17 Conference Report #techonomy17

What Can Be Done About the Rising Cost of Care?


Dan Munro

Mario Schlosser
Cofounder and CEO, Oscar


David Kirkpatrick
Founder and CEO, Techonomy

Session Description: The U.S. spends twice as much on health care as other rich countries, and gets less care for the money. What will it take to make positive change?  How can insurers and doctors use predictive data to help patients and reduce costs? Is consumer-friendly, affordable health insurance possible?

An excerpt of the panel is below with the full transcript available here.

Kirkpatrick: Now we’re going to look at why the American healthcare is so screwed up and what we can do about it. So please come out Dan Munro and Mario Schlosser. The statistics are shocking about how bad American healthcare is vis-à-vis other countries and in a minute Dan will recite those. But the fact is that it’s unconscionable, it’s a huge cost that we really shouldn’t have to bear as a nation and as American business and as consumers and people who are trying to stay healthy. All of the above are not working correctly in this country. And what we have up here are two experts on that, one is a practitioner and the other is a very polished observer.

Mario Schlosser is the CEO of Oscar which is a company, a health insurance company that has a lot of ideas about how to do things more efficiently using technology. Essentially it emerged as a response to Obamacare and so he has a lot of understanding about what’s really happened there, what it’s intended to do, what it might do, and we’re going to hear a little bit about that. Famously his partner is Josh Kushner so it gets a little extra coverage because of that and recently the two of them wrote an op-ed at Axios where they basically said, you know, that the president’s activities were having both positive and negative effects on Obamacare. But just the fact that you even implied that there was a little negativity there made a lot of news because Josh signed it along with you.

Dan Munro is a writer who has written about a lot of tech-related stuff and other topics but has become really an expert on healthcare and American healthcare policy reform in the last couple of years. He wrote a book in 2016 called Casino Healthcare, which is a powerful indictment of the American system and an argument for universal coverage. And I won’t use other buzz words because we’ll talk about the buzz words. But quickly, Dan, what are the statistics about how bad it is here?

Munro: Probably the first and the easiest one to kind of grab ahold of is the fact that the U.S. healthcare system as an economic unit if you measured it is basically the size of Germany’s GDP. And even abstracted one level lower than that, just the budget for Health and Human Services, which is now the federal government’s largest single department, just HHS is the GDP basically of Spain. So those two components coming together give you a sense of the size of the cost issue that I reference as being both a four-alarm fire, a category 6 hurricane, and on the Richter scale, a 9.0.

Kirkpatrick: And in the piece that you wrote for us in the last issue of our magazine, we had a chart that showed health expenditure per capita on one axis and life span on the other axis. And it is worth looking at that because it is so shameful. The U.S. spends so much more money and gets so much less for its money than any other major country. You know, Japan, U.K., all these countries spend less and people live like four years longer, five years longer. It’s just crazy. And we spend dramatically more than any of these other systems per capita. So what we’re here to do is to talk about what can we do about the rising cost of healthcare. So Mario, talk to us about what Oscar is trying to accomplish.

Schlosser: Think about in abstract healthcare costs, there will be three components that go into healthcare costs. There’s risk of population, there is utilization per risk, how often do you go to the doctor for a given condition, and there is unit costs in essence, so for every utilization what are you going to pay. When we compare the U.S. to other countries in the world at the abstract level then from a risk perspective the population isn’t that different.

In fact the U.S. population is on average, the median age is three years younger than most of these countries, rich countries in the world. From a utilization perspective we go to the doctor a little bit less, we get discharged from hospitals a little bit less than the rest of the OECD countries. And so most of the issue is in unit costs. That goes right back to the fundamentally incorrect sort of incentives in the healthcare system. Every provider isn’t in every insurance company’s network; there’s very little value and comparative pressure on the value chain. And the reason for that is that as an end user you don’t really pay for your own healthcare and don’t have much choice in the matter of how much you want to pay for that healthcare.

So the way we address this sort of like too confusing and too costly system is in three different ways starting with consumer engagements, we want Oscar to be the organizer of your healthcare. We care about 45 percent of all first-time physician visits—Oscar has a first-time physician visit, we can prove that we were the ones who recommended to you the physician that you ended up going to. We do alot through telemedicine. About 70 percent of all routine rashes and infections are now done through telemedicine for Oscar members and engagement is very different where we become the entry point of healthcare. We build different networks, for example; we just launched a healthcare plan with the Cleveland Clinic; we share risk 50/50 between us and the Cleveland Clinic, which is the perfect way in which you will—

Kirkpatrick: You mean financial risk?

Schlosser: Financial risk, exactly, which is the perfect way in which a provider system and an insurance company basically acts in a cooperative and coordinated way because you both share fully in the upside and the downside of the outcomes that you create. And we do all this on a very different technology stack. We talked about this a bit earlier but right now if I wanted in healthcare to do what Amazon, Uber, others in consumer industries are doing every single day, which is pricing based on demand and supply, I couldn’t do it as an example because the underlying infrastructure isn’t there. As an example, the typical claims formats by which a physician practices, so it’s a claim to the insurance company, doesn’t have a time of day in that format and so I couldn’t actually give you a discount if you went to a doctor in off-peak hours. Something as basic as that.

Kirkpatrick: And that’s sort of a rigidly predetermined form that can’t easily be changed.

Schlosser: We can change it because with the insurance the fees beyond Oscar from the beginning was the insurer is in a good position to become that organizer of your individualized, consumerized, personalized healthcare because the insurer controls the flow of data and the flow of money throughout the healthcare system and therefore can reroute those in smarter ways.

Kirkpatrick: So what is the fundamental incentive for a consumer to use Oscar versus another insurer?

Schlosser: Better experience and a lower price, as simple as that.

Kirkpatrick: It’s lower-priced but it’s also a more technologized, more user-friendly, and consumerized experience because I know consumerization is a key thing that you advocate that is basically absent in the American healthcare system.

Schlosser: Exactly. We essentially go to the member and we say we are going to build you a more customized, more narrow healthcare network. We work, for example, only with the Cleveland Clinic not with the other hospitals in Cleveland, Ohio. We work only with Mt. Sinai in Manhattan, not with the other hospitals in Manhattan. We therefore get lower unit costs from those providers but then because we have your attention as a member have a better, more scientific way as well to get you to the right provider for the right reason.

A simple example, again, if you go to the typical insurance company, you can try this today, go to the web, search one of the big incumbents and you look at the physician finder, very simple trick, you see they will distinguish about 100, 120 or so physician specialties, that isn’t enough to properly care routes, you know, the various conditions you may have as a member. You need about 400 different specialty distinctions and so we can build those in that tree, that hierarchy of medical sort of like concepts in conjunction with our healthcare systems because we built a narrower network, in exchange it got better unit costs.

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