High Costs, Headaches And Hidden Money Pits Of Healthcare Combated By Blockchain
Few things in life are less empowering than being ill. Not only is there physical discomfort, but there is the unsettling uncertainty of if, when or how we will get well. Thankfully, it is less and less a question of whether a treatment or specialist for the condition exists. Advanced, specialized medical centers are available across the United States and internationally. Pharmaceuticals cover a wide spectrum of illnesses, and new ones are constantly being developed. Alternative treatments are rising in popularity and prevalence, as well. In short, if a person is unwell, there are generally several avenues to pursue for treatment.
The questions keeping sick people up at night now revolve around the following:
"Will I be able to afford the care I need?” and “Will I receive treatment in a timely manner?”
These are the disheartening themes of many healthcare conversations. Incredibly high costs and inefficient processes pose often insurmountable barriers between a sick person and wellness. While we shouldn’t expect getting well to be effortless, it certainly shouldn’t be so tedious or inaccessible that we become discouraged. It’s stressful enough being ill to begin with.
Though advancements continue to be made in medical research and technology, the health care system itself has proven to be an impediment to wellness. This is especially true in the U.S., where healthcare costs run unchecked and simple tasks get bogged down by outmoded administrative processes. Furthermore, despite that keeping patient healthy is in the best interest of insurance companies, providers, and employers, they fail to work together to actually promote wellness and prevent illness.
Pricing of procedures and pharmaceuticals is a significant problem in the U.S. where per capita expenditures on health care are almost twice what they are in other developed nations. CNBC reported that the same treatments are often two or three times the cost in the US compared to other developed countries. For instance, the average MRI in the U.S. runs over $1,000, whereas in Australia, it costs $350.
Theories for why costs are so high in the U.S. include that the U.S. has more specialists who earn more money than in other countries and that use of care rates are higher in the U.S. However, as reported by CNBC, these theories were debunked by a Harvard Chan School study.
The study found that use of care is similar among the 11 developed countries analyzed and that the number of specialists in relation to primary care physicians was similar. The study acknowledged that physicians earn much higher salaries in the U.S., though researchers pointed to that fact as an area to examine when looking to decrease healthcare spending.
Pharmaceuticals are also drastically more expensive in the U.S., and prices increase frequently and without justification. Earlier this year, CBS reported on the death of Alec Smith, a diabetic who was unable to get health insurance through his employer. He could not afford to purchase insulin, as the cost had risen to over $1,000, and he died of diabetic ketoacidosis—the very condition that insulin would have prevented.
In the case of insulin, the murky abyss of pharmaceutical pricing becomes very apparent. As a prescription drug, insulin has been around almost a century, and manufacturers do not have to pay royalties. Yet, prices continue to rise, and no generic version is available.
Senator Susan Collins described insulin pricing as a “complicated web of transactions” that makes it extremely difficult to determine why the cost of the medication is so high and why patients who need discounts and rebates to afford it are not seeing the help.
Avik Roy, a Forbes contributor, shed light on the reality of pharmaceutical pricing, stating, “in the absence of competition, [drug] manufacturers frequently charge the highest prices they believe they can justify in the court of public opinion.” Roy explains that while the middlemen, or pharmacy benefit managers (PBMs), are often held accountable for increasing drug prices, it is the drugmakers who set the prices. PBMs are hired to research efficacy and cost effectiveness of various medications and then to encourage use of the most effective drug at the lowest price. According to Roy, PBMs have actually helped to keep prices from rising more drastically.
Rebates and discounts
However, drug manufacturers have found a way to influence PBMs and get patients on their higher-cost versions of a drug through rebates and discounts. Rebates are a gray area when it comes to prescription drugs, though they inarguably influence pricing and insurance premiums. In order to promote use of their brand-name, expensive drug over use of a generic version, a drug manufacturer may offer rebates. These rebates are divided between PBMs and insurance companies. Insurance companies can then require a lower co-pay from the patient, making the high cost drug accessible.
The problem is that the insurance company is unnecessarily paying for a costlier version of the drug, and while the patient isn’t paying a higher co-pay, the insurance company is putting out more money because the drug is more expensive. This helps drugmakers rake in money, but does not translate as a benefit to patients or insurers. In fact, it leads to higher premiums, which, as in the case of Alec Smith, prevents many patients from obtaining coverage.
Desperate times call for… a vacation?
Exorbitant costs for medical procedures and prescription drugs have led to a rise in medical tourism. Medical tourism refers to crossing international borders for medical treatment. It’s become common enough that some insurance companies offer medical tourism benefits.
For citizens of the U.S., Mexico and Canada are common destinations for treatment. Even including travel costs like airfare and accommodations, many people are able to afford medical treatments across the border that they can’t afford at home. For example, a common procedure like bariatric surgery costs between $20,000 and $25,000 in the United States. In Canada, the same surgery costs between $11,500 and $15,500. In Mexico, the cost of the procedure can be as low as $4,300.
Pharmacy tourism is another take on the medical tourism concept. Medications often cost a fraction of their U.S. prices in Canada and Mexico. Some insurers have taken note of the trend and are seeking to put it to work for their bottom line as well.
The Salt Lake Tribune recently described a Utah insurer’s new approach to cutting prescription drug costs. PEHP, the insurer, is helping those who need specific high cost medications get them at a lower cost. The company will pay a patient’s air travel to San Diego and ground transportation from there to Tijuana, Mexico. PEHP also gives patients $500 in cash. For a multiple sclerosis medication, the savings for a 90 day supply come out to over $13,000—well out-weighing the travel costs and $500 pay out for the insurer. PEHP offers pharmacy tourism benefits to those taking 13 different, high cost medications used to treat illnesses like MS, autoimmune disorders, and Crohn’s disease.
Administrative issues and bureaucracy
Health insurance is often touted as the remedy for making healthcare accessible. However, even someone with great insurance and affordable co-pays isn’t guaranteed timely or headache-free care. If a referral or pre-authorization is needed, treatment can be delayed for weeks. According to CNBC, in a survey of U.S. practitioners, “a significant portion of doctors call the time they lose to issues surrounding insurance claims and reporting clinical data a major problem.”
Patients suffer from this reality as well. Once granted the referral and in the specialist’s office, many patients find themselves repeating the same score of symptoms and medical history that they gave to their primary care physician, whose assistant diligently typed it into a digital record system. Alas, if that system or facility is not associated with the next, the whole process must be repeated, requiring time and resources.
Such inefficiencies translate to significant financial drain. The Harvard Chan School study attributed a significant portion of the spending disparity between the U.S. and the other countries to higher administrative costs. Administrative costs only account for 1-3% of healthcare spending in the other countries, while in the U.S., administrative costs come to 8%.
A healthcare veteran weighs in
The current healthcare system certainly wouldn’t be described as patient-centric, efficient, or value-based, but such a system is possible, according to Pradeep Goel, CEO of Solve.Care. Goel spent more than two decades on the IT side of healthcare systems, during which time he built 4 healthcare IT companies. He’s been a part of state and national health record initiatives and was at the forefront of developing and implementing data systems to manage patient data. He then faced the challenge of getting multiple systems to communicate with each other in ways that would improve the patient experience and outcome. Eventually, Goel realized that simply collecting and digitalizing data wasn’t going to disrupt the convoluted system.
In fact, he came to know the frustrations of seeking specialized treatment on a very personal level when his son was diagnosed with an array of medical complications. Even with his knowledge of the industry and involvement on multiple fronts, the task of coordinating care for his son was monumental. It became a full time job for Goel’s wife to manage their son’s care.
At this point, Goel realized that an overhaul was necessary, an overhaul that would give power back to patients to control their care and information and would incentivize stakeholders to act quickly, efficiently and effectively. Recently, Goel was interviewed by Forbes contributor, Jefferson Nunn, about his perspective on the healthcare system and its future.
A new vision for healthcare
High pricing, bureaucracy, and inadequate care coordination are three major concerns about the current healthcare system. As someone who has “seen healthcare from a consumer, employer, TPA, care, clinical, and HIE,” Goel has a unique perspective on how the system works and doesn’t work. He is currently channeling that knowledge and experience into the development of a blockchain-based platform for the administration of healthcare and benefits.
Blockchain, the technology behind cryptocurrency, is being tested in numerous industries as a means of improving existing systems. The characteristics that make it appealing in so many arenas include transparency, decentralization, immutability, and smart contracts. The healthcare system, with its notorious centralization, prevalence of fraud and abuse, and bureaucratic deficiencies, could clearly use a dose of what blockchain can offer. Goel believes that a three-fold approach is needed to improve healthcare. He stated,
Let's make the clinical outcomes better. Let's not just make it administratively cost less, we have to do that regardless…But we also can improve and will improve clinical outcomes. And then also make the payments accurate in real-time. And those three pillars are worthwhile, because each of them singularly have a huge impact. But if you can interact, if you can get those three working together, then it's truly the revolution that we all have been waiting for.”
Goel points to the need to shift from a cost-based system to a value-based system if healthcare is going to have a chance at being effective and accessible to those who need it. Value-based healthcare would ask how and where money could be spent to achieve optimal wellness and prevent illness. The current cost-based model is one that waits for something to go wrong and then seeks the cheapest way to fix it. As has been discussed, this is not the most effective approach from a cost or wellness perspective.
Defining and improving relationships between stakeholders
One component of Goel’s vision for an improved system is defining relationships between stakeholders, which he says blockchain can help achieve. The platform and system Goel envisions connects providers, insurers, employers, and patients in a way they have never been connected in order to manage healthcare and benefits.
His concept for a re-design of healthcare is largely based on the idea that if proper communication channels exist between relevant parties and those parties can communicate in real-time, many of the delays and costs caused by inefficient administration can be eliminated from the healthcare system. Further, that if transparency enters the healthcare space, there is less opportunity for fraud and abuse. By automating various aspects of healthcare like insurance verification, referrals, and appointment scheduling, everyone saves time and money.
Once relationships are defined, stakeholders are better able to communicate efficiently, which means care can be provided more efficiently. Currently, patients may wait weeks for treatment authorization and referrals. Providers frequently wait for payment from insurance companies. Insurance companies wait for verification of treatment from providers. With the use of blockchain, actions and transactions are logged in real time and visible to the relevant stakeholders simultaneously and instantly. A provider can log a treatment which can release an insurer’s payment for that treatment in real time. A patient can see that a provider has sent a referral and see when the request has been approved, and so on.
Smart wallets that can sync and communicate with each other are Goel’s answer for streamlining healthcare processes and improving outcomes. Through the smart wallet, secure communication channels are possible, and care coordination gets a much needed boost. The wallet approach facilitates direct transactions and communications between stakeholders, such as between patient-doctor or provider-insurer. In essence, it replaces the costly, inefficient administrative arm of healthcare and puts administration in the hands of the relevant stakeholders.
Healthcare wallets would be compatible with a variety of decentralized applications that communicate from wallet to wallet. All stakeholders, whether patient, provider, insurer, or employer, would have wallets. Each individual selects the applications that are relevant to him or her and with whom to sync the application.
Goel imagines applications not only to improve the patient-provider relationship function, but all other relationships, such as employer-broker. Some use cases for applications include eligibility and adjudication, management of chronic conditions, and more.
Since existing data systems in the healthcare sphere do not communicate with each other, care coordination is lacking. Incentivizing effective care and opening communication channels between stakeholders are two paths to improving outcomes in Goel’s opinion. As Goel pointed out in the interview, it is in the best interest of insurance companies and employers to encourage wellness, a concept that seems to have gotten lost in the push for profit.
For example, an insurer will spend less on preventative and supportive treatments than on a pregnancy and delivery wrought with avoidable complications; it is in the insurer’s best interest to encourage a pregnant woman to make healthy choices throughout the pregnancy. As such, the insurer could communicate with a pregnant woman via apps to remind her about check-ups and provide nutritional support. The company could also send funds to the woman’s wallet to cover transportation to and from the clinic. Apps would facilitate easy scheduling between the woman and her provider, and her visits would be logged and verifiable instantly for prompt payment via the blockchain.
Care coordination in regard to medical tourism stands to improve in Goel’s approach as well. While the platform wouldn’t control industry pricing, it can help patients see their options and to make alternatives like medical tourism more viable. Goel cites “a lack of transparency, coordination, and continuity” as the most pressing issues with medical tourism and explains how a blockchain and wallet-based platform would mitigate these issues. A facility’s accreditation could be verified via the platform, and apps would be used to document treatment and progress. As treatments are logged on the blockchain abroad, the patient’s primary care physician could stay up to date. The insurer could verify the treatment and release payment.
It is undebatable that changes are needed to make the healthcare system about health and care rather than about arbitrary rules, processes, and impersonal, generalized treatment. While for many years, little seems to have changed to improve the healthcare system, it appears that blockchain technology and a shift to a value-based approach may hold the key to a more efficient, patient-centered, and cost effective healthcare system.
How It Works
Blockchain tokens with smart contracts will be introduced to NDIS (National Disability Insurance Scheme). Participants and service providers will be able to make payments according to pre-defined conditions specified in the smart contract, like who can spend it, when it can be spent, and on what.
Those who participate in NDIS need highly ‘personalized payment conditions.’ The app helps participants find, book and pay for services from NDIS service providers, without having to do all the paperwork.
“Programmable money represents an opportunity to re-envisage how we think about money and how payments function across the economy,” said Sophie Gilder, head of CBA’s Experimentation and Blockchain, Innovation Lab. It is clear that the potential of this technology for the NDIS is enormous and ranges from greater empowerment for participants, reduced administration costs for businesses and greater visibility for the government.
An additional report on the project will be released in November this year, where designs, benefits, and limitations of the test with suggestions for other future applications will be put down in complete detail.
It is clear that CSIRO is looking at the immense potential of blockchain technology and wishes to harness it for the benefit of people throughout the world in general. Earlier, Data61 and the University of Sydney had teamed up to create the next generation Red Belly Blockchain that can process 30,000 cross-border transactions per second.
The CommBank also isn’t new to blockchain innovations. In August this year, it helped settle the world’s first blockchain bond issued by the World Bank and raised around $81 million in the process.