The Crystal Ball 8

“Golly, Curmudge, I can hardly wait until we get to the end of Christensen’s The Innovator’s Prescription. It’s like a novel; I’m eager to learn what health care will be like in the future.”

“It’s not a sure thing, Jaded Julie. The future will depend on which of the following two philosophies of health care will be dominant. (1) Improving the value of health care can’t happen unless those who receive health services know what they cost and bear at least a share of the cost burden. (2) Some people believe with near-religious fervor that employers or the government are morally obligated to cover health-care costs. In that scenario, reimbursements are administered prices; they are insulated from market forces and the efficiencies that would result from disruptive innovation.”

“Whether it’s through taxation or cash on the barrelhead, health care has to be paid for. It sounds as if Christensen’s ideas will function better under Scenario 1. How will that work?”

“As mentioned last week, the integrated fixed-fee providers will charge patients an annual fee (capitation). Employers who directly manage their employees’ health care use a combination of high-deductible insurance (to protect against catastrophic illness) and health savings accounts (HSAs). The employer puts before-tax money in the employee’s HSA; the employee can also add (before tax) to the account. The employee pays for health care out of the HSA up to where the high-deductible insurance kicks in. Upon retirement, the employee can keep any funds left in the HSA.”

“Hey, this sounds like my 401(k). I can see where it is to the employee’s advantage to frugally manage his health-care costs and to everyone’s advantage for him to stay healthy. But what about the ‘uninsured poor?’ “

“They could use HSAs too; but instead of employers (which they may not have), governments could match by formula the HSA contributions made by the low-income citizens. Governments would also need to subsidize their high-deductible insurance.”

“Curmudge, under any system—including the present one—someone is doing well financially. It’s human nature for them to want to protect their rice bowl. What kinds of resistance is disruptive innovation likely to encounter, and how might it be overcome or circumvented?”

“Virtually every innovation we have discussed in the past few weeks will be opposed by some group or organization that wants to protect the status quo. Their most common vehicles are regulations covering certification and licensure that control who gets paid. Usually the regulations were established to protect the public; but when they become outdated due to technology, they will end up protecting the economic interests of the providers. This means that head-on attempts to bring about change in the health care system are likely to fail.”

“So are we stuck in our present system? Was everything in Christensen’s book just an intellectual exercise?”

“The feasibility of the improvements has been demonstrated by the examples in the book. Organizations like the integrated fixed-fee providers and the employers who directly manage their employees’ health care are not directly bucking the present system. They are going around it by setting up systems of their own. Their success will bring about success elsewhere as others adopt their innovations. Changes that seem impossible at present will become feasible.”

“In his book Christensen suggests that regulations will ultimately change in reaction to the innovators’ successes. ‘The focus of regulations such as licensure and certification needs to keep pace with technological change.’ ‘As care moves through empirical medicine toward precision medicine, the focus should shift to accrediting processes, and ultimately to guaranteeing outcomes.’ “

“Julie, in countries like Great Britain where the government ‘owns’ the health care system, there is no place outside the system where innovators can bring about changes. Their needed modifications will require a head-on approach, which will be extremely difficult.”

“Okay, Curmudge, is there a simple solution to all of this?”

“As I said once before, for every complex problem there is a solution that is quick, simple, and wrong. In the U.S., that sort of ‘solution’ would be to handcuff our health care system in a way that makes disruptive innovation impossible.”

Affinity’s Kaizen Curmudgeon