Nathan Kaufman

Nathan Kaufman- Kaufman Strategic Advisors

Nathan Kaufman is Managing Director of Kaufman Strategic Advisors. With more than 40 years of experience as a strategist, executive and negotiator. Nate is considered one of the nation’s healthcare industry experts. He is a strategic advisor to healthcare executives, boards, physician groups and other healthcare companies. He is known for
his practical advice focusing on succeeding in the new post-ACA, MACRA, value-based risk environment. In addition he is a seasoned negotiator and has successfully completed hundreds of transactions involving payer contracts, physician compensation, service line development, acquisition/sale of surgicenters and imaging centers, restructuring employed physician groups, and developing clinically integrated networks. This provides Nate with a unique viewpoint since he not only studies industry trends but operates in the ‘trenches’ which provides him with a deep understanding of the physicians’ perspective

Nate is frequently a keynote speaker and facilitates board and management retreats. Given his vast experience with health systems, he will challenge the industry’s conventional wisdom when he believes that it is not supported by evidence and/or it will not provide desired results. While his clients may not always agree with his perspective, they appreciate that Nate challenges them so that they will consider different points of view. Nate knows that health systems hunger for realistic strategies (both short term and long term) that are financially feasible and will be supported by the majority of their practicing physicians.

Nate is a noted author contributing over 76 articles to healthcare literature. His education credentials include an MS in Health Systems from the Georgia Institute of Technology and a BS in Psychology from Emory University. Listed in Modern Healthcare’s Class of 1987 Up & Comers of Rising Young Healthcare Management Talent.

Transcript of Episodes 112 with Nathan Kaufman

Brian Kruger 0:00
Welcome to Richard Helppie’s Common Bridge, the fiercely nonpartisan discussion that seeks policy solutions to issues of the day. Rich is a successful entrepreneur in the technology, health, and finance space. He and his wife Leslie are also philanthropists with interest in civic and artistic endeavors, with a primary focus on medically and educationally underserved children.

Richard Helppie 0:24
Hello, and welcome to the Common Bridge. I’m your host, Rich Helppie, and today we’ve got a returning guest, a great guest, one of the foremost experts in healthcare, the healthcare industry, he’s got a great record of forecasting what might happen, he has a great analytical mind about what has happened, and more importantly, what is happening. And so from California today, welcome my friend and colleague, Nate Kaufman. Nate, thanks so much for you being on the Common Bridge today, it’s good to see you. (Nate: Yeah, it’s good to see you too, Rich. Thanks for having me.) I encourage everyone to go back and listen to prior podcast episodes with Nate. I think it’s a great grounding in the subject matter. And Nate and I were talking this past week about how little people understood about the healthcare industry and the healthcare financing and the way the various players worked. Nate, you want to take a shot at like, what’s the business model look like, and who’s out there and what’s some of the noise?

Nate Kaufman 1:21
Sure, the business model makes no sense. And so don’t blame me for what I’m going to describe. If you look at a typical health system, there are several issues. The first issue is that Medicare and Medicaid, which are the two primary payers for a health system do not cover the full cost of care. My bet is that Medicare and Medicaid pay about 85% of the cost of care. So if you look at a typical health care system, 85%, I’m sorry, 60% to 65% of their patients are covered by Medicare and Medicaid, and they cover about 85% of the cost of the care they receive, then there’s about 5% of the patients that pay nothing. So that leaves about 35% of the patients who have to make up the deficit for the other 65% of the patients. And thus we see this big differential between Medicare, say, and the commercial insurance companies. In fact, without the payments, the higher payments from the commercial insurance companies, hospitals, and health systems would probably go bankrupt. So there’s a thing called there used to be called the Iron Triangle, it’s now called the iron square. There’s four components, there’s cost, quality, access, and choice. And they’re all related. And what people don’t understand is, if we lower cost, the question is, what do we have to give up? Do we have to give up access like Canada? Do we have to give up choice? Like some of the HMOs? Do we have to give up quality and not send people to the super specialists who would be better able to provide care than some others? And so when people talk to me about hospital prices, and how high they are, the first question is, which prices are you talking about? Are you talking about Medicare and Medicaid, which don’t cover the cost? Are you talking about the prices charged to people that don’t pay anything? Or are you talking about the charges that are the prices that are paid by the commercial insurance companies that are forced to subsidize Medicare and Medicaid, so that is as simple as I can put it.

Richard Helppie 3:40
So Nate, that’s a great description and the trade-offs– everybody wants instant access, they want the ultimate specialist, and of course, they want to pay little or nothing. And just for our audience out there, that’s not sophisticated around healthcare, when Nate talks about it doesn’t cover the cost of care, that means that the physician or the hospital or the clinic, you know, they might receive $100 in payment from the insurer, yet it cost them $150 to provide the service, when you look at the facility and the staff and the supplies, and everything that goes into providing that care. So absent the subsidies coming from elsewhere in the market, those providers won’t be around. And Nate, you talked about hospital pricing. And now the prior administration, you know, frankly made a big deal about, we’re going to disclose hospital pricing. I think you and I had a few guffaws about that. And let me just see if the question has something of an answer in it. How futile is that?

Nate Kaufman 4:42
Well, it’s extremely futile for several reasons. First of all, about 10% of any population consumes probably 80% of the healthcare dollar. So the people that are generating the highest hospital bills don’t shop. They’re in the system because they’ve got cystic fibrosis or they’ve got pancreatic cancer, and so there’s no shop, they’re not going to go online and start shopping. The second and in my opinion, more important issue is the fact that healthcare is not a commodity. I know for a fact that some doctors are better than others at treating certain conditions, some hospitals are better than treating other hospitals. And the idea that a consumer can just look at price and make a decision about their life, and their ability to get healed from a condition, and I’ll give you one example, since we’re going to bring it down to a consumer level. A very prominent person in San Diego went to one hospital. And they told him… he got a test. And based on that test results, they told him to go home, he’s got a very aggressive form of prostate cancer, and he should get his affairs in order. Well, his son called me because I know everybody in San Diego, and I know, I found the best urologist that treats prostate cancer, I contacted the hospital CEO, he got him in the next day. It turns out that was a misdiagnosis. All he needed was some proton therapy. And he is now cured and a very happy person. But that’s not unusual. There are hospitals that do better jobs at heart surgery than other hospitals. And there are hospitals that do better jobs at pulmonary care than other hospitals. And by the way, the CMS quality indicators are just a bunch of rubbish.

Richard Helppie 6:44
CMS is the Centers for Medicare and Medicaid. That is the federal agency that regulates the two biggest insurance programs, both federally funded in one state and federally funded in Medicaid, and they’re trying to quantify what quality is. We share the view that we’re not there yet. And and I think your belief is that they’re not even headed in the right direction at this time.

Nate Kaufman 7:06
That’s correct. I mean, using my example, there would have been no way to go on the website for the government websites, or any health plans websites, because the health plans are the same, they believe that all healthcare is the same, and the only difference is cost. And the cheaper, the quote, higher value. But that’s not true, a low cost misdiagnosis is worthless. And so getting back to Medicare, Medicaid quality indicators, they don’t get down to the level of detail of looking at the doctors and those outcomes by service like urology, or prostate cancer. So there’s no way for them to provide any useful information to a patient other than price. And one other example, one of the more expensive providers of care in the country is Mayo Clinic. And what Walmart did is they actually looked at true quality by service line and designated Mayo Clinic, one of their centers of excellence, when they sent patients who suspected they had cancer or were diagnosed with cancer to Mayo Clinic’s Center of Excellence, 10% of those people turned out not to have cancer, and 55% of those people had a change in their treatment plan. So if you just look at cost, yeah, Mayo is probably a higher cost, but again, what value is there to a wrong treatment plan? And so simply looking at price is so short-sighted. Because if the person gets the wrong diagnosis, or the wrong treatment plan, their total cost of care will be so much higher than somebody that does it right the first time.

Richard Helppie 8:54
Indeed, if not paying for it with their very life. And Nate, to talk a little bit further about the pricing, if you and I were on the same health plan, be it Medicare or be it a commercial plan, like a Blue Cross or United and I went to ABC hospital and you went to Mayo, would it matter to our insurer where we went or would they pay Mayo and ABC the same?

Nate Kaufman 9:22
So let’s not talk about Medicare because it gets… it’s regulated, but in a commercial insurance market, if you went to Mayo for a procedure, they would probably get paid a lot more than just about any other hospital in Minnesota. And that’s because it’s a negotiation between Mayo and the insurance companies. And the insurance companies asked the following question. If I don’t agree to Mayo’s rates, can I sell premium to people telling them that Mayo isn’t included in our network? That’s their calculus? Their calculus isn’t: Hey, Mayo Clinic can cure these procedures or these conditions better than anybody else, and it’s worth paying them more because the total cost of care will be less, because the insurance companies and the government aren’t focused on total cost of care, what they’re focused on is cheap. And cheap care is not necessarily high value care.

Richard Helppie 10:19
And I think you’ve recently published on that very topic about the lower cost. Indeed, it’s the reverse lowest cost is often the worst type of care. But, moving on, Nate, the regulations that are on the insurance companies, there is something called Medical Loss Ratio, or MLR. And this is designed that of the premiums that are received by the insurance company that their statutory levels of how much needs to go out to pay for patient care. And you’ve done some research lately, on MLR, some deep dives into some data, what can you share with our audience about your early findings and knowing that you’re still on it.

Nate Kaufman 11:01
So the MLR requirement, that is that the health plan pays a certain percentage of what they collect as a function of the Affordable Care Act. And so the government requires each insurance company to publish their data on a website, but it’s very difficult to understand, we developed a tool that makes it easy to understand. What we’re finding first and foremost, is that there isn’t as much of a relationship between premium increases and medical costs, as the insurance companies want you to believe. That is, in many cases premiums are going up higher than medical costs, because many of the insurance companies are for profit, and their primary focus is how am I going to generate my margin for my shareholders. And so what’s happening now is in many markets, and in many states, the insurance companies are having to rebate the money, that they’re not spending on medical care back to the employer and employee. What does that mean? It means that they’re overpricing their product, but they still blame the providers, you see insurance companies take on average 18% of the premium 18 cents out of every dollar goes to the insurance companies, probably about the same amount of money as the insurance company spent on doctors they take for themselves. And I would argue the relative value of those insurance companies aren’t worth the same as the services provided by the physicians to the consumers. So what we’re learning, generally speaking, is that the insurance companies are not necessarily being forthright in terms of what’s causing the cost increases in our country,

Richard Helppie 12:53
Indeed, that the insured– the subscriber or the beneficiary, is it doesn’t matter what it shows on that bill that your hospital, your physician charged you this, what that hospital or physicians going to get is actually going to be set by the contract or by Medicare or by Medicaid. It’s a crazy system that has outlived its usefulness. And correct me if I’m wrong, one of the maneuvers that the big for-profit insurance companies tried to put in place in order to thwart the intent of Medical Loss Ratios was pharmacy benefit managers, and correct me where I’m wrong here, Nate– because I’m not sure I’ve got this right– But if you had a Pharmacy Benefit Manager, you could show that there was a cost of a drug being $10. And say alright, that’s $10 against my Medical Loss Ratio, but if you sold enough of those drugs, through your plan, you got a rebate, but that rebate wasn’t counted as a decrement to the Medical Loss Ratio. Am I describing that right? Because I don’t feel like I’m on real firm ground there.

Nate Kaufman 13:58
It’s really complicated. What happens is that insurance companies are really good at evaluating claims and paying claims for medical care. So if you go to the emergency room, they send the bill to the insurance company, the insurance company pays it what they’re not good at, is evaluating and paying claims for drug costs. So they’ve shifted that over to a new business called the PBM Pharmacy Benefit Managers. And in the beginning, what these PBM’s did was primarily negotiate better costs for the consumer and pay claims. What’s happened though, in the last couple years, 80% of the claims go through four Pharmacy Benefit Managers, all of whom are owned by for-profit insurance companies. So they can play all kinds of games. One of the games they play is called spread. So the Pharmacy Benefit Manager takes a drug, say Z Pak, they add a 20% profit onto that and pass it on to their insurance company. The PBM just generated more cost for the system because they added 20% costs. The second thing that they do is that for brand name drugs, they negotiate with their own health plans to take a rebate. So if a drug costs $100, when it’s charged $100 in the market 18 to 30% of that $100 gets rebated back to the insurance companies essentially to contribute to their profits, it actually contributes to the MLR. But by owning the pharmacy piece, and the health plan piece, you can play games and try to balance it so that you maximize your profits in both areas. They’ll tell you well, they’re trying to reduce cost. There’s not evidence of that. The evidence is that what they’re doing is, is essentially, as I said, trying to make maximize profits in both the health plan component and in the pharmacy benefit component,

Richard Helppie 16:12
You and I’ve spoken many times about this: the case or actually the non case for employer-sponsored health plans. Kind of the worst of all worlds, a person has this illusion that they’re covered. But, if you get so sick that you can’t work, you no longer have benefits, so the time you need it the most you don’t have it or if you age out and you reach Medicare age, well, you know, you’re out of that risk pool as well. And the tax advantaged way… I don’t think there’s a case today for getting your health insurance at work. People are, you know, becoming GIG workers and they’re working shorter terms and to do something that is longitudinal like healthcare, yet every time you change a job, you change plans, or the plan changes because the employer shops it, or the rules change is a little crazy. But why does it exist? Health plans have a special tax break where people aren’t charged for that compensation they’re receiving. I think it’s obvious this is a crazy case. Why do we still have this and how do we get out of it?

Nate Kaufman 17:14
Well, let me talk about why it’s even worse, first. The health plan is selected by the employer, not by the employee at all, in most cases. And JD Powers did a survey of 21 either regions or states. And what they found is in every state where there was Kaiser Permanente, they got by far the highest rating. And as a general rule, the largest for- profit health plans got the lowest rating, even though their premiums tended to be lower. So what might be good for an employer, which is low premiums, high co- payments, high deductibles, may actually be really bad for the employees. And when I talked to JD Powers about it, what they said was that the vast majority of people don’t burn through their deductible during the year. And for this arbitrary reason that the health plan is created every 12 months, the deductible gets reinstated. So they really don’t have insurance. But again, the point here is what’s necessarily good for the employer, which is cheap, is not necessarily good for the employee, which is high value. So Kaiser, which doesn’t have the same co-payment burden, doesn’t focus on denying or delaying care, doesn’t go “out of network” with Providers, with the employees’ physicians, because they won’t take a deeper discount. Kaiser gets these really high ratings, and the most aggressive for-profit insurance companies get the worst ratings. So not only I don’t know how to fix it necessarily, well, people say Medicare for All. So I mentioned earlier, Medicare pays about 85 cents on the dollar of cost. Over the last decade, Medicare has increased reimbursement for physicians an average of zero to 1% per year, forcing physicians to go into employment with health systems or PE firms in order to generate a decent living. And what people say is, well, if we just go to Medicare for all, that’ll be fine. Well, if you go into Medicare for All you’re going to lower the reimbursement. Physicians basically are going to drop out of the system, because they’re in short supply and you’re going to be left with cheaper physicians, not better physicians. And that’s pretty scary. One last example, in San Diego, right now where I live, many of the mental health professionals are don’t take anything, because there’s such a shortage of Mental Health, they won’t even take Medicare, you pay them cash, and you figure it out from there. And we see that around the country where there’s going to be a huge shortage, one out of five doctors right now could retire- of retirement age. And those physicians are just not going to take bargain basement rates, just because Medicare decides that’s what they should take. So people have a misconception about well, we can just do this or just do that and things will be okay. Remember, the health care square that I talked about earlier, access will suffer, quality will suffer or choice will suffer, if you lower cost.

Richard Helppie 20:41
Well, you and I are in strong agreement with that. And you’ve heard my proposal, which is take all of the tax-supported health plans, Medicare, Medicaid, VA TRYCARE and so forth, put it in one bureaucracy. It’s a base level of care, every citizen gets it by virtue of being a citizen of the United States, you pay for it on a sliding scale, right off the 1040. Again, not foreign concepts that don’t exist elsewhere in the healthcare payment ecosystem. You allow there to be private insurance for people that want better access, or more choice above and beyond that, but if an employer provides that to you, it is not tax deductible at all, it’s just compensation, and that would force the insurance companies to go make a market for a value-add and just kind of as a punctuation, I actually read the Medicare For All Bill. And it’s, well, first of all, it’s not Medicare, and it’s not for everybody. But other than that, it just empowers literally who’s ever in the office of the President that day, who appoints the Secretary of Health and Human Services, because the Secretary of Health and Human Services basically gets to define every bit of care in the country, and it would be illegal to provide it any other way. But to your point, people really don’t know what they’re getting.

Nate Kaufman 21:55
Let me just comment about that, because there’s two ideas embedded in that that are important. The first idea is that every healthcare provider, hospital physician has to deal with 30 different insurance companies. And they each have their own way of getting a bill and returning a bill and denying a bill and so on and so forth. If you want to streamline health care, you want to save 15% without touching patient care right now, mandate, at least, that all insurance companies have to use the same forms and the same methodologies for revenue cycle. That’s number one. Number two, the thing that scares me, scared me most when I was a commercial insurance patient, and why I won’t go into Medicare Advantage, is that there is a financial consequence to medical need. If somebody says to me, if a doctor says you need a proton therapy, which is very expensive, I have to go to an insurance company in most cases, and get that either approved or denied. Meanwhile, you know, it’s probably there’s cancer going on, and this could take weeks, an American Medical Association study showed that 30% of doctors say that pre-authorization, this process, these barriers that the insurance companies put up to define medical need has caused major health impacts on their patients. So the second part of this, if you had what you were talking about, is a central location for determining medical need. Because right now, there’s a huge conflict of interest. I don’t know if a health plan is picking a drug because it’s more efficacious, or because they get a higher rebate. And there’s some evidence if you YouTube PBM’s and look at some of the experts that talk about it, there’s some evidence that PBMs who are owned by health plans are using higher cost drugs, because those drugs give them a higher percentage rebate, then using a lower cost drug. So we don’t know what the medical criteria is, and do we really trust people who make more money by denying and delaying care? I don’t.

Richard Helppie 24:10
Well, you call that out last time you were on the Common Bridge about a system where medical necessity is is separated from the financial impact of what that medical necessity might be. Because frankly, what happens today is that the insurance company exercises that incentive says you’re not going to get this particular kind of care. Many people will just go Oh, I guess I don’t need that and suffer the medical consequences as well as the cost consequences. And very few are going to be equipped to say well, wait a minute, we really do need to get this and then you exhaust physicians who are recommending that course of care. Clearly, we’d have to find a trustworthy group. Now given some of the dialogue in other areas. I think that’s going to be tough, but you and I both know a lot of really credible people, particularly in the university health systems, that have a clear view on what’s working, and what’s not working. And Nate, that kind of brings us to the public square these days COVID and COVID testing, there’s been some news recently about price gouging around required COVID tests, what’s going on, because there was a lawsuit filed in Nebraska, in recent days, what’s happening with this COVID testing and the cost of individuals.

Nate Kaufman 25:23
So the way health health insurance and pricing works is a health care provider contracts with an insurance company for a specific rate. So let’s say a COVID test. And let’s say that rate is $120. And they do that for all of the services. Now, if the health insurance company comes in and says, Now, it’s not going to be $120, even if it cost you $120, we want to pay you $115, the only thing that that health care provider can do is say no, and now we don’t have a contract. And so the good news for the healthcare provider is they can charge whatever they want. The bad news is that that health plan is going to do everything they can to put that health care provider out of business, they’re going to divert as many patients as they can away, they’re going to withhold, they’re not even going to pay the health healthcare provider for the service. They’ll pay the patient and say, now you have to go after the patient to get paid, which creates more bad debt. So recently, the what’s called AHIP which is the health insurers trade association, came out with this big deal about the fact that out-of-network providers are charging more than, quote “market rates.” And the answer is, of course they are, they’re charging more, because AHIP, your members are so unreasonable today, that they’re expecting hospitals and health systems and doctors to provide care at cost below which they can do that. And so they go out-of-network, and then when they’re out-of-network, they’re in financial survival mode. And so anywhere they can make an extra buck, they’re going to do it. Otherwise, they either close or they sell, or they have to lay off employees and doctors. So charging more when you’re out of network is a survival mode that actually benefits the community, and is a signal in some cases, that the payers or the insurance companies are being unreasonable so that they can maintain their profitability. Not in every case, sometimes the health system is asking for more money because they’re way too inefficient. But to make a blanket statement like it’s price gouging is, it’s just, I hate to use the term fake news. But it’s fake news. And the other thing that that survey said is that 6% more providers are out-of-network today than they were at the pandemic, meaning that the negotiating stance of the health insurance companies has become so ruthless, that more health systems are willing to subject themselves to this fight for survival, because the health insurance companies are being so unreasonable. While all of this is going on United Healthcare, Anthem and others are making record profits.

Richard Helppie 28:23
It’s it’s time for a reform of the system, because look, what we’ve got here in a constituency that’s not heard from, are the people that are too young for Medicare, are doing too well for Medicaid, don’t work for an employer, maybe they’re small businesses, and they have to go on the exchanges, or buy individual insurance, and I know many, many people that are in the, you know, 30s 40s 50s– prime work years, that are paying 7 and $8,000 a year for a premium. And on top of that they have a deductible, 7, $8,000, $10,000. So essentially, you’ve got catastrophic coverage for the price of a very significant part of your family budget. I believe the household- average household income is 52 to 55,000 ‘ish right now. And if you’re going out-of-pocket after taxes for $8,000 premium, and then when you require medical services, you’ve got another $8,000 exposure. I don’t know how you’re getting money for a mortgage or to pay that student debt or to buy a car or to raise a family. It just the numbers just don’t work.

Nate Kaufman 29:35
Well, let me tell you how you do it. You don’t pay the health care provider your deductible, (Rich: Yeah) and co payment, you stiff them. And that’s what’s also happening. So when you see a price or this issue of high prices, a recent survey showed that 23% of the people that have insurance, or what’s called under insured, meaning they can’t afford to pay that co payment and deductible. So they’re going to pay their house payment, they’re going to pay their car payment. And the one thing that they’re not going to do is pay that deductible that they owe the doctor or the hospital. That’s the last thing that they’re going to do, and then complain that the doctor and hospital are too expensive. One other thing that’s going on, and this is a little esoteric, but the whole individual market exchange program is based on the Silver Plan. So they- what the government does, is provide premium subsidies for people in the silver- based on the cost of the Silver Plan. Most of the people in the exchanges get a subsidy from the government to cover most of the cost of their premium. So what’s happened is the insurance companies recognize this and have raised their premiums like $150 over two years, because there’s no price sensitivity in the individual market. Now, once you get that that premium subsidy, what you can do is you can buy the Silver Plan, and probably pay some more out-of-pocket, or you can go into the lower cost Bronze Plan. Now the bronze plan is lower cost because it has higher deductibles. So all of a sudden, you’re paying nothing for your health care premiums, because you’ve gone into the Bronze Plan, which is all a strategy that was created by the insurance companies, and the Bronze Plans now have a high deductible and high co-payment who gets stiffed by these low income people who have just bought health insurance on the books based on Bronze. So it’s really and by the way, to make it even more complicated, if you buy a Gold plan or a Platinum plan, you have almost no co-payments and deductibles, but the insurance companies have increased the cost of those so much, that they’re kind of slanting people to go into the Bronze plan. They get paid their premiums, but the providers don’t get paid the deductibles and co payments.

Richard Helppie 32:05
And, and/or people attempt to pay them and realize they can’t and declare medical bankruptcy. It’s a crazy system. Again, you’ve heard my proposal to fix that I think we’ve had yourself and four or five other experts, everybody kind of comes to the same place. And the frustrating thing for me is that we elect people they’re Democrats, Republicans on a couple Independents that are serving in the Congress or at state government, there’s a president that we elect, and yet they can’t figure this thing out. And I know that they’re beholden– there’s a lot of lobbyist money from the health plans, that get these favorable tax treatments, they get away with this kind of stuff. And the pharma companies are right behind them. And I know Look, I know the pharma companies have become the darlings. It’s really kind of weird, all of a sudden that people on a different end of the political spectrum are now going “Yay, Pfizer, let’s go”– whoever thought we’d see that in our lifetime. But it’s really the demand for wholesale change has to come from the vast majority of people that realize that the system is broken, it isn’t working, also that the solutions are within reach, if we have the will to do it. But we keep expecting the people that we elect to do something that they haven’t done and don’t seem likely to do that. Nate, what else should we talk about as far as healthcare goes? I know, we can’t cover the waterfront, but anything about current trends or policy recommendations, or just anything that you’re seeing out there?

Nate Kaufman 33:36
Well, I just want to comment on what you just said, which is, it’s not just politicians, it’s bureaucrats. MEDPAC, Medicare payment advisory committee is a group of people that advise Congress on what Medicare should do. So Medicare every year publishes a data book. And that data book is based on the Medicare– a form that people submit– called the Medicare Cost Report. Now, in the old days, hospitals didn’t employ doctors. So the Medicare Cost Report doesn’t include the cost of physicians when they report the information to the government. So what happens is MEDPAC ignores the fact that physicians can no longer survive in independent practice, based on many of their policies, by the way. And so when they publish data on how profitable hospitals are, they don’t include the huge cost of employing physicians. And I’ve pointed this out to them, by the way on several occasions, so they say, Oh, the hospital’s making a 7% margin. Well, no, they’re not. They’re taking that margin and they’re basically employing doctors, because over 50% of physicians now are employed by hospitals. Why? Because Medicare and the commercial insurance companies force them out of business. So in order to maintain their income, they had to, and they, ( I work with doctors all the time) give up their cherished independence, in order to survive in a given market, but MEDPAC ignores it. They don’t even consider it as part of their calculus. So we not only have politicians who don’t understand the nuances of healthcare, we also have bureaucrats who are unwilling to recognize the true data. And the most important thing that I keep coming back to is this issue of price versus cost of care. I’ll give you one other example. They took a patient that had a spinal deformity, and sent that same patient to 10 different MRI centers. Well, you say an MRI center is an MRI center, if one center is willing to take $500 for a procedure, shouldn’t they all be willing to take $500 for a procedure, when when they looked at the data, this is in the Journal of Spine, they found that there was only 20% agreement on the diagnosis, and 40% of the people missed the diagnosis. So if I go to an MRI Center, I want to go to someplace that has a neuro spine expert radiologist, a 3 t magnet, which is a lot more expensive, that that’s absolutely up-to-date. One other example, recent research showed that if you go to a radiologist who is sub specialized in breast imaging, the chance of an actual- of an accurate diagnosis is better. But of course, those people are more expensive. So it just gets back to this whole issue until we start focusing on the total cost of care and not on price. We’re going to continue to make bad decisions. And we’re going to mislead the public in terms of where they should get their care. And what’s driving this, I would say is the deliberate propaganda put out by the commercial insurance companies and the ignorance in government among the politicians.

Richard Helppie 37:05
It’s got to be willful ignorance. And, look, I’ve looked at lots of hospital financial statements over the decades, and nobody’s making 7% or lucky to get to break even given everything that’s going on. And I’ve met and talked with lots of politicians, I can think of two that understood health care, I won’t name either one of them. One is still in the Congress, one is no longer in public service. But a lot of it is that there’s not a public demand to fix it. And then people say, well, let’s do what Canada does. And then you actually look at Canada, and well, what we don’t want to do that, because that’s kind of get in line. (Nate chuckles in agreement) You know, or, or if you have cash come to the United States. And so we’re sitting here stuck. And you know, in the meantime, people do get treated, but are they getting the optimum care at that best price point? And do they have it accessible within their geography? Those are things that we’re still trying to solve. And we those, this is a issue of the day that we do need our political system to take leadership on. And we need those that report on this to actually report. I mean, Nate, wouldn’t this interview with someone like you be much better on any of the I don’t know, the cable news channels, or NPR or any of the broadcast networks, so that millions of people would hear it?

Nate Kaufman 38:27
Yeah, I’m starting to make progress, at least with the print media in healthcare, but it’s taking a long time. And just to get to one of the big issues that exists today is consolidation. They say, you know, what’s driven up the price of healthcare, hospitals consolidating with each other into bigger systems? And my answer is, you bet. That’s driven the price of healthcare up and the reason is that it most of the consolidatees–the hospitals that were brought into a larger system– were going out of business because they couldn’t get fair rates from the government or the insurance company. The question isn’t, should they-should hospitals consolidate? The question is, does that community want to go without a hospital? Or go without doctors? It’s the same thing with physicians and hospitals, consolidating. These physicians can’t afford to be in private practice without taking a major haircut. And so they have no choice but to sacrifice their independence, either with- and be bought by a PE firm, or by a health system or by an insurance company.

Richard Helppie 39:36
Right, a PE firm –the private equity firm– we’ve seen, know during the time you and I have known each other we’ve seen three cycles of that consolidation of physician practices that’s worked. Let me check my notes. Oh, never. (Nate laughs) It’s never gonna work. It’s not gonna work this time. And I was in an office of a physician last week who was on to it. And he said, “Yeah, the doctors aren’t going to be here when you need them.” That was a profound statement.

Nate Kaufman 40:04
That’s exactly right. People don’t understand. They just look at people like the RAND Corporation, desk jockeys like some researchers from Yale, they sit behind their computers, and they run numbers, and in my opinion, they misinform the public about the realities of health care. Because if you don’t go down to the next level, where I live, which is working with the doctors and watching how care is delivered, you really don’t understand what’s going on in health care.

Richard Helppie 40:34
And I think what you’re implying there, Nate is that people should turn off the cable news, they should turn off NPR, they should turn off the network broadcast, and they should tune into the Common Bridge, because we do talk about the issues of the day with experts like yourself, we do look for solutions, and we look for that common ground. And I think we can all agree, we want great healthcare in the United States. We’ve innovated so many of the breakthroughs. We want that care to be accessible to all, and we want it to be affordable. That’s what we’re after. And it seems that all this machinery is just pushing us in the wrong direction. Nate, any closing comments you’ve got for our audience on the Common Bridge? This is always a delight talking to you. I don’t know anybody more learned in healthcare, and I know hundreds and hundreds of people in healthcare and I just really appreciate the research and your ability to deliver a consolidation of the facts like this… really a joy.

Nate Kaufman 41:30
Sure. My message is to United Healthcare and Anthem and MEDPAC and all the people I puked on today. My message is, is we can do better. Focus on cost of care, listen to the consumers, we can do a lot better. And I don’t want to see these enterprises go away. I want to see them do better, and unfortunately, they’re doing worse.

Richard Helppie 41:52
We’ve been talking today with Nate Kaufman of Kaufman Strategic Advisors of San Diego. This is Rich Helppie. This Common Bridge podcast is available on most podcast outlets, on YouTube TV, and at RichardHelppie.com. At RichardHelppie.com you’ll find a full bio on Nathan Kaufman and also a link to his website which is Kaufmannsa (Kaufman Strategic Advisors).com. And now with my guest and friend Nate Kaufman, this is Rich Helppie signing off on the Common Bridge.

Brian Kruger 42:25
You have been listening to Richard Helppie’s Common Bridge podcast. Recording and post production provided by Stunt3 Multimedia. All rights are reserved by Richard Helppie. For more information, visit RichardHelppie.com.

Transcribed by https://otter.ai

Transcript of Episodes 19- 20 with Nathan Kaufman

BK:

Welcome to the podcast, the Common Bridge with Richard Helppie. Rich is a successful entrepreneur in the technology, health and finance space. He and his wife, Leslie, are also philanthropists with interests in civic and artistic endeavors, but with a primary focus on medically and educationally under-served children. My name is Brian Kruger. And from time to time I’ll be the moderator and host of this podcast.

Hi and welcome to the Common Bridge midweek. This is a podcast that’s in response to some requests that I received on the Nathan Kaufman interview. Now, Nathan Kaufman is, an expert and consultant in the field of healthcare. A couple of weeks back, Rich did a podcast and this is that podcast, but it’s two parts put together as one because I had some requests from folks that wanted to pass it along as one unit and copy that link to some people in the healthcare field. I can’t recommend one of our podcasts more than this one. There are a couple of them recently that have been terrific and this is one of them. You will learn more about healthcare and things you hadn’t thought about healthcare in one hour than you ever have before. So I really highly recommend that you listen to this again or pass it along to somebody because it’s incredible. Anyway, without further ado, here is Rich Helppie and Nathan Kaufman discussing healthcare in the USA.

Rich Helppie:

First of all, welcome to the Common Bridge. I’d like to bring on my colleague and good friend Nathan Kaufman. This is a real treat for us. Nate is one of the most knowledgeable people about healthcare, healthcare policy, healthcare financing. He understands the legislation. He understands the economics. He has a great way of bringing this right down to what a household can afford, back to the economics among physicians and hospitals. He also predicted, I think 10 years in advance, that we were going to have healthcare reform in 2010. He has been very, very accurate in his prognostications. You might call him a visionary with a lot of analytical data to back it up. So welcome from San Diego, Nate Kaufman. Kaufman Strategies.

Nate Kaufman:

Thank you, Rich, that’s a nice introduction. I don’t deserve it.

Rich Helppie:

I was trying to make your whole family proud and hopefully they’ll be listening in too.

Nate Kaufman:

Well my mom will appreciate it. Maybe she’ll figure out what I do.

Rich Helppie:

Well, let’s try to make that happen because our audience doesn’t understand healthcare and that’s a become a very popular topic. So Nate, from your travels and your interaction with thousands of healthcare industry participants both on the risk bearing side as well as on the providing side and the other supply side, what do you see that’s the biggest issue as of today as we enter 2020?

Nate Kaufman:

I think the biggest issue is-and I was kind of joking-but most people really don’t understand the healthcare problem. What just came out was the fact that self-funded plans and full risk plans, their costs are escalating at about the same rate. Actually some new data came out from Maryland, which has all of these cost containment programs and single payer programs. It shows their cost is also increasing at the same rate, which indicates that everything out there is not working. The reason it’s not working is that people just don’t understand what the problem is. The problem is that 5% of the population consumed 53% of the healthcare costs, 10% of the population consumes 70% of the healthcare costs. So this idea that per unit cost is the problem-that pricing is the problem-is just plain wrong.

The problem is that we have a small percentage of the population that consumes a huge percentage of the costs, and our delivery system is not designed to identify that population and to treat that population. So until we focus on the real issue, which is this small population, and the fact that we have to identify the next at risk population that’s going to be the five percenters, we’re not going to fix the problem. So our delivery system is really a one size fits all delivery system, when we really have this small at risk population that we need to hone in on. And we’re not doing it. Just one more thing-what we really need to do is to have payers and providers collaborate, but instead what we have is a payer population that is adverse to the provider population focusing on per unit cost as opposed to collaborating and designing a delivery system to focus on this high risk population.

Rich Helppie:

Great. For our listeners who may not be familiar with health care, could you give a quick definition-full risk plan, a self-funded plan? Because I think a lot of people think that Blue Cross or United Healthcare are the risk entities, but often times they’re the administrative layer and the risk is actually back with the employer.

Nate Kaufman:

Right, about two thirds of businesses are large enough so that they contract with a Blue Cross or United health care just to be a plan administrator. And these large employers actually take their own risk for the healthcare. Blue Cross or United Healthcare just simply administer the plan. Then the smaller employers actually contract with the insurance companies to actually take the risk. So the insurance companies take the actuarial risk of the health care provided. So in my case, I’m a small employer. So if people get sick in my company, it’s Blue Cross who bears the risk. In the case of Boeing, people get sick at Boeing, then it’s Boeing who bears the cost of the sickness in their company. So two thirds of the employers are large enough to bear the cost and the insurance companies just simply administer the plan.

Rich Helppie:

Great. I think our listeners will appreciate some of that inside definition. Nate, here in the state of Michigan, which I believe will be a swing state later this year, Michael Bloomberg is blanketing the airwaves with claims of things he accomplished in New York, saying that fewer people are covered today, that pre-existing conditions are being exposed and don’t have good coverage and that he’s going to lower pharmaceutical drug prices. Do you have any idea what his track record has been or any idea what goes into his plans to make those claims for improvement?

Nate Kaufman:

Not really. I think if you look at the Democrats versus the Republicans, in general, the Republicans have no plan. The Democrats I would say are probably more adverse to the drug companies. When I talked about the five percenters that consume 53% of the costs, the primary cost escalator among these high cost claimants is drugs. It used to be that these high cost claimants consumed about $8,000 per person for drugs. Now they consume well over-I think it’s $15,000 per person- for drugs. So the two primary escalators of cost right now in our country are not hospitals and physicians. It’s actually drugs and insurance costs. So we need to get control of those two costs. From my perspective, the Democrats probably are more adverse to the drug companies than the Republicans are. Other than that, neither one really has a plan that is particularly strong. The Democrats clearly want to give things away and are going to bust the budget. The Republicans just don’t seem to have any plan whatsoever to deal with the crisis. Neither one is really focusing on the issues that I discussed earlier.

Rich Helppie:

Have you had a chance to read the Sanders bill that is titled Medicare for all? I did read it and my first reaction was, it’s not even Medicare. My second reaction was it looked like the Department of Defense model applied to healthcare. I even had the quip: if you’d like $600 hammers in the Navy, you’re going to really like the Sanders plan for healthcare insurance. Accurate? Or if you’ve got a better view on Sanders plan?

Nate Kaufman:

Well, I’ll give you a couple of fun facts. The first one is a recent survey showed that 72% of Americans admit they don’t fully understand how Medicare works. So anybody who is in favor of Medicare for all, the likelihood is that they don’t even understand Medicare. The second thing is that it turns out that since employers cover more of the premium, or a significant share of the employee’s premium, that when you do go on Medicare, assuming you’re not on a Medicare HMO, you’re actually paying more out of pocket for Medicare than you do for an employer sponsored plan. I’m actually on Medicare. It’s the worst health plan I’ve ever been on in my entire life. It’s a horrible health plan. Thank goodness I’ve saved up enough money so I can afford it. The only choice people will have, unless they are high income, is to go into Medicare Advantage where you totally lose control of your health care.

As a very knowledgeable healthcare person and healthcare consumer, I would think that anybody who would advocate for Medicare For All really doesn’t understand healthcare, number one. And number two, as you said, the cost would be astronomical. But the worst thing about Medicare-I get essentially the same care as I did under commercial insurance. My cost is very close to the same in terms of out-of-pocket costs for my premium, and my providers are getting paid a third of what they did before. People don’t understand this. So at the end of the day, what you will find is that there’ll be a provider revolt if we move to Medicare For All. So I think the disruption in the provider system will be unbelievable. From my standpoint, if you want Medicare For All, you’re going to want long lines, you’re gonna want access problems, it’ll be a total disaster. So I really don’t understand why any knowledgeable person about how about healthcare-who understands the payment system-would ever advocate for Medicare for all.

Rich Helppie:

Nate, I’ve spent some time in recent days with folks that are coming from a real absolutist free market mentality. It’s interesting to me when ideology collides with reality. There were proposals floated to eliminate third party healthcare coverage. I liken that back to a great uncle I had who was a country doctor at one time. And if you wanted to see the doctor, you had to pay the doctor. And if you didn’t have cash, he got paid in chickens. That was the system at that time. Obviously we are a much more sophisticated society today, with much more choice in what diagnostics and therapies are. But one of the points I’m leading to is this, when I look around at what’s existing out there, I look at the budget for Medicare, I look at the budget for Medicaid, I look at the budget for CHIP, I look at the budget for the VA-all of these tax supported plans. Would it make any sense at all to consolidate that to a single plan, eliminate all the barriers and costs of qualifying. If you’re a US citizen, you get that at a particular level and then supplement that with a free market plan if you want to buy insurance above that. The key question, I don’t know if you’ve given any thought to what would happen if we just consolidated all those tax supported programs and just issued it and be done with it.

Nate Kaufman: (14:58)

Well, it would be nice, but there’s so many special interests out there right now, I just don’t know. The issue or the problem that we have-and the cost problem with the free market system as it applies to healthcare-is we have an asymmetric market. It’s much like when I go to take my car into the shop and they tell me that my transducer is broken and it’s going to cost $800, at that point in time my car is broken. I don’t know what to do. I just basically trust my dealer and I get it fixed. When you go to the doctor and they tell you that you have this kidney problem, what do you do? Most people just basically have to trust their physician. Unfortunately from a pricing standpoint, you’ve picked your health plan, you go in, and you get it fixed.

The cost problem in healthcare right now has to do with these very, very sick people. We just aren’t knowledgeable enough to make legitimate choices, even when we’re given the choice. For example, if you have pancreatic cancer, you may be better off flying from Michigan to the Mayo Clinic and you probably would get better care. I’m just making this up. Most people would say, well, I’d rather just stay home and get care locally. So we’re not very good healthcare consumers is the problem. The idea of “free market”-we’re just not knowledgeable consumers, number one. Number two, one of the biggest problems we have in our healthcare system right now is administrative costs. We’re spending about $2,500 per capita to have these third party systems, which we call commercial payers, where we’re fighting denials, and they’re fighting providers and adding this administrative layer. If you look at the administrative costs of the “free market” versus the government, you wonder if it’s worth it. I just don’t know what the answer is at this point in time, whether it’s better to have the government regulators versus the free market regulators at this point.

Rich Helppie:

Nate, the insight you’ve got about the reimbursement rates to providers being squeezed and going down is end of the spectrum. Several years ago you had some really great data about the average household income of an American family and how much the premiums and co-pays and deductibles would cost them. From that side of the spectrum, my recollection is that, that math didn’t work either. Am I remembering that correctly?

Nate Kaufman:

Right. The co-payments and deductibles and premium contribution have escalated far faster than the worker’s income.

Rich Helppie:

So we have on one side, providers that may not have enough income to provide services. And on the other side we have consumers who can’t afford to buy the insurance or buy the care. In the middle we have these two for-profit behemoths in the pharmaceutical industry and in the health plan industry. How do we get out of this morass?

Nate Kaufman:

Well, there’s a reason for that actually. There’s some new data that just came out, and the reason for that is the insurance industry is subsidizing the underfunded government programs. Medicare and Medicaid-if you look at them on a totally inflation-Medical inflation adjusted basis, has been basically flat in terms of payments over the last two decades. So in other words, for inpatient care, Medicare and Medicaid have not increased their payments to hospitals. So what’s happened is, in order to stay in business and stay state of the art, the only place that hospitals have been able to go…now I have to say that hospitals have not been the most efficient, there’s a lot of mismanagement, hospitals and health systems, so I’m not here to say that hospitals shouldn’t do a hell of a lot better, but in order to stay in business and compensate for their inefficiencies and mismanagement, hospitals have had to raise their rates. The only place they’ve been able to do that-to compensate for the underfunded government programs-is the insurance company, is the privately insured. So we’ve had this hidden tax, so that they haven’t been able to raise their premiums to do that, so they’ve raised co-payments and deductibles. That’s been passed on to the employee and that’s made healthcare unaffordable. One of the solutions would be to raise Medicare and Medicaid reimbursement in order to remove that hidden tax. But of course that ends up raising government expenditures and that’s a huge problem. So we’re in this vicious cycle of not being able to figure out how to solve the problem. The solution basically is to now go back and start hammering providers and blaming providers for all this. You see all of this literature that it’s the providers fault and eventually they’re going to start reducing reimbursement to providers, which they’re already doing. Hospitals are going to close and physicians are going to stop taking Medicare and Medicaid, and access is going to become a problem. We’re already seeing that as an issue. We’re in a really difficult time in healthcare because really the answer is we’ve spent two decades of trying to compensate for under funded government reimbursement by hammering the employers and employees.

Rich Helppie:

Let me see if I can illustrate that. So let’s say that I’m not on Medicare yet. I have my commercial plan, which is a high deductible plan, catastrophic coverage. Let’s say I have a gallbladder issue and you who are on Medicare, you have the exact same issue. We get admitted to a hospital on the same day. We’re in rooms next to each other or maybe it’s an old hospital and we’re a semi-private room with just a sheet between us, that’s horrifying…no! But the point is this, when your gallbladder surgery is complete and my gallbladder surgery is complete, the hospital has to charge my insurance more because Medicare does not pay enough. So the hidden tax falls onto my private health insurance, which shows up in my premium, which starts to drive the unaffordability for consumers. Is that the right flow? Am I thinking about that the right way?

Nate Kaufman:

You will be charged about 240% more than I will for the same procedure. Yes.

Rich Helppie:

So when you look at a program like a Medicare For All the notion has to be that magically all the reimbursement rates are going to collapse down to a point where the health systems, the hospitals, as you said earlier, would be in revolt. They would not be able to survive based on the contours of that legislation.

Nate Kaufman:

Well, there are three components: there’s cost, access and quality. If you impact cost, either access or quality would suffer, or somehow by magical thinking, the hospital would have to readjust somehow and be able to provide the same service and the same access and the same quality. The other issue to keep in mind is not only would the hospital be reimbursed at a much higher rate, but the doctor would be reimbursed at a much higher rate and the doctor says, well, hold on a second. If under Medicare For All, I’m going to get paid a whole lot less, maybe I’m just going to drop out of Medicare and instead of seeing 20 patients a day I’m going to see six patients a day, and I’m going to demand that they pay cash because there’s a severe shortage of physicians in this country that’s only gonna get worse as two out of five baby boomer physicians retire in the next decade, and that’s what I’m going to do. I call it DREXIT-doctors exiting Medicare and Medicaid. And already we see this all over the country. The doctor just says, fine, there’s a shortage, if you want spine surgery from one of the best, you’re just going to have to pay cash and you can go figure it out with the insurance companies. And I’ll just play golf two days a week. I’ll do cash based payments the other three days and have a nice day.

Rich Helppie:

That is some of the things that I’ve heard from the folks that are way on the edge about pure free market, which obviously doesn’t address the access issue, but nor does the other side because the other side of it would be get in line to get that spine surgery. One of the things I’ve been thinking about-I don’t seem to have a week go by that someone doesn’t say, I’ve got this company to invest in-you can detect cancer off a urine sample, or something like that. And if that was true, then that would be lower cost, more efficient. What do we need to do to keep the innovation engine humming?

Nate Kaufman:

Well, it’s a good question. I mean, again, my interest in innovation has to do much more with the back side of healthcare-that is the really sick patients. People say we don’t need hospitals anymore-they’re always talking about Netflix and Amazon, so on and so forth. My son is a hospital administrator. His hospital’s full-he says people don’t die. Hospitals are really full with 80 year old people with multiple chronic conditions in beds. They’re full with people with cancer. People don’t die from cancer anymore, they live a long time and they have multiple chronic conditions. An interesting, fun fact is that the number of acute care visits to primary care physicians is actually going down. The reason for that is that we don’t have enough primary care physicians. And when you’re sick, you can’t get in to see them, so urgent care is becoming really popular. So my interest in innovation is how do we care for all of these very old, very sick people because we’re going to have a bunch of them and they’re going to drive up costs and that’s where I see the need. Everyone’s talking about primary care-that’s not where the cost problem is. The cost problem is on the other side where we have, we’re going to have, a whole bunch of people with cancer and five different chronic conditions, that are living to 85, 90 and we’re not going to know how to take care of them or what to do with them and they’re going to be driving up costs as we develop new drugs to keep these people alive.

Rich Helppie:

That is a wonderful insight into this. I want to shift gears a little bit here and talk about some of the policies that have been in place for so long. I’m an advocate of taxing the employer provided benefits-it’s compensation. There was a day when a popular benefit for people was a company car and when those started to be taxed as compensation (because it is) the company cars basically went away. I have a theory that if you taxed people for the value of their health plan, they might start questioning what’s in the plan itself and that that might introduce the consumer in. Obviously this is a very dangerous political rail for any politician to take on, but I’m wondering just as a healthcare economist, any merit to this at all?

Nate Kaufman:

I don’t think so. The reason I don’t is that there’s the vast majority of the population who, first of all don’t understand their healthcare. They wouldn’t be able to discriminate between a good healthcare plan and a bad healthcare plan. There aren’t Kaisers out there around the country, they’re just looking at co-payments and deductibles. It’s unfortunate. I’ve spoken to the teacher’s unions here in California. They really don’t understand healthcare, how to use it. What we need to do is design plans-we need to advocate for them and design plans that make sense for them. I think we need to help them choose. For example, there’s-I call it the Rule of 47-47% of the people don’t get colonoscopies, 47% of women don’t get mammograms, they don’t get the appropriate interventions, flu shots, and so on and so forth. To me, where we need to be focusing on, is somehow getting people to…actually taxing them if they don’t get the appropriate interventions because those people who don’t get colonoscopies ended up getting colon cancer and mammograms get breast cancer and so on. And we have the ability to prevent a lot of these five percenters. So from my perspective, again, the healthcare system isn’t designed to deal with the cost problem that we have. So that’s where we need to start to look as part of that cost problem that we have. That’s where we need to start.

Rich Helppie:

The last stats I saw was that the average American’s private health insurance plan, they held it for about 18 months because they change jobs or the employer switched plans. Would that be part of the problem in that if you have a 52 year old person who needs a colonoscopy and they’re insured by payer A, and payer A says if they don’t get that colonoscopy till next year, I may not need to pay for it. When the potential awful consequences of not having that colonoscopy manifest, they’ll be long gone. I mean, isn’t that part of the issue…is that health care is longitudinal, good health-prevention, mammograms, colonoscopies, flu shots and the like-those are longitudinal, but the payment system’s focused on a 12 month period, which really doesn’t seem to make any sense. Am I kind of getting to the point that you’re driving here?

Nate Kaufman:

Right. I mean, you think about that and, and you think about how many payers have actually said rather than denying care, we think this patient should actually get a more expensive treatment. We’re not thinking about those kinds of things. Or, for example, Amazon, a self funded payer, has actually developed a relationship with the City of Hope, which is a specialized cancer treatment center-and said (and I don’t know all the details, but the theory is according to the literature), that if one of our employees gets cancer, we want to send them to the City of Hope for a second opinion or first opinion because we want to get a specialist-cancer specialists to intervene right away. Those kinds of things make sense to me, because that’s one of those high cost claimant type of 5 percenter situations.

Walmart’s has done the same thing with the Mayo, where they say they incentivize their employees to go to Mayo. And they found that when they send their cancer patients to Mayo, they found a lot of misdiagnosis and mistreatment by some of the community-patients that were treated by community based physicians. So again, people talk about taxing and this and that. To me, the issue is what’s the cost of a misdiagnosis? What’s the cost of the wrong treatment? We’re focusing on the wrong issue. From my perspective, it’s really how do we get people to get the right interventions? How do we get people to the right doctors in the first place, and how do we optimize the chance that they’re getting the right treatment? If somebody, for example, has cystic fibrosis or HIV, which are again, some of these high cost treatments, diseases where we spent $250,000-$300,000 per year per person, how do we make sure that they’re getting the right care, coordinated care, so that we’re not spending too much or giving them the wrong drugs or whatever. These are the kinds of things that we need to be focusing on. Our delivery system isn’t designed to do that. We’re talking about Medicare For All and we’re talking about should we tax it, should we not tax? And that’s not the issue. The issue is our delivery system is designed to just ping-pong these people around and give them the deductibles, and for payers to puke all over providers. We’re not focused on dealing with the real issue, which is how can we get patients the right care? That’s my speech.

Rich Helppie:

When I look at this from a policy point of view-where we’re in agreement-Republicans are just flat out bewildered. They don’t know which way to turn. They’re very disorganized. Democrats are going to throw out policy proposals that there’s going to be a chicken in every pot and everything’s going to work out famously. But upon examination, you find it’s kind of nonsense. What people need to think about the future of a politician who said, our healthcare system isn’t designed for the issues of today, there’d be no villain in the new cycle to be constantly pounded on. It wouldn’t be something that could be used as a cudgel by one party over the other. In the meantime, our country continues just to drift with this very central issue remaining unaddressed.

Nate, one thing I use, I’m an advocate or fan if you will, of Medicare part D. My view on that is that it’s a fair fight, that we’ve pitted the for profit health plans versus the for profit pharmaceuticals. There’s actually leverage in the model. If Pfizer wants to put Lipitor into the formulary, they’ve got to hit a price point or United Healthcare will kick them out. You put that same model inside of a CMS, Medicare and Pfizer will just go get their lobbyists to put that in at whatever cost they want. It’s Medicare part D is also real insurance-you get in, it’s reasonable cost even if you’re not using any drugs. But if you don’t get in when you’re eligible, just it costs a lot more, like trying to buy house insurance after the house was already on fire. Last numbers I saw still running at 95% subscriber satisfaction, still running nearly 40% below cost projections. Is this something that’s been done right?

Nate Kaufman:

It’s interesting. Again, I’m a subscriber to part D. I buy most, at least half, of my drugs on Good RX for cash. It’s cheaper. It just turns out there’s an app where you can just go online and find the drugs cheaper, which is even a better model, as far as the market’s concerned. It’s still more expensive than Canada, the part D drugs, and I don’t understand why. I think it’s okay, but again, I can buy my Lipitor at a pharmacy with an app cheaper than I can get it on a part D.

Rich Helppie:

We discovered that too, for certain hypertension medications for people in our family, ordering them from Canadian pharmacy. And even though we’re sitting here on the Canadian border, we don’t even have to cross the bridge to get there. Nate, you’ve been an outstanding guest on the Common Bridge. What haven’t we covered or what would you like people to understand or any calls to action? What else do we need to get out there in the world?

Nate Kaufman:

I think that the one thing from my standpoint, as far as reform is concerned, there’s two or three things that I would like to see, because the one thing that I spend most of my time in on is-I spend most of my time with doctors, and I see that healthcare costs as a percentage of the GDP is somewhat leveling off. Hospital and physician reimbursements from the insurance companies is flattening out. So from my standpoint, we need to get control over administrative costs. I see no reason why medical necessity of/by United Healthcare is different than Blue Cross of Michigan, for example. Why we can’t have a clearinghouse for medical necessity that would save billions of dollars so that if an MRI is deemed to be medically necessary, it’s deemed to be medically necessary for all. Denial management is a huge cost. So consolidating a claims clearinghouse and a medical necessity clearing house for all payers, would save billions and it would be an incremental change. So there’s one way of submitting forms for all payers, there’s one way of getting a pre-authorization for all payers. I would say we could probably save tens of billions of dollars by doing that. And it’s a simple incremental change.

The second thing is drug costs. Again, there’s no reason why we can’t get the same kinds of rates that they get in Canada for our drugs, at least for Medicare and Medicaid. And the third thing is, I don’t understand why Blue Cross of say, Alabama, can have 90% market share, but providers can’t have 90% market share. So for me, when I think about healthcare reform, if we could just have a single clearing house for medical necessity and claims, if we could buy drugs just like every other country, and if we could just apply the same antitrust rules to health plans as we do to providers, those three simple incremental changes could cut healthcare costs by 30% and we would have time to begin to reform the entire system. So that’s what I’m advocating for.

Rich Helppie:

Nate, you’re the only person I know that has the insight into the economics, the flow of funds, the diagnostic treatment, and real solutions that could work. I would say I’m heartily on board with all three of your recommendations. They indeed are what the Common Bridge is about. I think the only thing I would adjust would be if they’re saying you don’t need that MRI and you want to come out of pocket for it, great, you should have that option. If that’s the care you think you want and you have a way to pay for it. But the Common Bridge is not about ideology. It’s not about partisan politics. It’s about let’s look at real problems and let’s find real solutions. And I know that America’s grateful for experts like you that are willing to lean in and give us these kinds of ideas. So thank you for being part of the Common Bridge today Nate. I do appreciate it, my friend.

Nate Kaufman:

Hey, thanks for inviting me.

BK:

You have been listening to Richard Helppie’s Common Bridge podcast. Recording and post-production provided by Stunt Three Multimedia. All rights are reserved by Richard Helppie. For more information, visit RichardHelppie.com.

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