Ian Morrison

We have a Bush in the White House. Cheney, Powell and Condy Rice are bombing Iraq. And, health premiums are going up at double-digit rates. It’s 1990 all over again.

1990 was the beginning of big health reform. The recession pushed corporate America over the edge and healthcare became a CFO issue. Back then, the combination of cost escalation and recession led to a massive growth in HMOs, an acceleration in the number of uninsured (particularly among the marginally employed), widening dissatisfaction with health care generally, Harris Wofford, and the Clintons. Massive government health reform offered the prospect of universality.

Don’t count on an exact replay. There was a chance to do something big and the chance was blown. But a new set of forces may conspire to bring universality to the fore again, driven by the business of health insurance itself.

Three key driving forces are conspiring to challenge the traditional health insurance system:

• Consumer Payment for Healthcare. In pure form, defined contribution health plans are ones in which employees are given a fixed dollar contribution by employers and asked to choose among a choice of insurance options or care systems. While it is fashionable to talk about defined contribution as the next megatrend, it may play out in a more prosaic way with consumers simply paying more out of pocket for healthcare through co-payments, co-insurance and deductibles. Employers jacking up the cost sharing with employees is defined contribution by stealth. Either way it will represent the reversal of a 30 year trend where there has been progressive economic insulation of the consumer from the cost of care. When consumers have to pay more of their own money they will become even more demanding, more skeptical, and more fearful of being left behind.
• Customization of Care. Genomics will yield new tests that tell us all about our future course of disease and health. But more important than the burden of prescience (which we futurists carry with us all the time) consumers will know that their care will be more effective if customized for them. The right drug, for the right patient, at the right time will become the mantra reinforced by the pharmaceutical industry and the morning shows. The combination of predispositional genetic tests in the hands of consumers and insurers alike with the desire for customization by consumers and technology vendors will undermine the current health insurance system. In particular these trends aggravate the three Achilles heels of health insurance: moral hazard (when you have insurance you use it); adverse selection (you buy it when you know you are going to need it); and cream skimming (we won’t sell it to you if you really need it).
• Technology Tiering. Consumers will be asked to trade-up with their own money for superior technology. The three tiered formulary is a harbinger of things to come: the brand name over the generic, the low side effect drug over the higher side effect drug. Viagra and cosmetic surgery were just the beginning of this trend, but it will become more mainstream. While it’s harder to see how the technical content of inpatient care will be easily tiered : “Will that be the $1,000 or the $2,000 stent Mrs. Johnson?”, the trend is there. According to pharmaceutical companies, health plans and PBMs alike there has been remarkably little backlash against the tiered formulary. It is inherently American: you pay for the upgrade with cash or frequent flyer miles.

We are moving towards a system of floors and ceilings. We Americans want a floor below which no American falls, and the right to trade up with our own money. New economy entrepreneurs, innovative health insurers, and pharmaceutical executives are all salivating at the prospect of serving the affluent clients who can, and will, trade up to these new ceilings. But the new world of customized, consumerized and tiered healthcare will all unravel politically, economically, and morally if we do not guarantee the floor for all Americans. The business of healthcare must make a case for universality. Without it, the new consumerist nirvana can neither be created nor sustained.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California. This essay was published in the May/June 2001 Issue of the Health Forum Journal.