A Serious – and Consumer-Driven – Policy to Promote Competition in the Health Economy 

In last month's Counterpoint, I addressed the dearth of serious policymakers in D.C., which is reflected in the lack of thoughtful policies to address the real problems in the health economy. In fairness to those policymakers, health economy stakeholders are all too content with the status quo. Absent a truly transformational catalyst, it is simply a question of how long until the U.S. healthcare system collapses on itself. This month, I want to explore the root cause of the ills that plague the U.S. health economy and offer a transformational solution that would benefit every American.

Jerry Tarkanian, the legendary UNLV basketball coach, once remarked that “the NCAA was so mad at Kentucky they gave Cleveland State two more years probation.”¹ Since 2000, healthcare antitrust enforcement has been like that, characterized by a Whac-A-Mole®-like approach heavily focused on individual provider transactions at the local level coupled with a curious silence on the handful of health economy stakeholders that habitually exhibit monopolistic behavior.² 

The reality is that most health economy stakeholders don’t want to compete, and even fewer know how to compete, the proof of which is AHA, AHIP and PhRMA. People under siege try to extend the moat, not engage the enemy, and that describes the “strategy” of most health economy stakeholders. 

Presumably in accordance with the Tenth Amendment, the Federal government allows Americans the discretion whether to buy life, disability and even burial insurance products regulated by the individual states. Similarly, poor people have the discretion to enroll in Medicaid, and elderly people have the discretion to enroll in Medicare or Medicare Advantage. Why then does the Federal government through the Affordable Care Act (ACA) effectively compel Americans working for “large” employers (50 or more employees) to purchase health insurance through their employer?³ 

It is interesting to compare the Financial Crimes Enforcement Network’s definition of money laundering with the ACA’s mandate for employer-sponsored health insurance: 

With few exceptions, criminals are motivated by one thing-profit. Greed drives the criminal, and the end result is that illegally-gained money must be introduced into the nation's legitimate financial systems. Money laundering involves disguising financial assets so they can be used without detection of the illegal activity that produced them. Through money laundering, the criminal transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source. 

This process has devastating social consequences.⁴  

Greed and profit-seeking certainly characterize the employer-sponsored health insurance system, which, expressly in the name of tax avoidance, transforms an increasingly significant portion of an employee’s cash “salaries and wages” into “benefits” in the form of health insurance premiums.⁵ Greed and profit-seeking are also the root cause of the oft-cited, if fallacious, notion that 30% of U.S. healthcare spending is waste.  

What is curious is how rarely anyone ever identifies the parties who are responsible for this waste, particularly keynote speakers who, like Bart Simpson, repeatedly “say the line” about “healthcare waste” at industry conferences that are the very definition of wasteful spending.  

So, what are the characteristics of the fraud, waste and abuse that exists in healthcare, and who is largely responsible? 

Fraud and abuse in healthcare are continually perpetrated in the same CBSAs, either by unscrupulous and often poorly trained providers or by criminal syndicates. Fraud and abuse are fairly obvious fairly quickly, and the fact that they are not prosecuted more frequently is an interesting question for another day. 

Waste is perpetrated almost entirely by participants in the employer-sponsored health insurance ecosystem, particularly health insurers, health insurance brokers, benefits consultants and pharmacy benefit managers, who collectively and cleverly execute a government-sanctioned, value-extracting grift at the expense of employers, consumers and providers.  

What is at stake? In 2021, more than $1.0T of the health economy was funded by or on behalf of employers.  

How is it that “a government of the people, by the people, for the people” allows more than $1.0T to be taken from the people by statute?⁶ The power of the status quo. 

Aleksandr Solzhenitsyn said that the “debilitating dream of a status quo is the symptom of a society that has ceased to develop.”⁷ For all the healthcare waste in healthcare innovation and transformation conferences, the status quo is still undefeated in the health economy, and the lack of development – and implementation – of truly transformative ideas has made health economy stakeholders sclerotic, to the detriment of every American.  

Like Shorty in City Slickers, any White House administration that was serious about promoting competition in healthcare would focus on one thing: exhorting Congress to eliminate the tax deduction for employer-sponsored health insurance. 

Imagine the creative destruction that would be unleashed in the health economy if $1.0T was converted from premiums and deductibles and co-pays and co-insurance into salaries and wages. Imagine what would happen if providers were forced to compete for the hearts and minds and wallets of consumers. Imagine how consumers might change their behavior if they were “connected” to the financial impact of their health decisions. Imagine the reduction in waste from the elimination of the broker/benefit consultant industry. Imagine the eradication of the administrative industrial complex that is the U.S. health insurance industry, including prior authorization and claims denials and carrier networks, especially “narrow networks.” Imagine how much time the DOJ and FTC would have to focus on targeting real monopolies instead of preventing the mergers of failing hospitals that will otherwise close. 

The more that you imagine the consumer-driven competition that would emerge in the U.S. health economy that consumes $1 out of every $24 of global GDP, the more that you will understand the power of the status quo in the health economy, replete with stakeholders that are not strong competitors but merely entrenched interests with skilled lobbyists.  

At some point, maybe in 2028, the American electorate will have a reckoning with health economy stakeholders. If, to paraphrase Merle Haggard, a President walked through the White House door and did what he (or she) said and unleashed value-based competition in the health economy, what would happen to your organization? How would you fare if you were forced to operate profitably by competing effectively instead of through the compulsion and coercion that characterizes employer-sponsored health insurance? 

Hal Andrews, President & CEO, Trilliant Health

By the Numbers

Under CMS’s Transparency in Coverage initiative, “most group health plans and issuers of group or individual health insurance are required to disclose pricing information” in machine-readable files (MRFs) that include “rates for all covered items and services between the plan or issuer and in-network providers.”⁸  

Aetna posts its MRFs at this link. 

The file that Aetna posted in June 2024 had more than 164,500,000,000,000 data points in its “raw” format, but only 49,800,000,000 distinct data points, meaning that the Aetna MRF was duplicated by more than 3,365X. Whether that excessive duplication results from incompetence or malice is, perhaps, a good question for Congress. Whether having almost 50B distinct reimbursement rates for ~750 DRGs and ~11,000 CPT codes is representative of the legendary “30% of healthcare spending is waste” seems self-evident. 

Strategies from the Field Guide

Health economy stakeholders can deliver value for money to the customer – the employer – in one of three ways: 

1. Better than average quality at a price at or near the median market rate
2. Average quality at a price that is below the median market rate
3. Better than average quality at a price that is below the median market rate

The lower the acuity of care, the more that value depends on price and convenience. 

In this example, there is a 1,100% variance in rate in the Chicago-Naperville-Elgin, IL-IN CBSA for ankle X-rays: 

There is no value for money proposition in offering worse than average quality at any rate, especially one that is higher than the median market rate. 

Using a combination of provider directory, CMS QualityNet and health plan price transparency data, analyzing the relative value delivered by facilities performing outpatient diagnostic colonoscopies in the Dallas-Fort Worth-Arlington, TX CBSA suggests that employers could generate value for money by disincentivizing employees from utilizing the Arlington - North Texas GI Center and incentivizing them to utilize the Endoscopy Center at Central Park. 

Connecting Dots

🛌 Surveys conducted over decades have revealed that Americans are generally more stressed and sleeping less than ever before. While just 3% of Americans got five or fewer hours of sleep per night in 1942, this share increased to 20% by 2023. Trends in sleep disorders by condition also reveal meaningful levels of change over the last four years, with visits for sleep apnea increasing 27.9% and sleep-related hypoventilation increasing 60% from 2019 to 2023. The prevalence of insufficient sleep and related disorders underscores the need for more sleep specialists and resources to address the growing demand. More in our latest analysis for The Compass.  

🏪 Walgreens’ stock prices have decreased by 80% in the past five years. To bounce back, many healthcare experts believe that the company will have to relinquish its retail clinic dream and focus more on its core pharmacy business, and Walgreens’ CEO Tim Wentworth agrees. On June 27th, he announced the company’s plans to shut down a quarter of their U.S. stores by 2027. Now, the most challenging obstacle to streamlining its retail portfolio will be protests from local officials and residents in the communities affected by the upcoming store closures. More on Walgreens’ financial performance and path to recovery in my conversation with MedCity News.  

Points to Ponder

→ Physicians have traditionally represented a key element in public health outreach efforts. A new study published in JAMA found that trust in physicians and hospitals dropped significantly from 71.5% in April 2020 to 40.1% in January 2024 across all demographic groups surveyed, suggesting that the COVID-19 pandemic has been associated with a continuing decrease in trust in physicians and hospitals. (JAMA)

→ A new report from accounting firm PwC forecasts a 13-year high in commercial healthcare spending in 2025, with an 8% increase for group plans and a 7.5% for individual plans. This is due to inflation, rising prescription costs and increased behavioral health services. Revised trends for 2023 and 2024 also reflect higher use of GLP-1 drugs and higher acuity inpatient and outpatient care. (PwC) 

→ Recently, economist Noah Smith predicted that Ozempic will jump-start a weight-loss trend among people who don’t take the drug due to social contagion. However, physician Vinay Prasad is skeptical of this for three reasons: 1. long-term use could reveal negative side effects, dampening enthusiasm, 2. long-term success of Ozempic is uncertain and 3. The need for such a drug highlights broader issues with poor food quality and portion sizes. While hope for the drug may be high, Prasad predicts that the real-world results will be disappointing. (Observations and Thoughts) 

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