The Diabetic Elephant in the Room
Concept
A futures market for population health.
This is not about health system evolution, but rather health market revolution.
Depending on their maturity and context, health systems tend to adopt a range of market forms:
- 1st generation = free market, no regulation (Chinese primary care)
- 2nd generation = government subsidies (UK, US, AU)
- 3rd generation = private health insurers (US, AU)
- 4th generation = quality-based payments (Never Events – US)
- 5th generation = value-based payments (Disinvestment – US)
- 6th generation = outcomes-based payments (ACO – US)
- 7th generation = wellness markets (tbc)
Problem
The healthcare sector monetizes illness. If there is no illness, there is no need for healthcare.
Healthcare often speaks of prevention, but this is secondary prevention, or more properly described as the treatment or control (but not cure) of existing (usually chronic) disease.
Asking healthcare to prevent illness from occurring in the first place is asking a sector to annihilate itself. Immunisation is an exception to this generalisation.
Doctors say they are all about health and prvention, but the way they are paid needs illness to put bread on the table. If Doctors are are serious, then they need to advocate for a change in how they, and the entire health system is remunerated.
The Frame
– when an individual enjoys an extra year of healthy, vital living, they create new value either through added personal income (if employed) or social benefit (if caring for family/volunteering etc.)
– when a population enjoys an extra year of healthy, vital living, the government captures this new value either through income tax (if employed) or savings (if caring for family/volunteering etc.)
– in this context, living an extra year of healthy, vital life is not a community liability (due to cost of caring for decrepitude), but rather a net generator of value
Problem
– current economics strongly reward the creation of chronic disease (i.e. processed food sector) and cure of chronic disease (i.e. healthcare sector)
– chronic disease is eroding the number of healthy, vital years of life enjoyed by the population, while healthcare is extending treatable, profitable, but depleted life
– population wellness is presently only promoted/defended by an altruistic moral imperative and political expediency
– but population wellness is too important to be defended solely by moral imperative – it needs a strong economic imperative as well
– in a contest between moral imperative and massive economic incentives, the latter dominates
– these economics exist because the health and vitality of humans, and the value they create, is not commoditized and capitalised
Solution
- make the creation of QALYs extremely profitable by:
- commoditizing QALYs
- establishing a market-based trading mechanism (c.f. carbon credits) to trade in QALYs
- prime the market from the expected and substantial economic (taxes) and social (savings from care not required) windfalls these QALYs represent
- mandate health (vs. healthcare) systems to optimize population QALYs
- establish QALY futures markets to generate liquidity to invest in innovation
Benefit
– commoditizing QALYs produces an economic cost to injuring populations and an economic windfall to improving their wellbeing
– activities which create QALYs (e.g. immunization, fresh vegetable distribution) generate windfall profits
– activities which destroy QALYs (e.g. smoking, alcohol, processed food) generate windfall losses
– activities which have no impact on QALYs (e.g. spinal fusion, knee arthroscopies for OA etc.) get nothing
– this also creates an incentive for innovation around the highest value intervention (i.e. low cost/high, lasting impact) vs. highest cost, highest impact intervention (e.g. Sovaldi)
– the most underserved communities stand to be the most profitable to turn around as they have the most “upside” to work with
Notes
– the life risk pooled (and traded) by life insurers provides an economic/analytic frame for implementing such a market
– Australia has 70% life insurance penetration amongst employeed individuals
– John Hancock has started to offer discounts on life insurance based on the sharing of healthy behaviour (e.g. fitbit) data
People
- Greg Simon – Poliwogg
- Peter Orszag – citi
- Andy Conrad – Google
- Esther Dyson – hiccup
- Ceci Connolly – PWC
- Chris Kryder – flare capital
- Rushika Fernandopulle – Iora
- Mohan Nair – Cambia
- Adam Pelavin – Comprisma
- David Katz – Yale
- Daniel Polsky – Wharton
- Kevin Vollp – Wharton
References
- Robert Schuller – paired trades
- Kevin Murphy Bob turpel Chicago study 2000, 2005
Notes
If you’re not fighting in the trenches against incumbent adversaries, then you’re not trying hard enough to change things.
If you want to change culture, don’t write a paper about it, get active, do what coke does and get dirty and rumble in the communities you want to change.