This post is a complement and response to the post by Michael Greeley entitled ‘Bet the Jockey…Bet the Horse…and Bet the Track’ (hyperlinked).
Michael Greeley is one of the nicest people I have met in the investment sector. The above well-written blog post is a ‘must read’. Michael periodically writes these nice blogs with well compiled information and passion. This particular post talks about changes in healthcare and how he and his firm have chosen to invest in a company and entrepreneur who are going to be in the midst of a fascinating market vortex, and extrapolates to the rebuilt healthcare system we are striving for.
These are great points from the perspective of an investor – but not always of the ‘consumer’. Being passionate about health reform and working to ‘Build an efficient and healthy world’, I want to shed light on alternative perspectives that need attention. In that process, I borrow many words and perspectives from Michael’s blog to connect the two views.
If we further incentivize tiered and ‘branded’ healthcare delivery system, WHILE moving more towards B2C rather than B2B – bulk of the population will be forced to get substandard care – because they cannot afford it. One may argue that is better than many not getting healthcare coverage at all – true, but is that what we are striving to build? It is like telling those consumers: ‘you want to buy from the branded tier, but you can’t afford it’. Healthcare is not a nice to have feature, but a necessity and a significant population of people not getting a good one will affect the others who can afford branded tier – including health of the latter and societal wellbeing.
The other argument about the healthcare cost drop due to ‘insurance cost-sharing initiatives like expanded deductibles and …’, again points to shifting the burden to the consumer. The other part of the statement ‘and the proliferation of innovative healthcare technologies’ include using big data (like EHR/EMR) to justify with data that low cost alternatives work as well on majority of population. Whereas majority of the cost result from a couple of percent population who suffer from illness that cannot be easily ‘cured’ to whom these low cost alternatives may not be the right choice, and subtle differences in effectiveness hurt them a lot. Now, using this population data and depriving the seriously ill (especially ones who cannot afford ‘brand’) who need the higher cost alternative is going to have serious negative consequences to real consumers (not investors) in the not so long run.
Here are few examples:
- An example is insurers saying that expensive medicine is excluded from coverage in your tier – the ‘brand’ effect.
- Another example is a doctor entrepreneur – whose qualifications cannot be questioned (but motives can be) – building and promoting a model writing that the patient does not need some specialized care or specialized medicine, depending on where they are on the tier and brand.
- To those who do not follow this closely, there are enterprises being built with an alternative business model whose sole purpose is to cover medicines and treatments when denied due to circumstances exemplified by above two points.
Most people who go to McDonalds and equivalent rather than more healthy and other ‘brand’ alternatives (of course they cannot live on apples) do so because they cannot afford the latter.
Yes, we all agree that current healthcare model needs a major overhaul that many are working on with lot of passion, and money from institutional investors like VCs (and return for them) is an essential part of this transformation.
We should be more careful in thinking out the healthcare system beyond the five year VC models, lest we end up with another broken healthcare system that needs to be fixed by another ‘New President Care’ (or ‘NACA’ – new ACA) in place of the just implemented ‘Obama Care’ or ‘ACA’. The point is not just about cutting cost but about making the system efficient in a sustainable way.
You can share your thoughts on solutions below comment section, or go on and build the system without these major pitfalls.
*Picture depicts the state we do not want to get to – where sole reasoning driving decision is cost.