Brainstorm Health 2024: The Health Care Affordability Crisis
Meghan Fitzgerald, Investor; Founder, Grey Ghost Capital; Adjunct Professor of Health Policy and Management, Columbia University (appearing virtually) Larry Levitt, Executive Vice President, Health Policy, Kaiser Family Foundation (KFF) Lee Shapiro, Managing Partner, 7wireVenture Moderator: Maria Aspan, Fortune
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00:03 Welcome, and Megan, thank you for joining us.
00:07 I'd like to start with just some definitions.
00:09 I mean, it's so overwhelming, this problem.
00:13 How did our health care system become so broken?
00:16 And Larry, I'll ask you to start.
00:19 Well, you stole all of my talking points in my data
00:21 with your introduction.
00:23 And thank you for that.
00:25 You know, it really comes down to, I think, two things.
00:29 One is price.
00:31 You mentioned that we spend double
00:32 what other high-income countries spend on health care
00:36 and get poorer outcomes.
00:37 That's not because we use more health care.
00:39 It's because we pay higher prices for health care,
00:42 whether it's hospitals, drugs, or physician care.
00:46 And then the second is the structure
00:48 of our private insurance system.
00:51 Deductibles now for people with employer-based insurance
00:54 average $1,700 per person.
00:57 So it's price that drives the overall affordability crisis.
01:00 And then the way people experience
01:02 it is with these high deductibles.
01:04 Lee, anything to add here?
01:06 Well, I mean, we're facing a new type of pandemic.
01:11 We've just gone through one in 2020 and 2021.
01:14 But the affordability crisis is a pandemic in this country
01:18 with, as you mentioned, more than half
01:22 of those of working age and above not
01:25 being able to afford health care.
01:26 And what does that do?
01:28 When you can't afford health care,
01:30 you're not buying your prescriptions.
01:31 You're delaying the delivery of care.
01:34 You're not making appointments.
01:36 And so all that does is result in you getting sicker.
01:39 And that, of course, increases the cost in the entire system.
01:43 So it's a massive problem that we need to address.
01:46 Megan, I'd like to ask you to weigh in both on the problem
01:49 and on perhaps some of the solutions
01:53 that you're pursuing at your firm.
01:56 Yeah, I think from where I sit--
01:58 I volunteer in the hospital.
02:00 And I also am an investor.
02:02 I believe there's millions of Americans that
02:04 are underinsured and unheard.
02:07 So 40% of adults believe that mental health is not
02:11 addressed at all and not seen as something
02:13 that should be addressed by insurance
02:16 or by society at large.
02:18 So that's the first thing.
02:19 That's a big deal.
02:20 Second, I would say in terms of being underinsured,
02:24 as mentioned by Larry and Lee, it's really an access issue.
02:28 You have 45% of Americans who are underinsured.
02:33 So you can go bankrupt from cancer care, which
02:36 you can imagine what a double whammy that is,
02:38 to get diagnosed and then find out you get a $5,000 bill.
02:42 And those are people that have insurance.
02:45 So I think for me, when I think about things
02:47 and how to get stuff done, you have
02:50 to find things that can be done at the local level.
02:53 Everyone can agree that we spend close to 20% of GDP
02:57 on health care.
02:57 In fact, you might say we like that.
02:59 For as long as I've been around, it's been 18% or 20% of GDP.
03:03 But when you start to break it down,
03:04 I think the few areas I would point to
03:07 is primary care, a new generation of providers,
03:11 and can we please address waste and bureaucracy,
03:16 which I've never met anyone that hasn't
03:18 agreed on targeting that.
03:20 We spend about $1,200 a person on administration
03:24 and bureaucracy, because again, we
03:26 like it to be super complicated.
03:28 And I also think we need more people to enter health care.
03:32 They have to find this field as exciting as technology
03:36 and finance.
03:37 So one thing I always say is let's hear it
03:39 for the trade degrees.
03:41 It would be so great for someone to stand up and pay
03:43 for someone's school that is getting a two-year nursing
03:47 degree.
03:47 I love hearing all these people pay for physician education.
03:51 But I think we could really do well
03:53 to attract more people into pharmacy, nursing,
03:57 and just get on the ladder in hospital.
04:00 In a hospital setting, we can certainly
04:01 use them over the next 20 years.
04:03 So I'd love for us to find ways to attract more thought
04:07 and energy into health care.
04:09 You know, you raise a lot of excellent points.
04:11 And Larry, as I was preparing for this,
04:14 to the under-insurance point, I was stunned to read a KFF stat
04:19 that six out of 10 people with insurance
04:23 ran into a problem accessing those benefits in the past
04:27 year.
04:27 I mean, we're at a point where even
04:29 those who are fully insured can't get health care coverage.
04:32 Like, what's going on?
04:34 No, and we do have to remember, I mean,
04:36 we focus a lot in our political debates about Obamacare,
04:40 the Affordable Care Act, Medicaid, Medicare.
04:43 But most people still get their insurance through an employer.
04:47 And we have not done a lot for those people.
04:50 And we're here today talking about affordability.
04:52 But there's also the complexity of the system
04:56 that makes it so hard for people to navigate,
04:59 figuring out who's in their network,
05:02 figuring out what their benefits are,
05:03 figuring out what the price of something is going to be,
05:06 and what they will have to pay out of pocket ahead of time.
05:09 And that complexity ends up mattering for affordability
05:14 as well, right?
05:14 If you're stuck with an out-of-network bill,
05:16 you're stuck with a balance bill,
05:19 you're stuck paying out of pocket because you couldn't get
05:22 prior authorization for a drug or a service,
05:25 that's an affordability problem as well.
05:28 So how much responsibility does big business bear for this?
05:34 And what solutions are you seeing big business
05:38 propose or put into place that could actually address this?
05:41 Well, employers are footing most of the bill.
05:44 Employers pay roughly 80% of the cost of insurance
05:50 for their workers.
05:51 And employers are effectively caught in the middle.
05:53 I mean, they're feeling the burden of the affordability
05:57 crisis because they are paying the bills.
06:00 But frankly, they are part of the problem as well.
06:03 They're not using their leverage,
06:05 whether that's economic leverage or political leverage,
06:08 to try and get prices down.
06:11 And they've been raising deductibles.
06:12 I mean, employers have just run out of solutions.
06:17 And so the one solution left was to increase cost sharing,
06:20 increase deductibles.
06:21 And that then exacerbates the problem for their workers
06:25 and their families.
06:27 And I think hospitals, pharmaceutical companies
06:31 have a lot of political power.
06:34 If there's going to be any kind of political or policy
06:37 solution to health care affordability problems,
06:39 employers have to be a counterweight.
06:42 And it kind of has to be in the C-suite
06:44 because it's CEOs that have that political capital.
06:48 Lee, I'd like to ask you to add on to that.
06:50 And also, perhaps, from your perspective as an investor,
06:53 like what sorts of solutions are you investing in?
06:57 Well, one of our portfolio companies, Transparent,
07:00 is helping to equalize the playing field
07:04 between self-insured employers and those
07:07 who are providing care or otherwise providing them
07:10 with services for their team members.
07:13 And what Larry had mentioned is that we
07:16 have this disproportionate knowledge that
07:19 exists between those who are providing insurance
07:22 and those who are paying for the cost of care.
07:25 And what Transparent is doing is helping
07:27 to equalize that playing field by providing employers
07:32 with not only better information,
07:34 but guidance to their team members
07:36 in order to be able to direct them to the best possible care
07:39 at the lowest possible price.
07:41 I'm sure many of you have seen a number of the studies that
07:44 talk about the discrepancy that exists even
07:47 in a given geographical market for a service like a CT
07:52 scan or an MRI.
07:53 Same equipment, same order, and yet there
07:56 could be in magnitude thousands of dollars of difference
07:59 just to source that type of imaging test.
08:02 And so being able to provide individuals
08:05 with a better understanding so that we give them
08:07 the opportunity to leverage the dollars that their employers
08:10 are making available to them in better ways
08:13 and to let those health care dollars go further
08:16 is a benefit.
08:16 And lastly, what I'd say is many employers
08:20 don't have the capabilities to do direct contracting
08:25 with providers in their area.
08:27 So they rely on Transparent and others to help them do that.
08:31 If you're Disney and you're in Anaheim,
08:33 you might be able to have some direct contracting because
08:36 of the concentration of employees you have there.
08:39 But very few self-insured employers have that ability.
08:42 So relying on a third party intermediary
08:44 to help you with that is important.
08:47 One other thing that I'll mention quickly
08:49 because you asked about where we're investing,
08:52 one of our other companies, Payzen,
08:54 which is based in San Francisco, is helping individuals
08:58 to better manage their out-of-pocket cost expenses
09:01 by giving a zero-interest loan to those employees.
09:05 But they're doing it in partnership with health systems
09:07 because health systems recognize their responsibility.
09:11 And frankly, the burden they have--
09:12 Larry mentioned cost shifting to employees.
09:16 Well, now with high deductibles and large out-of-pocket
09:18 expenses, you can't afford care.
09:21 How can we use tools to help make that care more affordable?
09:24 And that's what Payzen is doing.
09:27 Megan, I wanted to ask you because you
09:29 are an advisor on a new fund that
09:31 was announced this morning, Investing in Health Care.
09:33 And the Wall Street Journal covered it.
09:36 And there was a quote in there particularly
09:39 about how that fund is not interested in doing physician
09:43 roll-up investments, which we've seen contributing
09:48 to the primary care and just provider crisis.
09:52 And I wondered if you could tell me a little bit more
09:54 about the philosophy behind that and, again,
09:56 how you're thinking about this as a solution or a fix.
10:01 Yeah, well, I think a few investments I've made this year
10:04 have been in rural health care.
10:06 Anywhere there is a desert and there's not access to care,
10:10 many don't have the luxury of picking where they can go.
10:13 So whether it's a pharmacist or an urgent care center,
10:15 super important, as well as I spend a lot of time
10:18 investing in caregiving.
10:19 And I think we all know the stats.
10:20 It's about 50 million people that do that work for free.
10:23 So huge leverage if you can have access
10:26 to care in remote locations and you can stand up caregivers.
10:29 The fund this morning that was launched by Joan Notori
10:32 very much is focused on health care services.
10:36 And I think her view and a lot of the views
10:38 is I think 75% of the physicians right now are privately
10:42 employed.
10:42 So 25% are still independent.
10:46 And I think what we often forget is many of them
10:49 are fighting to stay profitable.
10:52 Many of them have to do paperwork every day,
10:54 advertise for patients, and manage risk.
10:57 And that's become really difficult
10:59 when you go to school, do all this training,
11:01 and you want to treat patients.
11:03 And you went into the field to make things better.
11:05 You didn't go into the field for bureaucracy.
11:08 So I think it's more of an interest of where
11:11 the market is going and less about a critique on one field.
11:15 But what can we do to empower the front line
11:18 and make it easier for people to stay in medicine
11:21 and do what they signed up to do?
11:22 And that is take care of patients.
11:26 So obviously, we're in an election year.
11:28 And health care affordability seems
11:30 like it should be a bipartisan topic.
11:33 But I wonder if--
11:34 I mean, it obviously affects all of us.
11:36 I wonder if I could ask each of you
11:37 to talk a little bit about what you hope for
11:41 and what you expect to happen after the November elections
11:45 in either scenario.
11:47 Well, I would hope for some bipartisan consensus on issues
11:53 where that's possible.
11:56 We've seen it, for example, in the effort
11:58 to eliminate surprise medical bills for patients
12:01 with broad support from Democrats and Republicans.
12:05 We've seen it around antitrust issues,
12:10 dealing with anti-competitive practices.
12:13 And even, at least among the public,
12:15 we see it in efforts to address prescription drug prices.
12:18 The public broadly supports Democrats, Republicans,
12:21 independents, the Inflation Reduction Act,
12:25 negotiation of drug prices in Medicare,
12:27 capping insulin co-pays.
12:31 And so I would hope at least--
12:34 I mean, things are as divided as they've ever
12:36 been in Washington.
12:38 But I would hope that we could find some ways
12:40 to make some progress on affordability issues
12:44 in a bipartisan way.
12:47 The marketplaces that were established by the Affordable
12:50 Care Act have provided a lifeline to so many people
12:54 to be able to obtain affordable care.
12:57 In 2025, the end of 2025, some of the subsidies
13:00 for the marketplace are going to expire
13:03 without further political action.
13:04 So my hope is that in spite of some
13:07 of the rhetoric around the Affordable Care Act,
13:09 that there's a recognition of the number of people who
13:13 are dependent on that, as was said earlier
13:15 about rural communities and those who lack access to care,
13:20 those individuals are really dependent on the ability
13:22 to get these types of policies.
13:24 And I would hope that we can find ways
13:26 to continue to support them.
13:28 - Megan, what are you preparing for in November?
13:32 - I'm with my peers there.
13:34 I think the ACA worked.
13:35 I also think it was, ironically, both a Republican
13:38 and a Democratic construct at its heart.
13:41 And it drove down the uninsured rate.
13:44 And a lot of people benefited from it.
13:46 And I also think you can't take benefits away from voters.
13:49 That's just me speaking from a policy perspective.
13:52 What I'd love to see moving forward--
13:54 and I think there is bipartisan support--
13:57 is finally an honest discussion about the sociodeterminants
14:00 of health.
14:01 Where and how you live affects your health more than anything.
14:04 So we can talk about care in the home and all things
14:07 we aspire to do.
14:08 You can't discharge someone when they don't have a home.
14:11 You can't give them care when they don't have a home.
14:13 So I think having an honest discussion
14:15 about all the things that drive health care that right now
14:20 aren't directly seen as health care is inspiring to me
14:24 and also daunting.
14:25 So I think a lot is set on the election trail.
14:28 And at the end of the day, there's
14:29 a lot more common ground when the rubber hits the road.
14:34 - If I could add, I mean, we--
14:36 Obamacare was as politically divisive a law
14:39 as we've ever seen, primarily because of the person
14:43 who it's named after.
14:45 And I think now, 14 years after the Affordable Care Act
14:48 has passed, we've finally seen some of that change.
14:52 So for example, this year, Mississippi,
14:54 which is one of the 10 states that has not expanded Medicaid
14:58 to low-income people under the Affordable Care Act,
15:00 came very close to doing so.
15:02 And there's not a redder state than Mississippi.
15:06 And it was really because of that symbolism of Obamacare
15:10 starting to fade and Republican and Democratic politicians
15:15 in Mississippi seeing that it would bring money
15:18 into the state and, frankly, a lifeline for hospitals,
15:24 particularly rural hospitals.
15:27 - Do you see a path forward in our lifetimes
15:30 for universal health care?
15:31 And would that be the best fix?
15:34 - Well, we-- I mean, we're the only country that does not
15:38 have universal health care, the only high-income country.
15:41 We've come as close as we ever have.
15:43 The uninsured rate is at a historic low.
15:46 But there's still upwards of 30 million people uninsured.
15:50 I, at least in my lifetime, I don't think we'll get there.
15:56 I think the politics of the US are
16:01 more about incremental progress than Big Bang legislation.
16:06 And I expect we will continue to make incremental progress,
16:09 but not quite get there.
16:10 - Just a quick realization, though,
16:12 that the government today pays for over 50% of health care
16:15 in this country, doing Medicare, Medicaid subsidies
16:19 into the states that have that expansion, CHIPS
16:22 programs, and the like.
16:23 So as we start seeing the further graying of America
16:28 and more people moving into Medicare,
16:31 I think that we'll start to see a realization that having some
16:35 of these programs that are able to better regulate
16:38 some of the challenges we face around pricing
16:40 and the cost of care can be meaningful in terms
16:43 of extending that to the 100 and some odd million people that
16:46 get their insurance through employers.
16:48 - So it almost sounds like you're saying we might
16:50 eventually get to universal health care
16:51 as long as it's rebranded or under a different name.
16:56 Megan, would you like to close us out,
16:58 your outlook on the future of health care?
17:02 - I think the future is really bright.
17:03 If you listen to all these panels, the level of innovation--
17:08 and I think our frontline workers and our health care
17:10 workforce and some of our institutions are world class.
17:14 And if you were sick, you'd want to be treated here.
17:16 I think what we're discussing on this panel
17:18 is that it's not equitable and access is still a challenge.
17:23 And I think we're in a position of power.
17:26 We have the money.
17:27 We have the ability to change that if that's something
17:31 that we want to address.
17:32 I also think the fertility refill rate is falling below.
17:36 So we need health care workers to take care of us as we age.
17:40 And the fastest growing segment right now is those over 80.
17:43 So we all have a vested interest to keep the American health
17:46 care system.
17:47 It's the frontline.
17:48 And as we saw in the pandemic, it's the only line.
17:51 So I think we learned an important lesson
17:54 of how important it is.
17:55 But I'm optimistic with all the innovation.
17:57 I also think we should celebrate people that solve the mundane.
18:00 If you solve billing, we should be cheering you on.
18:03 Thank you so much, Megan.
18:04 Lee and Larry, thank you so much for joining us.
18:07 Please join me in thanking our panelists.
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