2009 US Health Care Industry Predictions: Cosmetic or Reconstructive Surgery

I'll finish up the South Africa series next year since now is the time to either review 2008 or make predictions about 2009. I suppose that I could also pick any other year to review and take advantage of general nostalgia of this time of year (like 1985 for the incredible Grateful Dead shows) or pick another year in the future where I can document blatantly incorrect guesses.

However, I'm feeling good about 2009 predictions for what will happen in the US health care industry. I read Jane Sarasohn Kahn's predictions on The Health Care Blog to check my reasoning. Her predictions are very comprehensive and helped form my thoughts. As a health care Estimated Prophet, here goes:

1. Just some Nips and Tucks for Medicare Advantage: Medicare releases the 2010 health plan reimbursement in the spring and finalized plan designs are due in early June. There is not a lot of time for the Obama administration to make any major changes which is why I think that there will be little new for Medicare. Additionally, the 2008 legislation that delayed cuts in physician reimbursements also tightened sales and marketing restrictions and called for the end of Private Fee for Service (PFFS) plans in 2011. PFFS plans were the source of most of the complaints and confusion.
Medicare comes up in reform or cost conversations because of the size of the program. However, when reimbursement is cut in Medicare, costs are shifted to commercial plans resulting in no net change. Likewise when reimbursement is raised in Medicare (like with Medicare Advantage plans or Part D prescription drugs), costs in the commercial side can go down. Since any changes to Medicare would be politically difficult and just get absorbed by another part of the system, I don't see major changes made.

2. Technology dollars will start to leave the health care industry: There were attractive returns for health care technology since the purchasers (mainly hospitals) generally got paid what they needed to be paid. Kahn pointed out that the credit crunch and new construction costs are hitting hospitals so they will have less money to spend on new technology. As those funds dry up, GE and the like will look to for other places to sell its imaging technology. Maybe Medtronic will figure out a way to incorporate pacemakers in fuel cells.

3. Except there will still be dollars for technology that explains health care: Health care is becoming a retail industry. Consumers are paying more of the costs and having more questions about what they're paying for. After your next hospital stay, ask for an itemized receipt and see if you can get one that you can understand.
As a result, a return is starting to emerge for web-based programs that can explain health care to end users so an organization's operators and call centers are not overwhelmed. Transparency is starting to become mandated so there is also a regulatory need to be able to explain why services cost what they do or what kind of service someone should get. This is the next frontier for technology companies to enter where they can get the return that they're looking for.

4. SCHIP will be expanded: The State Children's Health Insurance program (SCHIP) will be expanded by the Obama administration to provide health insurance for more children. This should be a really easy one since it's getting harder and harder to make the case for not providing health insurance for children. Their check-up's are cheap, they generally don't need expensive total joint replacement surgeries, and preventative services for children can have a 400% return. I was at a health insurance CEO forum, where one CEO was painted by the others as the conservative one. He cleverly responded by repeatedly pointing out the need for health insurance for children, showing that while he may be conservative, he has a heart.

5. No changes will be made for the individual or small employer group market: The most dysfunctional insurance markets are around individuals and employer groups of less than 25. They pay the highest rates and if they use a lot of insurance, will often be priced out of the market. There are no easy solutions around it so it can't be addressed without generally resulting in insurance carriers leaving the market. A comprehensive health care overhaul that addresses these markets, large employers, Medicare, and Medicaid is the only thing that will really solve it. There will have to some cost shifting or subsidizing of the smaller employer or individual markets by the larger ones.

6. Providers will start accepting more patients with Medicare and Medicaid: More and more providers had stopped accepting Original Medicare and Medicaid insurance since the programs kept the prices down. A 2006 physician workforce survey in Oregon reported that about 25% did not accept Medicare at all and the number is higher for Medicaid. However, with less and less patients having commercial insurance and bad debt rising from self-pay clients, any kind of insurance is going to start to look good. I guess this is a silver lining.

7. Reconstructive Surgery or Comprehensive Reform will happen in 2010: We have gotten to the point where a comprehensive overhaul is the only kind of real change left to be made. The Congressional Budget Office issued a very sobering report that can be found here for anyone looking some light reading and light holiday conversation, that dispels the myth that there are tons of savings to be found with Electronic Medical Records and promotion of more Preventative care, like colonoscopies. True savings and solutions will come with a major reconstructive surgery that addresses the tougher questions of health care like how we pay for units of service, not outcomes, or how so much money is spent on the last 6 months of life. However, it will take the whole year to demonstrate the need to the entire nation. Change isn't a quick process nor is explaining the health care system, so I don't see it happening in 2009. The Obama administration is positioning it well by showing the economic argument but not even Obama can turn water into wine.

Overall, my predictions are pretty safe, kind of the equivalent of an index fund. I should throw in some predictions like "US Hospitals install tanning salons to combat medical tourism" or "Scotch approved as cheaper option to anesthesia for elective procedures". But health care changes slowly and we are starting to hit the inflection point where the current system is not sustainable.