(Part 2) The Data “Revolution” in Healthcare: Obstacles and Opportunities

Part Two: Healthcare Structural Issues (continued from Part One)

By Ellen Martin

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First, let’s recognize the fundamental market disconnect between providers, patients and third-party payers like employers, insurance companies, and managed care. This detachment is a fundamental reason as to why healthcare is not a free market.

The tax-advantaged, employer-provided insurance system is a historical accident of circa-WWII business practice and political policy. Kaiser Permanente was the original managed care organization founded as a health care program for industrial workers. The organization worked on large projects such as the Los Angeles Aqueduct, then shipyard workers during WWII. After the war, Kaiser offered public health plans through employers and unions.

When US industrial workers peaked at more than 1/3 of the labor force, many large employers turned to healthcare as a tax-advantaged union-friendly way to attract workers with higher compensation. These employers were encouraged by union demand, the post-WWII industrial boom, and tax incentives like deducting employee health costs.

Impact of Turning to Healthcare

In the 60 years since then, we have seen an ongoing accumulation of unintended systemic consequences:

  • The unemployed also become uninsured (16% in 2009 Gallup link below) and often unable to access healthcare, while labor forces in industrial jobs have dropped to 20%. 
  • Growth of government-provided care for veterans, elderly, and poor, now totaling one third of Americans reliant on government-mediated medical care (per Gallup).
  • An ever-increasing number of regulations and agencies, sometimes with conflicting requirements (see next post).
  • The “Affordable Care Act” (aka Obamacare), with an unprecedented Federal intrusion into the already messy insurance markets, and with its future known, unknown, and unintended consequences.

Oddly enough, changes in tax policy that would separate health insurance from employers and give ownership (and tax advantages) to individuals have not been politically viable. The support of increased medical use of individual pre-tax dollars has also not been supported. In actuality, the ACA reduces the amounts you can set aside for these accounts like SS125 and flexible spending accounts.

Repercussions Over Time

Over the past 75 years, we have seen a multitude of unintentional consequences, including:

  • Consumers locked into employers or insurers, especially after events (e.g., serious or chronic illness) that raise insurance rates or reduce availability.
  • Patients don’t have pricing information and tend to be price-insensitive because “somebody else is paying for it”. Patients become less willing to pay their own after-tax dollars for preventive care like dental work.
  • A large number of uninsured who cannot pay for their own care are forced to us use expensive emergency services. In certain circumstances, they put off healthcare until desperately ill which increases costs.
  • Multiple entities like payers, providers, patients are involved in every healthcare transaction in the IT workflow sense. This increases problems of silos, handoffs and workflow complexity, which will be expanded upon in Part 3.

This political and economic kludge deeply affects who cares about what in healthcare IT and data, as well as who pays whom, for what, and how.

I won’t dwell on the volume-oriented, fee-for-service model, which has been challenged from all directions on the political map. A different view of big data obstacles in healthcare is, of course, from McKinsey.

My next post will focus on regulation, and the one after that on IT-specific obstacles.

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