insurance companies profit more as healthcare costs go up, because they can charge higher premiums. As to the new competition originally offered by insurance exchanges, political obstructionism and uncertainty in the insurance market has caused many insurers to pull out entirely. Many think this is a form of political sabotage?

Insurers started offering low-cost policies with higher deductibles and copays, giving consumers more skin in the game and an incentive (often for the first time) to comparison shop for the best value in health care, and to focus more on their lifestyle choices. To make such shopping easier, insurers even began pressuring providers to be more transparent and disclose their once-secret hospital charges up-front. To some extent, that imposed new competition on providers too, causing them to also innovate to maintain profitability.

New telemedicine and telehealth-based business models, featuring video consultations across state lines and even international borders, became possible as state licensing agencies considered policies that recognize licensed physicians from other states, much as drivers licenses are recognized. This too is an unstoppable trend, given the broad Internet access and those new high-deductible policies.

Medical tourism is another unstoppable trend when the cost of travel, the medical procedure, and recovery in a 5-star hotel on the beach is less than what a local hospital charges, or the annual deductible. Some progressive insurers are already starting to reimburse for the costs of medical tourism, telehealth, and home health care when those costs are lower and outcomes better. That’s because financially it makes sense.

All of this churn is putting intense pressure on the entrenched incumbents, and I expect that those who don’t dramatically change their ways will not survive. I made that clear in 101 MiniTrends, an article that said 429 of the original Fortune 500 corporations are no longer in business today. That should worry those at the top of the healthcare mountain and cause them to change and adapt more rapidly. But many have simply ramped-up their investment in political lobbying.

With the aging population and 11,000 boomers reaching 65 every day, we expect a doctor shortage of 90,000 by 2020. The smart docs are finding new and better ways to deliver care and improve their value. They’re starting to push more of the medical functions downward from physician to physician assistant, nurse practitioner, RN, and to consumers themselves. That’s being done with the impact of Moore’s Law and a mix of sensor & medical imaging devices that keep getting cheaper, smaller, more accurate, and easier to use, along with big data analytics (IBM Watson) on the backend as an expert advisor to the doctor, PA, NP, nurse, etc.

These smart doctors, who in medical school may have only received one semester on prevention, are starting to see the handwriting on the wall. They’re upgrading their skillsets to cover the three pillars of health: nutrition, exercise, and sleep. As for me, I’m publishing more articles on Sleep because of its close ties to health, and its affect on safety and performance.

2 thoughts on “Get the Health Incentives Right


    The Problem with FREE Health Care (NYTimes editorial)

    “Obamacare” — Three Keys for Improvement (Huffington Post)

    COMMENT: The doctor’s discussions of telehealth (liveClinic) and patient education (while waiting in the ED) address ways to improve healthcare delivery & prevention, but I’m not a fan of health savings accounts, or any health insurance for that matter. There’s way too much debate on how care is paid for and too little on wellness.

    My concern with HSAs is that people living on the edge already delay getting medical attention or taking their meds, because those costs compete with other expenses like housing, transportation, utilities, and food. Not only do poor people find it more difficult to eat healthy meals or stay fit through exercise; they also lack disposable income that can be redirected into savings. It should be clear that Republican health saving account proposals would greatly benefit those with means but would burden those without. HSAs would also give the wealthy new tax shelters and a way to avoid inheritance taxes.

    The key to successful health reform is getting the INCENTIVES right, as I wrote in To influence consumer behavior and lifestyle choices, they too need the right incentives, but don’t just focus on healthcare payment. I much prefer universal healthcare like what other advanced nations provide.

    Opponents of universal and free access to healthcare as a government service say people need to have “skin in the game” or they’ll abuse the system. To them I’d say, change the incentives — away from the focus on costs and instead to focus on improved health & wellness and how that effects school & work performance, income potential, and overall happiness. Frame the issues differently, and there won’t be a need to bribe people to live healthy.

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