Healthcare financing reform in the U.S.: Trumping the ACA and Medicare?

01 Mar 2017

Financing healthcare is a global problem, but the U.S. spends significantly more on healthcare than other nations and the gap is widening.

Increasing costs

Technology may lower costs in many industries, but it is actually a major driver for rising expenditure in healthcare. Advances in procedures and medication are mind-boggling – but so are the bills. Some advances, like the new hepatitis C, drugs are true breakthroughs but are very expensive.  Others may offer small marginal benefits at very high marginal costs.  All of this is further confounded by major price increases related purely to market factors, like the case of the EpiPen, where prices skyrocketed to over USD 1,000 for two pens.

Facilitating greater personal engagement

Costs are only one of the barriers to patient engagement. The "MI Free Trial" study looked at whether patients were more likely to take their medicine if it was free. Following a heart attack, one group of patients were given free medication; the others were in standard co-payment schemes. Medication adherence improved when co-payments were eliminated, but surprisingly, neither group exceeded 50% adherence. The emerging science of behavioural economics, on the other hand, is proving useful in changing behaviour and motivation levels. Compared to lower success rates for educational and interviewing techniques, behavioural economics approaches are able to get patients to take their medication over 90% of the time.

Healthcare expenditures vs social care

Healthcare, per se, is a relatively minor contributor to overall health, perhaps at the level of 10% or so. However, it is, by far, where we spend the most - on the order of 88%. In the US there is a particular mismatch in that we spend the most among the OECD countries on direct healthcare expenditures and the least on the social determinants of health. One can make a strong argument that redirecting a portion of the direct healthcare expenditures towards social determinants would substantially improve the health of the population. In the apparent absence of the political appetite to make such a shift, the movement towards value-based reimbursement is creating incentives for providers to address some of these social determinants, albeit sub-optimally.

Source: Derived from Information from the Boston Foundation (June 2007)

Shift to value-based healthcare

Value can be measured in terms of quality divided by cost and cost is a constraint for society. In the early stages of healthcare system development, technology produces large marginal benefits at a low cost. But newer technology is proving increasingly expensive, often with little marginal increase in quality, eg the controversial screening for prostate cancer. So the question is, for example, who should constrain the high cost "low value" technologies? Should it be the payer (including governmental payers), the patient or the provider? What about the government as a kind of regulator, as in the case of the National Health System (NHS) in the UK? And who decides what society can afford? For example, should proton beam radiation therapy be available to all men facing prostate cancer if it is a lot more expensive, but only slightly reduces the risk of impotence and incontinence?

There is likely to be a shift in healthcare finance in the US from defined benefits to defined contribution. High deductible plans are an early step in this shift. Whether this will reduce overall costs and improve the quality of healthcare for Americans is debatable. Evidence suggests that while consumers confronted with high out of pocket expenses are less likely to purchase wasteful care, they are also less likely to get important preventative care. This could lead to overall higher consumption and a decrease in healthcare quality. Similarly, there is mixed evidence on the efficacy of providers serving this function under value-based reimbursement.  Government-based regulatory models, like the NHS in the UK, are also struggling. In many ways the problem is analogous to the “Tragedy of the Commons” for which there is no perfect technical solution.

In summary

The US is in the midst of a major experiment involving patients and providers - so far with mixed results, but with ample learning opportunities. Inevitably, healthcare spending in the US and other countries must be rationalised (or “rationed”). How this happens will largely be a reflection of a given society’s values.  Hopefully, as the healthcare financing crisis progresses around the world, new innovative approaches will emerge to benefit our citizens and the people we serve as healthcare providers.

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Summary of the Centre for Global Dialogue's Transforming Healthcare event in February 2017. Summary by David M. Taylor.
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Critical Illness (CI) insurance is a living benefits product providing indemnity cover for major medical disorders including cancer. For each disease covered the triggers to pay a sum is defined according to clinical diagnostic criteria. With medical progress prompting evolving clinical guidelines, CI definitions become obsolete. The introduction of liquid biopsy might become a disruptor for the diagnosis of cancer with an urgent need to update the current CI cancer definitions and reconsider reserving for in force CI business.


Liquid biopsy is increasingly used in clinical practice and has the potential to alter the diagnostic cascade. This could affect our Critical Illness business. With more cancers diagnosed more claims will be paid. The aim of the Expert Forum on Cancer Diagnostics was to gather insights from experts to understand the potential impact from advances in cancer diagnostics, such as liquid biopsy, on Swiss Re's Critical Illness book of business.


The event was split into two; the first part focussed on cancer biomarker technologies and the second part on advances in imaging techniques and the regulatory environment for cancer diagnostics.


Kenneth Bloom, from Human Longevity Inc, kicked off the day with an overview of early molecular cancer diagnostics and targeted therapy in cancer care. He highlighted the role of molecular diagnostics in personalized medicine, disease monitoring and surveillance as well as the limitations of liquid biopsy for the early detection of cancer. Nicola Aceto, from the University of Basel, gave a snapshot on liquid biopsy, highlighting success stories and the need for further clinical validation of liquid biopsies before they can be used for the detection of early stage cancers. Vincent Mooser from the University Hospital in Lausanne discussed the use of germline genomics as a cancer risk indicator. Damian Page, from Roche, discussed the current limitations of diagnostics in personalized treatment from a pharmaceutical perspective.  


The take home message from the morning session was that the use of liquid biopsies for early detection of cancer is still in its infancy. More clinical validation is needed before liquid biopsy can be routinely used for cancer screening and diagnosis. Liquid biopsies' primary strengths lie in the molecular assessment of minimal residual disease and as a companion diagnostic for targeted therapy. Early warnings about possible recurrence improve disease management and adjuvant therapy, and clues for drug-resistance allow for personal tailoring of therapy. However, the present gold standard for diagnosing cancer remains microscopic and histochemical analysis of a tissue biopsy.


Luigi Catanzariti, was the first speaker in the afternoon session. He discussed the use of companion diagnostics and the future of preventive immunotherapy for early stage cancers. He emphasized the fact that diagnostics collaborating is now an integral part of pharma strategy, but regulators treat drugs for targeted therapy and companion diagnostics as two quite different categories. Pierre Hutter, from Sophia Genetics, emphasized the importance of genomic data collection and how the data can be used to learn and improve predictive and treatment algorithms. Hans Hofstraat, from Philips, discussed the role of imaging technologies in detection, staging, monitoring and for follow up of cancer patients. He emphasized applications for personalized therapies and its value for staging cancer precisely. Thomas Hany, from a private radiology practice, closed the afternoon sessions with an overview of the use of imaging technologies in clinical practice, sharing insight with their limitations. 


The take home message from the afternoon session was that imaging technologies play a vital role in localizing and staging cancer. This is needed for deciding on best treatment options, and for monitoring recurrences. The speakers highlighted the fact that imaging techniques play an important role for early detection for many cancers, mainly breast and lung cancer. However, even state of the art imaging is limited for early cancer diagnosis. Only when combined with other diagnostic tools such as liquid biopsy diagnostic sensitivity and specificity will be increased.


To conclude, modern cancer biomarkers and imaging technologies are extremely useful in the treatment and surveillance of cancer. However, no tumor marker or imaging technology identified to date is sufficiently sensitive or specific to be used on its own for earlier detection of cancer. Tissue biopsy will remain the gold standard for diagnosing cancer in the near future.<[if gte mso 9]> <[if gte mso 10]> <[endif] -->

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