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Will Uncle Sam Be the Only Customer in Healthcare? · CareTalk: Healthcare. Unfiltered.

• 0:00
  The
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  David: US is often called a free market healthcare system, but Medicare and Medicaid are the biggest insurers, and the government pays for about half of all healthcare.
• 0:08
  David: The private sector is getting the message with some big players like Humana saying goodbye to private customers altogether.
• 0:14
  David: So are we on a one-way trained to single payer?
• 0:17
  David: Will innovation suffer?
• 0:19
  David: And if government pays all the bills, should it also own all the hospitals, physician practices, drug companies, and maybe pharmacies too?
• 0:26
  David: Welcome to CareTalk America's home for incisive debate about healthcare, business and policy.
• 0:30
  David: I'm David Williams, president of Health Business
• 0:32
  John: Group.
• 0:34
  John: And I'm John Driscoll, a president of Walgreens Health.
• 0:36
  John: David, where are you coming from?
• 0:38
  John: What, what, what triggered this, this, this explosion of, of speculation.
• 0:46
  David: I'll tell you what, John it's not me.
• 0:48
  David: You know, I just watched what goes.
• 0:49
  David: I just watched the headlines, John.
• 0:50
  David: I watched the headlines and I watched, you know, I watched TikTok, I guess, but Humana just announced it's pulling out of the employer market to focus on government business.
• 0:59
  David: I mean, that is the big news, John.
• 1:01
  David: Everybody's talking about it, but what does that
• 1:03
  John: even mean?
• 1:05
  John: Well, I think it means that they're gonna focus on government programs.
• 1:08
  John: Humana has a storied history of success in a lot of different areas.
• 1:12
  John: It owned hospitals.
• 1:14
  John: Initially, it was an early and aggressive investor in getting government programs right, specifically Medicare Medicare plus Choice, Medicare Advantage, the Medicare HMOs, all of the things that have built it helped it build probably the most compelling franchise.
• 1:31
  John: Private sector Medicare, which is called now called Medicare Advantage.
• 1:35
  John: They still do Medicaid plans in a number of states, but I think it's, you know, remember the context here.
• 1:42
  John: is they have an activist in their stock.
• 1:44
  John: An activist is that kind of investor that says you need to reduce costs and improve profits.
• 1:51
  John: And I think that a lot of times when activist investors get in, companies focus and this is, this is Humana focusing on what it can do really well, which is Medicare advantage.
• 2:01
  John: It's not that much of a surprise, Dave.
• 2:03
  John: I mean, where were you going with all that
• 2:05
  David: speculation?
• 2:07
  David: . Well, John, I think the question is, okay, so we'll put Humana as a special case.
• 2:10
  David: You know, there's always some special case.
• 2:12
  David: I mean, how many companies have the word human in it?
• 2:14
  David: You know, ahu, they could have just called it that, and.
• 2:18
  David: . So sure Human has been focused on government plans for a while, and on the other hand, it does say something with one of the biggest health insurers out there.
• 2:24
  David: Says, you know, who's really the best customer?
• 2:26
  David: It's the government and we're not even gonna sell to the private side, especially when we're hearing at the same time, the insurers are complaining about these so-called cuts.
• 2:34
  David: and Medicare Advantage and which the, which the administration says are not cuts.
• 2:38
  David: And also the Republicans are saying, well, let's cut Medicare and Medicaid just in exchange for a, for an increase in the debt ceiling.
• 2:45
  David: So it's sort of curious to me, John, that a company would say, I'm gonna go whole hog.
• 2:49
  David: On selling to the government at the same time that we're hearing about, you know, cuts and about how it's actually not that, not that attractive overall.
• 2:56
  David: That I think is what's interesting.
• 2:57
  David: Well, it's
• 2:58
  John: a little bit more nuanced than your simplistic approach suggests.
• 3:02
  John: The government pays for Medicare Advantage, but it is a, they're not selling directly to the government.
• 3:08
  John: They, Medicare advantage plans are.
• 3:10
  John: Individually to Medicare eligibles who choose to go into those H HMO and open open panel plan, the plans that are either closed or open that are private sector that often have a lower cost benefits for the Medicare individual, and often some extra things like dental and vision and sometimes OTC over-the-counter drug benefits.
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  John: But it is, it is inter, it is a little bit quizzical that at a time.
• 3:35
  John: The, the, the, the Medicare Advantage plans are, you know, fighting for the private sector.
• 3:41
  John: It is based on a public sector subsidy, but it's a little, it's a little bit more complicated than you're suggesting.
• 3:47
  John: Are I, are you suggesting that, that I mean, what, what, where are you going here, Dave?
• 3:51
  David: Yeah.
• 3:51
  David: John.
• 3:52
  David: Don't lead the witness.
• 3:52
  David: Usually.
• 3:53
  David: You say, are you suggesting, and then you say something that's, That's, that's crazy.
• 3:56
  David: Which has, you know, I would not attribute to myself.
• 3:58
  David: Could just, could be repeating you . Lemme just be clear.
• 4:01
  David: So John, let's look what was happened over like a little longer sweep of time.
• 4:05
  David: I'll just pick 1987 cuz we have some data for that.
• 4:07
  David: Public spending on healthcare.
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  David: At that time, the government was spending about one third of the total amount that was sent on healthcare was spent by the government.
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  David: And now it's about half.
• 4:16
  David: There's actually some distortions due to the public health emergency.
• 4:18
  David: But let's say it went from a.
• 4:19
  David: To a half over that timeframe.
• 4:21
  David: Now, if you look at the total government spending as a percentage gdp, it's gone from about 21% to 25% over the time.
• 4:28
  David: So it's gone up, but nothing nearly as dramatic as that.
• 4:31
  David: And so clearly the government role in healthcare is sure.
• 4:34
  David: It's always been big.
• 4:35
  David: but it's really been increasing a lot, and I think there's some bets being made that it's gonna continue to increase.
• 4:41
  David: Maybe once it starts to get to 50%, then it's mostly
• 4:45
  John: well slow, slow, slow, slow, slow down partner, slow down partner.
• 4:49
  John: Let's think about what's happened over that period of time.
• 4:52
  John: You've got the expansion of the aca, the the, the creation of a true benefit for the uninsured and for small business that was unaffordable.
• 5:00
  John: that's a substantial piece of it.
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  John: And another substantial piece is in the aging of America, you've got 10,000 Medicare eligibles being turning Medicare turning 65 every day as we work through the baby boom.
• 5:11
  John: So part of that is simply a, a, a question of numbers.
• 5:15
  John: And the third thing is, if you look at lifespan and expectancy between 1987, when, I believe that was your birthday, right?
• 5:22
  John: That was when you were born.
• 5:23
  David: And uh, that was, that was, yeah, that was, that was my first legal drink.
• 5:26
  David: John.
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  David: Then we're not talking about sel.
• 5:28
  John: The, the that the, the As, as more people live longer, naturally, the, the elderly, the folks who are getting Medicare, el getting Medicare benefits are going to, it's go the, the, the cost is gonna go up.
• 5:42
  John: Now, the cost of providing healthcare has also gone up.
• 5:45
  John: Hospitals, doctors, drugs.
• 5:48
  John: But there are three structural things.
• 5:50
  John: I mean, the biggest ones.
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  John: You know, the fact that the baby boom is now hitting, which will eventually taper off, and the fact that we've now got an individual.
• 6:00
  John: In a, in a lot of states, a program that covers individuals in small business at an affordable price.
• 6:05
  John: I mean, don't you think that's relevant, Dave?
• 6:06
  John: Or are you just going to blame the government on this one?
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  David: Now, John, you always, you know, so you accuse me of saying things that are too simple.
• 6:13
  David: Now I'm gonna accuse you of doing just the same, and it's not an accusation, John.
• 6:17
  David: Just consider it more in the, in the rainbow, like friendly coaching.
• 6:19
  David: Okay, so I talked about like the percent.
• 6:22
  David: Of total spending on healthcare, the government share of spending has gone way up over time.
• 6:28
  David: Now you're talking about things that are driving more the total cost.
• 6:31
  David: Yeah.
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  David: Healthcare is a percentage of the of the overall economy's gone up too.
• 6:34
  David: But the government is, is a increasing share in a market that's, that's increasing a lot.
• 6:39
  David: And it's not just the
• 6:41
  John: No, no, but think about Dave.
• 6:43
  John: If, if, if government provides a hundred percent of the be 99% of the benefits for the elderly and there's more elderly people, Elderly go up, price go up, straightforward.
• 6:57
  David: John the you know, as I was gonna say, the aca, you know, is part of it.
• 7:01
  David: Some of the things that you, that you mentioned, but it's been actually not just the Democratic led initiatives, cuz we have to remember also Medicare Part D which preceded the Affordable Care Act, which was led when Republicans were in office and that that added drug coverage to Medicare.
• 7:16
  David: So there are, there, you know, it's gone from a lot of different, a lot of different directions and I think that there's a realiz.
• 7:21
  David: That even if you sort of, the rhetoric is against things like an individual mandate and socialism and so on, when it comes right down to it, people kind of expect that they're gonna get healthcare and someone else is gonna pay for it and that someone else is the federal government.
• 7:35
  John: Yeah, this is, this, this is, I think, the big reason why the Republicans have been attacking Obamacare and, and still, you know, I don't know, almost 20 years in, we, we, we, we have we have Part D, we've got Obamacare, we've got the sca.
• 7:51
  John: There's a lot of complaints about it, but the reality is the vast majority of Americans are very happy with their Medicare benefit, their Part D benefit, their Medicare advantage benefit.
• 8:02
  John: And we're not going back.
• 8:03
  John: So you're right.
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  John: Government is a much bigger player.
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  John: The federal government in particular, it's really driving it.
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  John: And I think that people are kind of happy.
• 8:11
  John: I mean, as much as they, you and I can come up with reasons to complain, they're, they're pretty popular programs.
• 8:18
  John: .
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  John: David: So, John, let me, let me Since we're not beating a, a dead horse, I think that's not allowed anymore anyway, but I wanna ask a question about some of these high profile initiatives led by employers or these very rich foundations that are trying to have an influence in healthcare delivery.
• 8:35
  John: I'll point out a few of them.
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  John: The Commonwealth Fund, Robert Wood, Johnson Foundation, the Gates Foundation, all, you know, philanthropic foundations that have tried to have an impact on healthcare.
• 8:45
  John: And then you've got others in the private sector like Haven famously, which was, you know, JP Morgan Amazon and Berkshire Hathaway coming together.
• 8:51
  John: And then when that didn't happen, really, you know, Morgan Health is another example.
• 8:55
  John: Are these private players just sort of, you know, talking into the wind or, or, or is there some actual, some influence, some impact that they actually.
• 9:04
  John: Well, they haven't had a great deal of impact, the big named ones that you talk about.
• 9:08
  John: But if you think about.
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  John: Self-insured employers, which is the next big category of spend.
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  John: You know, the employers of, of companies larger than 5,000, in some cases larger than a thousand.
• 9:20
  John: And the big named players that, like you were talking about, like JP Morgan, American Express, the airlines.
• 9:25
  John: Those are often the place where if you've got an innovative idea as a healthcare company, it's kind of hard, hard, and could take forever to get the government in interested.
• 9:32
  John: Health plans are very, are are historically very slow Twitch decision makers regarding innovative ideas.
• 9:39
  John: They're, they're, they're like, like a lot of things in healthcare, they're very conservative.
• 9:43
  John: but they, the innovative ideas, whether it's telemedicine, before it was intrigued, people were intrigued by that.
• 9:50
  John: Or different models of virtual first care or remote patient monitoring, or different kinds of benefits that pushed people to.
• 9:57
  John: A lot of that started with innovations with the self-insured employers and through some of the initiatives that you're talking about.
• 10:03
  John: Haven was a bust.
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  John: I'm expecting better from JP Morgan Healthcare, but the way to think about 'em, I, I.
• 10:10
  John: Robert Wood Johnson Commonwealth Fund, when they back something is how do you raise the money to do something new that needs to happen?
• 10:18
  John: The famously hospital at home was not funded by the, by the federal government, even though it makes a great deal of sense, it was funded by individual foundations and you're gonna see, I think most of that, those innovations are gonna come from that part of the sector, or at least that's a place where you can innovate somewhat comfortably, certain.
• 10:38
  John: the, the Center for Medicare and Medicaid and event in, in innovation, C M M I has had a really hard time doing novel things because everything gets political at the government level.
• 10:46
  John: I think I'm actually kind of a mo modestly optimistic about those initiatives.
• 10:52
  John: You sound like you're more of a skeptic.
• 10:55
  David: John, I remember years ago hearing Charlie Baker, who at the time was the, the c e o of Harvard Pilgrim before he became governor of Massachusetts and was talking about what they, Harvard tried to
• 11:04
  John: pilgrim the pilgrim, Harvard.
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  John: The health.
• 11:05
  John: The health.
• 11:06
  John: Just to be clear, Harvard pilgrim, the health plan, not nothing to do with the, the Plymouth Plantation or anything like that.
• 11:11
  David: Exactly, yeah.
• 11:12
  David: The health plan.
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  David: and they were trying to, they had a bunch of innovative things, you know, like named like number one health plan in America, et cetera.
• 11:19
  David: And they're trying to influence the, the hospitals to do things differently.
• 11:23
  David: And so they had this, you know, this kind of value-based payment system.
• 11:26
  David: And they said what happened was, you know, the hospitals would get this and they have all these special incentives and things, but they just basically translated into like Medicare equivalent units.
• 11:35
  David: Cuz Medicare is the main customer anyway and nobody really cares what Harvard Pilgrim is doing.
• 11:39
  David: So like the.
• 11:41
  David: Famous or like the number one health plan in America had, you know, little impact on its on its local market.
• 11:47
  David: And that was one of the things that said to me, you know, it really is the government, you know, where things are happening.
• 11:51
  David: So John, I think if we look at that and we say, let's look at markets.
• 11:55
  David: Yeah.
• 11:57
  John: Look, I no, I completely agree on that.
• 11:59
  John: I think if you really wanna scale anything, you, it's gotta, you've gotta get the government to pay for it.
• 12:07
  John: If you want to start something, I'm not sure you'd wanna start it with the government as a payer, do you disagree?
• 12:15
  David: Well, I'm, I'm talking less on the theoretical side, and I'm saying more, let, let's accept that it's actually a government run healthcare system.
• 12:21
  David: The government is paying, and let's not pretend everything is happening in the, in the private sector, which is how we tend to talk.
• 12:27
  David: And if we look overseas instead, let, let's look at places where government is acknowledged as the only customer.
• 12:32
  David: What do we see in those health systems?
• 12:33
  David: Well, they tend to have universal access, which we don't have.
• 12:36
  David: There's more of a focus on cost, even though they worry about cost, it's.
• 12:40
  David: , they worry about cost.
• 12:41
  David: At half the level we have, there's more standardization.
• 12:44
  David: So people are more likely to get, you know, equal sort of treatment.
• 12:47
  David: They have national databases as opposed to a whole industry trying to link data together and they have more centralized decision making, which may be, you know, may be good, maybe, maybe bad.
• 12:56
  David: It's usually considered bad here, but I think we're May, we're kind of fooling ourselves by talking about we have a private system and really it's a government system, and it would be better if we just acknowledged that and acted according.
• 13:08
  John: but I don't think it's as black and white as you suggest.
• 13:10
  John: I mean, if you look at like an NHS where they've got centralized decision making, they've been underfunded and it's kind of.
• 13:17
  John: Falling on its face right now.
• 13:19
  John: In fact, y y you know, if, if you, if you, you've got people literally dying because they can't get access to lifesaving and very easily executable like cardiac surgeries.
• 13:30
  John: You've got people waiting hours to be picked up.
• 13:33
  John: By ambulances and get to the emergency room.
• 13:35
  John: And so central decision making doesn't always work.
• 13:39
  John: You've got advantages like in France where you've got one card that's got all your healthcare information.
• 13:46
  John: That's quite powerful because they made a conscious decision to centralize and simplify and, and, and the information about you and your healthcare record.
• 13:55
  John: So there's no mistakes there.
• 13:57
  John: But there's, there are, there are a number of systems that that could work without going to a fully owned and integrated healthcare system from the government.
• 14:05
  John: You've got the system in Germany and Switzerland where.
• 14:08
  John: You've got a standard benefit.
• 14:09
  John: The government's, the kind of the finance backbone, universal coverage to your point.
• 14:13
  John: But you've actually got a pretty vibrant sector of private insurers that then compete around benefit design and innovation that people get to choose.
• 14:22
  John: And it could be the BMW planner could be the plan of that particular area around I think it's in Munich a regional health plan that would be competing directly for.
• 14:32
  John: Beneficiaries, those families to enroll in.
• 14:34
  John: And that's worked pretty well.
• 14:35
  John: And, and, and it keeps, you keep the competitive and the competitive instinct and the variety of choice without losing the advantage of universal coverage.
• 14:46
  John: But I, and, and David, I, I, I think that's probably a better analog to what the alternative is.
• 14:53
  John: I don't think America's ever gonna go to get comfort.
• 14:57
  John: with a, a totally government run health plan.
• 14:59
  John: But from a, from a finance perspective, I, I I, I mean ultimately the taxpayers are the insurer of first resort.
• 15:09
  John: Increasingly as, as Medicare and Medicaid represent the government programs for the poor and the elderly, more than 50% of every, every healthcare dollar.
• 15:19
  David: So, you know, Switzerland may be the example of of a company of a country whose healthcare system is closer to a free market one.
• 15:26
  David: But even there, you know, not just universal coverage, but there's actually an individual mandate.
• 15:30
  David: The government, as you say, sets the standards for plans.
• 15:33
  David: They are have subsidies like we have here.
• 15:35
  David: They also regulate healthcare prices.
• 15:36
  David: And that's something true in Germany too.
• 15:38
  David: And I wonder what will.
• 15:41
  David: if we actually move away from sort of a, if, if we really move toward a government system, let's say, especially as it comes to one of your favorite topics, drug prices.
• 15:49
  David: Cuz one of the things that Germany does is they basically make it so that any new drug is gonna be priced the same way as, as an older drug.
• 15:57
  David: And it's very, very difficult to get beyond that.
• 15:59
  David: And if they weren't for sort of living o as a freeloader off of the US paying excess.
• 16:04
  David: For new treatments, you know, we'd probably be in a, in a bad spot.
• 16:07
  David: So if the US actually does move more toward being government run in terms of dictating prices for drugs, we may actually see less innovation.
• 16:16
  David: What do you say to that?
• 16:17
  David: I, I, you know,
• 16:18
  John: I'm, I'm not a buyer on that.
• 16:19
  John: I, I, I think that we, we, we, we could preserve That's a multi-part answer, Dave.
• 16:27
  John: I, I, I, I think we could easily.
• 16:30
  John: Regulate or mitigate by regulation, the excessive cost increases of the standard chemical compounds that are not innovative and around which the majority of patent investments are made by.
• 16:48
  John: Drug companies, the majority of their patents, which are there, which are, which are set up patent protection for novel drugs two-thirds of them are about extensions for drugs that are already expiring.
• 16:58
  John: So you've got, you've created an incentive where the drug company is incentive to put more of its money into keeping prices up.
• 17:06
  John: than keeping the new drugs coming.
• 17:07
  John: I think you could exclude and protect the, the new drug innovation.
• 17:11
  John: You know, the, the drug companies wouldn't make as much, much money.
• 17:14
  John: They wouldn't be as fly as many private jets.
• 17:17
  John: They wouldn't have as many drivers like you kind of taking them around in their, in their, in their big, big cars.
• 17:23
  John: but they, in my buck be forced to put perhaps a bit more money.
• 17:27
  John: Currently they spend more money on marketing than they spend actually in developing drugs.
• 17:31
  John: And so I, I think there's a lot you could do there.
• 17:34
  John: You know, the reality is we are going to have, in the United States, I think a, a, a government and a private sector in healthcare and government, to your point, does set the price for pretty much everything other than drugs.
• 17:46
  John: You know, even the private sector kind of shadow prices up or down.
• 17:50
  John: Which is to say they, they base their price based on what government pays.
• 17:54
  John: So government does kind of set the rates in everything, but drugs, and I think drugs are a u, a unique failure of this public-private partnership.
• 18:03
  David: Well, that's it for yet another episode of CareTalk.
• 18:05
  David: We've been talking about Humana's decision to throw itself upon the mercy of the federal government and what that means for the rest of the healthcare system.
• 18:12
  David: I'm David Williams, president of Health Business
• 18:14
  John: Group, and I'm John Driscoll of President of Walgreens Health.
• 18:17
  John: If you liked what you heard, you didn't, please subscribed on your favorite service.