Get the Health Incentives Right

MotivationThis post is based on a comment I made when Pritpal Tamber called for “Creating a parallel system to health care” in MedCity News.

At least for consumers, Modern Health Talk ( can already be called the “Institute for New Health Thinking,” with 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 it all comes down to getting the INCENTIVES right, as I wrote two years ago when proposing a hybrid, public/private model of health care. The goal then was to exploit the differing incentives of capitalism and private sector organizations that measure success in business terms such as profit, ROI, and payback period, contrasted with that of 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 nations but still live sicker and die younger, we “should” be able to cut our spending in half (now over $3 trillion/year). But with annual revenue loss of $1.5 trillion at stake, entrenched incumbents in the medical industrial complex spend twice 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.

Obamacare, in many ways, has caused market forces to now 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.

But it’s not just the competition. Insurers can no longer cherry-pick the healthiest and most profitable customers or cut off coverage when care gets expensive, and that’s forcing them to invest in health & wellness programs – a parallel system if you will. Many of those wellness programs already exist and were developed for self-insured corporations to improve work productivity by keeping employees healthy. So it’s almost a matter of just extending the programs to individual consumers.

Insurers are also 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 possible, however, insurers are having to pressure providers to transparently disclose their once-secret hospital charges. That imposes new competition on providers too, who must now also innovate to maintain profitability.

New telemedicine and telehealth-based business models, featuring video consultations across state lines and even international borders, are becoming possible as state licensing agencies consider policies that recognize licensed physicians from other states, much as drivers licenses are recognized. This too is an unstoppable trend, given the Internet and those new high-deductible policies. Medical tourism is also unstoppable when the cost of travel, the medical procedure, and recovery in a 5-star hotel on the beach is less than the annual deductible or what a local hospital charges.

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 a 101 MiniTrends 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.

With the aging population and 10,000 boomers reaching 65 every day, we expect a doctor shortage of 90,000 by 2020, but 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 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.

Smart docs, who may have only received one semester on prevention in medical school, are starting to see the handwriting on the wall, and they’re upgrading their skillsets to cover the three pillars of health: nutrition, exercise, and sleep. As for me, I’m working with a Ph.D. sleep consultant to open an Intelligent Sleep solutions center in Austin with plans to extend across Texas and then scale nationally and potentially internationally through a variety of scaling options. As such, Modern Health Talk will start to include more articles on Sleep, because of its close ties to many health conditions, 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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