Rae Lee is on the executive team at Vita Benefits Group, an employee benefits consulting group.  Her focus is strategic consulting for large employers and legislative/compliance issues.  Her hallmark is developing practical solutions to complex business challenges.  Click here for Rae Lee's LinkedIn Profile.

Dan:  Thanks for joining us at JwJ.

During open enrollment last November, I noticed that my wife's employer pays about $25,000 a year for our health insurance premiums, and that doesn't include deductibles or co-pays.  What has happened?!  Give us some history about how we got here.

It's useful to remember where it all started.  After WWII, the government-mandated wage freeze caused employers to get creative in providing incentives to attract and retain employees.  Enter group sponsored health insurance.  And, after protest, the IRS blessed offering such benefits on a tax free basis.

So, my employer gave me a huge benefit heretofore unknown, I didn't have to pay for it, and the government didn't tax me for it.

Exactly.

Importantly, at the time, they were catastrophic-only policies with very high deductibles.  In the 1950s, we had $100 deductible policies, but back then $100 was the equivalent of a monthly mortgage.  If we apply COLA adjustments to that $100 deductible, in today’s dollars it would be about $2,750, but until about two years ago, the average deductible across the country was $250-$500.

Lori Wilson, oncology surgeon and cancer survivor.

The health insurance that employers provided back then, and that the government didn't tax, was only for catastrophes?  Not all the many things we've grown to expect today?

That's right. 

In 1965, Medicare was passed and was structured to provide equivalently low out of pocket cost thresholds. Thus, over time, a measure of entitlement to more than catastrophic coverage has crept into our healthcare “psyche.”  Milton Friedman famously said, “Nobody spends somebody else’s money as carefully as they spend their own,” and the reality of the “my insurance company pays for it” attitude has been an important cost driver as healthcare consumption has continued to rise.  Couple these two things with unprecedented medical and pharmaceutical R&D efforts, and you get the foundation for ever-escalating healthcare costs. 

So, there's been a distinct evolution of our health care system.  Anything else? 

Well, yes.  We need to add to the equation a significant underlying shift from health to unhealth in our population.  Fundamentally, we are a stressed out, overweight, smoking, drinking, pill-popping, sedentary, fast food, and Ho-Ho eating population.  Sadly, it is not a pretty picture, and all these things have a direct impact on our health and our health care costs.  The Centers for Disease Control indicates that 74% of our healthcare costs treat illnesses that are, in some measure, the result of lifestyle choices.  Just think of the potential if we worked to reverse the impact of those lifestyle-impacted diseases.  Our healthcare costs could be reduced by as much as 40%–50% (a conservative guess).

What about the huge challenge of the uninsured?

The Affordable Care Act’s little-noticed success has been in cutting the uninsured rate to the current all-time low. The number of uninsured has dropped from 44 million in 2013 to 27 million in 2016.  This is primarily a result of the Medicaid expansion and premium subsidies put in place under the Affordable Care Act.  Importantly, of the 27 million currently still uninsured, 11.7 million are actually eligible for financial help (either through Medicaid or ACA tax credits).  As a side note, the public isn’t generally aware of this reduction in the uninsured rate, with 67% surveyed indicating it is “about the same” or at an “all-time high.”  (Stats from the Kaiser Family Foundation).

I wonder whether our congress has the political will, the creativity and spirit of compromise, or even the ability, to solve this complex problem.

In short, no.  Congress does not have the political will to solve the healthcare problem in our country.  However, I don’t believe it is because our Congress is in some way weak.  Rather, in this regard, I think Congress actually reflects the will of the people. What do I mean?  I mean that everyone thinks that “cost containment” is necessary and a good idea, but only when it is seen in the abstract.  You will always hear people say, “We need to have lower healthcare costs.”

That was my very first question to you!

Yes, however, what people really mean is, “We need to have lower healthcare costs, but not when it’s my Grandma, not when it’s my husband, not when it’s my child.”  The problem is that it’s ALWAYS someone’s loved one.  And when someone learns that their mom needs heart surgery, they aren’t saying to their family, “Okay, now we need to shop around for the cheapest cardiac surgeon.”  It’s not that Congress doesn’t have the will.  It’s that WE, the American people, don’t have the will to accept any measure of rationing of care in the name of cost containment.   

The Affordable Care Act ("Obamacare") has its defenders and detractors.  I know you have read it in its entirety (over a thousand pages), along with the even significantly longer 109 final regulations that spell out how the ACA is to be implemented.  What's your take?

The Affordable Care Act made important strides in extending insurance coverage to more Americans and providing subsidies to help pay for coverage (for those whose income is between 133% and 400% of the federal poverty level).  Importantly, however, it did nothing to actually make healthcare more affordable. 

Let’s take a silly example.  If you want to have a lower grocery bill, you can buy the same amount of food but find a way to spend less for it, or you can buy less food.  Those are pretty much the only two options.  The principle with healthcare is the same.  In order to lower healthcare costs, we Americans need to either pay less for the care we receive, or receive less care.  It’s really very simple. 

Despite the name of the bill, the Affordable Care Act did nothing to either lower the actual price of care or to encourage less healthcare consumption.  Think of it from your personal perspective. Since 2014 when the ACA was enacted, have you paid less when you go to the doctor for your care?  Or have you been consciously motivated by the ACA to consume less healthcare?  You are not alone, no one really has.

It's a moving target, but with a new president there's talk of repeal and replace.  Any predictions about the future of Obamacare?

There are certain elements of the Affordable Care Act that, I believe, have already become part of the fabric of our healthcare system today.  Those include 100% coverage for preventive care, dependent coverage to age 26, and no pre-existing condition exclusions.  It is unlikely that these key provisions will disappear. 

Other provisions, however, such as the individual mandate and the Pay or Play provisions for employers are likely to be the subject of repeal and replace efforts.  Importantly, President-Elect Trump appears to be ceding much of the detail of future healthcare actions to Paul Ryan, whose White Paper and proposed legislation (the Patient Choice Plan) proffer a fairly radical change in the tax code relative to health insurance. 

Ryan's vision would make all health insurance taxable, and then provide a personal/family tax credit to cover the cost of the insurance.  It is likely that, over time, the tax credit would not keep pace with the cost of healthcare, thus we would see a taxable corridor on health insurance in the future. 

Further, it's also important to remember that the Affordable Care Act has taken six years of focused effort to implement and required billions of dollars to be invested in creating necessary infrastructure.  It is unrealistic to assume that it will all be unraveled cleanly with the stroke of a pen (as is being purported in the news soundbites).  

Atul Gawande, surgeon and author of the book Being Mortal.

Is health care a right or a privilege?  It's a loaded question, of course, especially for those of us who follow Jesus, for whom physical healing was a central part of his ministry.

I have a fairly radical view on this issue.  It starts with the central tenet that the healthcare crisis in America is rooted in a fundamental lack of faith, or at least a gradual movement away from faith.  In short, we as an American people are afraid to die, and we have the expectation that our healthcare system should provide everything possible to save, extend, and enhance life.  In short, our expectations for healthcare in the face of illness are essentially insatiable.  In few circumstances do people refuse care or critically think about what is really the right thing to do from a cost efficiency perspective when it comes to treatment and care.  Callous as it seems, we need to be willing to ask the hard questions.  Is it right that we spend $40,000 on a cancer treatment that will potentially extend life for two months?  Is it right that we spend billions of dollars on treating diseases that are caused by lifestyle choices?  Can we continue to afford this luxury?

This was the message of Atul Gawande's book Being Mortal, right?

Yes.  In his book, Gawande calls out the need for meaningful change in how we think about healthcare for ourselves and our loved ones.  He frames a potentially different future, one that focuses on enabling health rather than simply managing illness.  In this process, he shines a spotlight on our instinctual value of quantity of life over quality of life and  offers up a mental challenge of shifting our thinking from healthcare as a means to ensure survival to healthcare as a means to enable well being, These themes are consistent with the hard questions that I believe we need to ask, not only as they relate to our attitude toward health and dying, but also to our attitudes about healthcare consumption. 

So how does this circle back to faith? 

Consider the following questions. When is it right to accept that we are all mortal and will die?  And when does faith in God both comfort and challenge us to be less afraid to die?  When do we have the faith and courage to believe that maybe more isn’t necessarily better, especially when the “more” comes at a cost of burdening our society, mortgaging our children’s future, and siphoning resources that might be used to create basic food, shelter, and health for the billions in the world that are hungry, living in poverty, and fighting for clean water?  These are hard questions, to be sure, but I believe they are the questions that need to be asked in order to truly change the cost structure of healthcare today.  And until we are willing to face the dreaded issue of rationing care, of not getting everything possible just because it is available, we will not fundamentally be able to change the escalating costs of healthcare today. 

But isn’t there a huge amount of waste in the current system that should be cleaned up? 

Yes, a big yes.  Yes, Big Pharma drives up costs. Yes, there are hospitals and providers that receive more than reasonable compensation.  Yes, there are insurance companies that are profiting from the healthcare system. And yes, there is administrative waste that can be trimmed to help cut costs. 

However, the total percentage of cost attributed to administration is approximately 15%, while the cost of actually providing the medical care is 85%.  So, certainly, it is important to trim the fat from the 15%, but to do so whilst ignoring the 85% will not solve the problem.  If we waived a magic wand and fixed all of these ills in the current system, we would still be left with escalating costs from unfettered American expectations, expectations that are unmatched anywhere else on the globe.  The burden of the long term and compounding impact of those unfettered expectations and extreme consumption of healthcare will continue to wreak financial havoc into the future, even if we were to fix all of the obvious “sins” in the current system.  

As an expert in this field, what do you think we lay people need to know about health care in the United States?  Can you help us separate the true "signal" of what's happening amidst all the "noise" in the system and the media?

This is a complex problem.  There are many stakeholders and a complex existing infrastructure in place to care for Americans, all with overlapping and sometimes conflicting interests — federal, state, and county governments, Medicare, Medicaid, regulators, employers (small businesses, huge corporations), employees, the uninsured and the unemployed, various care providers (doctors, nurses, hospitals, therapists, etc.), insurance companies, litigators, lobbyists, unions, Big Pharma, NGOs, tech companies pioneering potential therapies like gene editing, veterans, etc.

On top of that, throw in a solid dose of politics and media.  So how is it that we can ferret out the rhetoric and noise from the things that really matter?  My suggestion for a bright line test is as follows: financing vs. health.  If the talk is of changing how healthcare is financed, how it is paid for, how it is taxed, etc., surface level change may be implemented, but it is unlikely that longstanding and meaningful reductions in cost will result.  On the contrary, if the talk is of changing the health of our population, of focusing on wellness, of creating support systems for recovery and heath enablement programs, and, most importantly, of lowering the actual amount of healthcare that we consume, then there is at least a possibility that meaningful change for the better will result. 

Do keep in mind that any of these changes for the better won’t come to fruition within a convenient election cycle or even business cycle, for that matter. Rather, we need to understand that investments in our population’s health (reductions in smoking, obesity, stress, addictions, and risky behaviors) lay the foundation for a better future for our grandchildren and generations beyond.  

Are you optimistic or pessimistic that our country can figure out our health care conundrum?

I am an eternally optimistic person who is incredibly pessimistic about the future of our healthcare system.  Until we are ready to grapple with those hard questions, until we are willing to consider the consumption of resources within the American healthcare system as a burden to our children’s future, and unless we are prepared to put a value on world health over American health, I do not believe that we will see material, long term changes in our healthcare system.

Image credits: (1) Trbimg.com; and (2) Jegan's ASCII and Wallpaper Blog.