Thursday, September 3, 2009

The Health-care Trifecta

Health Insurers, Hospitals/Clinics, and Pharmaceuticals form the Health-Care Trifecta - the triple winners in the profit-driven health-care market. I have nothing against winners - I much prefer winners - but not at the expense of Society - then everyone loses.

As i mentioned in an earlier blog entry - unregulated profit incentives have made the Insurers focus their energies on reducing their claims-to-premiums-ratio (aka the medical-loss-ratio) to maximize profits for their share-holders. Outcome: a very negative impact on society - in fact a direct conflict of interest to serving society whose money they are taking. Obama's public-option (much like the Post-Office, Military, Firemen, Police etc.) will place an upper-limit on Administrative costs of competing Insurers and thereby curb conflicting profit incentives - this is a good strategy. A simpler option (I prefer) is just limiting the claims-to-premiums-ratio at 0.95 by law i.e. all Insurers by law would have to pay out 95% of premiums earned for health-care claims. This still gives the Insurers 5% for Administrative costs and Profits which over time would be fine-tuned for greater efficiency towards making more profits.

Unregulated profit incentives have made Hospitals/Clinics prescribe as many procedures and hospital stays as they can squeeze into a patient's life and charge ludicrous prices for sometimes the most trivial of procedures and items. Doctors are also incentivized through clever monetory schemes by the Pharmaceuticals into prescribing their expensive drugs. Outcome: patients are treated with as many short-term expensive procedures as possible with no overall patient wellness in mind. This is the biggest driver of health-care costs. Obama's strategy to identify and pay for patient wellness based on care-results data is the correct strategy to incentivize doctors to provide the right care - it will reduce costs considerably and bring true doctor-patient relationship back into focus.

Profit incentives in this sector have clearly propelled costs of drugs through the stratosphere. Additionally, the Drug companies focus on high-profile drugs with long-term dependencies and have little focus on actual cures. Outcome: Patients generally find themselves prescribed on several drugs for very long periods sometimes their entire life-time. Again, Obama's strategy to identify and pay for patient wellness based on factual statistical results is the correct strategy in reducing these costs and putting patients first.

In the end any system we humans create must serve society or face a backlash eventually. The Heatlh-Care Trifecta is a big cost to our society and must be addressed sooner or later.