Fifty-Two Card Pick Up

Remember when you were a kid and someone asked you if you wanted to play “fifty-two pick up” with your new deck of cards? He would throw them all into the air and you would pick them up. Fun!

The health care industry today resembles this game. All of the cards have been thrown into the air and we are gradually picking them up. But the order has changed completely. Things are no longer assembled in tidy boxes by suit and number but completely re-ordered into new relationships.

I am not speaking here about “health reforms” as envisioned by Washington, but about what is happening in the market. The “reforms” just add to the complexity of the environment for the real players in health care. If anything, Washington will serve to retard the transforming re-arrangements.This notion has been nagging at me ever since Consumer-Driven Care started becoming a reality, but was focused especially by Bill Boyles’ latest issue of “Consumer Driven Market Report.” (For subscription information, e-mail Bill Boyles at Interpro Publications

Things had been quite stable for half a century before CD Health. On the financing side there were insurance companies doling out benefits. Even Medicare and Medicaid did not alter that fundamental arrangement. These companies paid benefits to doctors, hospitals, maybe also to some “allied professionals,” labs and drug stores. And that was the “system.”

All this began to change with the advent of cash accounts in health care financing — first Flexible Spending Accounts (FSAs), then Medical Savings Accounts (MSAs), then Health Reimbursement Arrangements (HRAs), then Health Savings Accounts (HSAs). Suddenly the banks were involved in financing health care. There may not have been much competition between insurers (all offering virtually identical products at virtually identical prices), but the new players (banks) started working hard to get a piece of the pie.

They brought in the card companies (credit, debit and discount), which began to blend with wellness and incentive programs, which relied on infotech companies. Boyles says the “new configuration” is “ACCOUNTS-CARDS-INCENTIVES,” all powered by technology. Notice that he gives insurers barely a mention.

At the same time all of this is being supercharged by employers moving to Defined Contribution and Private Exchanges.

Boyles wraps up his newsletter with an essay on three “Lookouts” (not “outlooks”) for 2013.

The first is the entirely new environment for employers and insurers. They will have to start reserving for the new federal premium tax, limit premium increases to avoid a federal rate review, add costs to comply with Exchange data requirements, and deal with new underwriting uncertainty as they can no longer ask medical questions of applicants. He concludes —

Chances are very good that employers and insurers will have no choice but to cut benefits even more to subsidize all the new sources of costs.

The next Lookout is —

Everybody will be looking for relief from the incredible complexity of the ‘new’ U.S. health system coming this year, and rising costs will make simplicity a lovely word to the ears of employers and consumers.

Concerns include a new emphasis on coordination of benefits across payers, cost shifting from expanded Medicaid programs, the complexity of dealing with different Exchanges in different areas with a portion of employees in them while others are not, plus the complexity of subsidies for some and not others and the prospect of having three different account arrangements (FSA, HSA, HRA) across all these platforms. A vendor who can smooth all this out will be very popular.

Finally, Boyles discusses the likelihood of market consolidation of the various vendors. He doesn’t expect any winner-take-all consolidation in the near future. There is too much innovation going on for the market to become that settled. Instead, he expects that some break-through innovations will become standard across all of the market, enhancing everyone’s market position.

I haven’t mentioned yet, but it is worth noting, that similar realignments are happening in the medical service delivery side. Some of this is due to the ACO push that merges physicians and hospitals, but the real revolution was already happening before ACOs were even thought of. This includes the advent of retail clinics, medical tourism both foreign and domestic, concierge medicine, physician-owned hospitals, at-home testing and monitoring, and many other innovations.

Much of this was anticipated years ago when I was running Consumers for Health Care Choices. Let me add a couple of links to some of the visionary speeches given at some of our events —

  1. John Goodman speaking at our annual meeting in Washington in 2006.
  2. Bill Boyles speaking at our annual meeting in Washington in 2007.
  3. Tony Miller (founder of Definity Health) at the same event.
  4. Gary Ahlquist (of BoozAllen Hamilton) at a banquet in Las Vegas in 2007.

We can’t know how all this will settle out or even when it will become settled. All we know now is that the entire health sector is going to look very different in the future than it was just a few years ago when all the cards were neatly organized in a little package.

Comments (12)

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  1. Ramesh Chandra says:

    Well said John.
    We will work towards simple , yet economical workable solutions that are really CDHC.

  2. Greg,
    I remember those good times and discussions in 2006 and 2007. Lets hope reason wins in the end sometime while we are here to see it. Thanks for all you’ve done.

  3. Bruce says:

    Greg, I think what you are trying to say is that it is one big mess.

  4. Frank Timmins says:

    Interesting piece Greg. I am a bit confused about Boyles’ comment regarding the “likelihood of market consolidation” of the various vendors. He doesn’t expect any winner-take-all consolidation in the near future.

    Perhaps I should read his article to understand, but I am curious as to how we can “avoid” inevitable “market consolidation” given the current direction of both healthcare and healthcare financing. It seems there is little room for creative thinking in a system that dictates both services to be rendered and the price to be paid for them. I do see coming creativity in software methodology in dealing with the bureaucracy, but it seems that economic creativity has been locked in a Statist version of Pandora’s Box, and they certainly want to keep that evil innovation contained.

  5. Ron Bachman says:

    There an old saying that “legislation tends to crowd out the future.” Of course, ObamaCare will restrict the progress of many new techniques and approaches to better and more cost effetgive healthcare. But, healthcare consumerism is a strong megatrend that can not be stopped by elections or ideology. It can be slowed down or sped up, but a new future around engaging the consumer and providers in a more direct relationship is inevitable. It will not necessarily be account based plans (they were a good start), but the movement will involve the consumer in making better informed decisions with a financial stake in the game. In addition, the “Internet of Things” will grow exponentially to monitor, inform and guide our health and health care decisions. The future is exciting and unfolding befire us, inspite of the politics of health care.

  6. Charlie says:


    One big mess is a huge understatement.

  7. Andrew O says:

    Charlie, I think you are right and what is especially troubling is how this directly affects people’s lives.

  8. Greg Scandlen says:

    Frank, I think you are right that “they” would like to keep it (innovation) contained, but I don’t think it can be. Defined contribution gives us (the people) the power to do what we want with our money. The central planners won’t like it, but they can go do (you know what). Ron Bachman has it about right. Remember my two-step formula for real health reform —
    1. Give us back our money.
    2. Get the hell out of the way.

  9. H. James Prince says:

    Greg, I completely agree with that two-step formula. We are near-miraculously inspired to save money and find deals when its actually -our- money.

    Hospitals, doctors, surgeons, and insurance companies need to print coupons in the morning paper – then we can have Extreme Couponing: Healthcare Edition on the Discovery Channel.

  10. Wanda J. Jones says:

    There are many ironies in this situation, but one of the biggest is that the same bureaucratic drive to “reduce costs and improve quality”while adding millions to the insurance pool was the culture behind Medicare and Medicaid in the first place. That is, they are the cause. Now they want to lead the corrections. Looking at the description of their “demonstrations’ of “Bundled payments” you see the same kind of adolescent power-mongering that is so rife in the PPACA itself. One example: if a medical patient returns for any reason, not just the original one for which there was a payment, it is treated as if it were for the original admission. Not paid. I marvel at the willingness of privately-owned or community hospitals to put up with this level of integrity in the Federal mind-set.

    To me, there is a race between the market power behind high deductible policies where the consumer is in full charge of his primary care and the marionette scenario where rules are made and enforced by the equivalent of many string-pullers. I agree that the encouraging trend is the rise of entrepreneurial networks of retail health services.

    It’s hard not to march on the barricades and urge providers not to play these silly games at all. Give enrollees vouchers, and let them make their choices.
    The public has no idea how all this will raise administrative costs, not reduce them. At the core, the Federal staff falsely equates quality and cost. And they won’t overtly appear to touch labor costs.

    I have done an analysis of the PPACA’s Intended and Unintended Consequences. Request it in a comment and I’ll send it to John to redistribute, if he could be so gracious. 50 pages.

    Cheers to all–

    Wanda J. Jones, President
    New Century Healthcare Institute

  11. John Sweeney says:

    So, if you were an employer without a health plan facing all this, what would you do?

  12. Beverly Gossage says:

    If you were a small employer I would continue not to offer a group plan which has very expensive rates and is not portable. You do not face a penalty for not offering one, even if your employees qualify for a subsidy through a govt. exchange.

    Let your employees be grown ups and use their paycheck as they see fit, including buying a health insurance policy.

    Focus on running your company, making a profit and hiring qualified workers at a competitive salary. I’m guessing that is what you would prefer your focus be.

    Imagine how much more efficient and innovative our businesses would be if they didn’t have to include health insurance and all its trappings in the equation of running a business.

    Beverly Gossage, candidate for KS Insurance Commissioner