This is the first part of a three part overview of the major contributors to “wasteful” healthcare spending in the US (estimated to be in the ballpark of $1 trillion annually). This installment cues up more in-depth discussions to come regarding complications which spring from poor patient decision-making (i.e., smoking, unhealthy nutrition, failure to stick to prescription drug regimens, and alcohol abuse).
Overview: PriceWaterhouseCoopers estimates poor patient decision making necessitates ~$500B of otherwise unnecessary American health care spending each year. Obesity and smoking* are estimated to comprise a bulk of this figure (~$200B each), with non-adherence to prescription drug or physical therapy regimens contributing about $100B. Alcohol abuse makes up a much smaller figure (comparatively) at only $2B.
*For some reason, the smoking figure is given as a range of <$1B-$190B. That’s a pretty big range! My understanding is that the $200B figure reflects unrealized income due to possible higher cigarette taxes, where the ~$1B figure is the possible savings from a realistic reduction in smoking rates.
Issues at Play
Fighting behavioral problems are tricky: you’re basically hoping to override peoples’ cultural norms, comfort zones, and in some cases, addictions. Any government restrictions or attempts to influence behavior may be viewed as a threat to civil liberties. And finally special interests supporting these poor behaviors are massive, powerful, and resistant to anything that may encourage their customers to give up on them (just think of the restaurant chains, soda makers, massive grain processors, Big Tobacco, alcohol brewers, etc. – each group has a lot to lose and a very strong voice with lawmakers).
However, the war on tobacco is a great example of how concerted efforts can have a massive and positive impact on personal behavior. Smoking rates are way down in the US over the past few decades, with a lot of that likely driven by government steps to discourage smoking. Drugs like Chantix and nicotine replacement therapies and counseling are widely available. And start-ups are even at work designing tools to support positive behaviors. It feels like learnings from the anti-smoking revolution could be applied more widely to fight obesity and alcohol abuse, and to some extent, help encourage patients to adhere to trying medical treatments.
Conflict with the American Way?
Treating problems stemming from poor behavior lead to one of the most fundamental points of friction in the US surrounding the adoption of a more socialized form of medicine: should people leading healthy lifestyles have to subsidize the high healthcare costs of those leading unhealthy ones? Jon Stewart recently interviewed Cabinet woman Kathleen Sebelius, the head of the Department of Health and Human Services and former Kansas Governor. He pointed out that he’s in the top bucket of earners and may have to pay an additional income tax to offset the cost of expanded patient coverage. As a result, he joked, “Can I then stop poor people from smoking and eating ice cream? If I see them on the subway can I say ‘Hey dude – you’re costing me money’?’” While responsibility for one’s own decisions is paramount, there is a fine line between denying healthcare and demanding one pay for their own poor decisions: the CEO of Whole Foods found this out the hard way when he was roasted by his left-leaning customers for his apparent support of Republican obstructionism of healthcare reform after authoring a piece suggesting we should hold people accountable for their nutrition. Moreover, who is to say that someone more genetically inclined to be diagnosed with diabetes or heart disease should have to bear the cost of their own treatments when the bar to getting their disease was lower than those of others?
Some have called for taxes on unhealthy snacks like sugary soda. Indeed, such surtaxes are in place and expanding in the world of tobacco. And the taxes may be working. It’s arguable as to whether the drop in US smoking rates are due to better knowledge of the longer-term repercussions of tobacco use, a media-led blasphemication of Big Tobacco, or higher prices per pack. But something is clearly having an impact.
Healthcare + Productivity Drain
Finally, it’s important to note that other costs not shown here impact the economy more broadly – PWC says other costs due to “lost productivity, absenteeism, and presenteeism, can be three to four times higher.” Ironically, once the economy gets moving again, we’ll need as many people working as possible to generate tax income to pay off the Baby Boomers drawing from Social Security and Medicare. It’ll be imperative that we keep our workforce healthy and productive to do just that, and thus ensuring people make the right health decisions will be even more important.
What Can Be Done?
Generally speaking I can think of a few ways to tackle these problems:
- Education (Government/ Parent-led solutions): As early as possible, teach students about the importance of nutrition, good health, and obeying doctor’s orders. Reinforce these messages over time and through as many channels as possible.
- Disclosures at Point of Sale (Government-led solutions): Place notices, like the surgeon general warnings on cigarettes packs, on packaging or menus that outline the risk of alcohol and Calorie-rich food. Moreover, governments can force restaurants to display nutritional data like Calorie counts on their menus (they are increasingly doing so, to some effect, in pioneering cities like NYC).
- Taxes (Government-led solutions): Tax unhealthy vices (e.g., cigarettes, alcohol, or fast/ sugary food) to discourage their consumption, fund educational programs explaining why they’re so bad, and pay for the increased healthcare costs they cause.
- Drugs (Enterprise/ Startup-led solutions): A slew of biopharma pipeline drugs aim to get people to quit smoking, abusing alcohol and overeating (though unfortunately are often associated with the adverse effect of depression). It’s hard to think of these drugs as ‘disruptive,’ as drug companies typically find a way to squeeze out as much profit as possible to recoup R&D costs, and it’s hard to equate smoking quit rates or lower Calorie consumption during a clinical trial to lifetime healthcare cost savings. But if these drugs work well at getting people to live healthier they could easily be cost-effective to prescribe. Let’s just hope anyone prescribed these drugs actually take them (as non-adherence is the one behavioral issue you obviously can’t design a drug to treat)!
- Personal Behavior Support Tools (Startup/ Enterprise-led solutions): Here’s where entrepreneurs are best suited to get into the mix. Imagine mobile apps that remind you to take prescription pills, tell you how many Calories are in your lunch options, track what you ended up eating each day, or measure your weekly workout performance. Or social networking tools which encourage you to challenge friends and family to live healthy. Given entrepreneurs in this realm can sell directly to patients, but provide value to healthcare payers and employers, their ability to monetize their products and services are strong.
- Just Live Healthy (Patient-led solution): The old fashioned way of staying healthy. Putting this on here because if it worked for my grandparents’ generation it theoretically is still effective.
Next Steps: We’ll go in depth into each of the big sources of wastes and potential solutions, calling out more specialized considerations, and give some examples of trend-setting entrepreneurs.
Discussion Topic: What do you think about these problems and potential solutions? Are you or someone you know involved in startups operating in this space? Please feel free to comment or let me know.
