Episode 99: Why is Healthcare so Challenging Now? A Quick Analysis.

Welcome to another edition of "Around with Randall", your weekly podcast making your non-profit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.

Thank you for joining me here on "Around with Randall" and of course I'm Randall. We're gonna talk today a little bit up at the 40 - 50,000 foot perspective because there's some challenges, particularly in the health care industry, that I'm getting more and more consternation about. What I'm talking really, and what it's related to, is a lot of philanthropy-driven professionals, fundraisers are asking what is going on in healthcare that there are so many problems? So let me give you what the problems they're feeling and seeing. There have been, through this year, a number of reports that have come out which are pretty much required from health systems about where they are financially, and in the first quarter which were released in April and May there were huge losses by some of the largest health care systems in the United States. And now we're getting the next round of those reports and recently an example is Cleveland Clinic announced losing a billion dollars in the first half of the year. It's one example amongst many. They're not unusual or unique, which is putting an immense amount of pressure on leaders in health care to make financial decisions, and we're into discussions at local levels about all kinds of things about cutting and why can't I get resources, and like more importantly, I can't get executives to make decisions like they used to. And it's because all of this is happening at once. And the question that I'm being asked is, "what is this that's happening?" So I want to go up 40 000 feet and maybe try to diagnose, at least from Randall's perspective, what's going on in health care and why this is a problem.

So let's start with the big picture. Health care in the United States is about 20 percent of our gross domestic product. Last number I saw was actually about 19.7% when you look at CMS. What does that mean? Well, that means that one out of every five dollars spent in the United States is spent in health care in one way, shape, or form. Prescriptions, hospitals, doctors visits, all kinds of stuff. What you don't know or what most people don't track is, well, what does that mean? What is 20% compared to what? Well if we go back to 1995 it was 13% of our gross domestic product so we've seen a 50% increase in health care costs or spend expenditures as comparison to the gross domestic product. You might say well what does that do or what is how does that compare to the rest of the world? Well, the rest of the world's average according to the world bank's about 10% of the local gross domestic product. So as an example, and I'm not using this specific number, but in France they may spend 10 percent if they were on that, on the average. And actually France probably doesn't spend exactly 10%, but it's just an example. We are double the cost expenditures in the United States and at the same time we don't have a economic model in health care that allows most providers, and I'll call hospitals, doctors clinics, whomever to control their prices, controlled by a third party in the insurance industry or medicaid medicare by government agencies, who set boundaries limits negotiate pricing for the various things that are chart we're charged for.So that brings us to this moment where there's a real problem.

And the question is, why is there such a problem? I think there's four things that dominate this conversation and at the end we'll try to bring some tactical things into this. There's also some solutions which are challenging, but the first is understanding what the problems are. So let me start with number one which is that our population as a country 330-340 million people is broken up into generations. And what we know is that the baby boomer generation - 1946 to 64, 65 something of that nature - is about 71 million people, which on percentage is you know 20% ballpark, maybe a little less. Actually there are now more millennials than there are baby boomers in the United States and quickly coming up are the generation z's which is 97 to 2012, they're gaining on the baby boomers as well. We're losing, obviously, the silent generation which is those who fought in World War II. There's just 19 million left and that's 1928 - 1945 when they were born.

So the first factor is that the baby boomers are an incredibly large percentage of the population, and to be honest, they always have been. But there's a second factor and that is that the costs of health care are completely dependent on the aggregate, in total, on age. So if you're watching this on YouTube, I'm holding up a graph, I first saw it from Kaufman Hall, that tracks the cost of health care by a number of countries including the United States, all of them industrial, first world countries. And at about age 54, 55, 56 on this graph you see that the cost goes up like a rocket ship in the United States. It certainly goes up in other countries, but it doesn't go up at this level. And what this means is that the baby boomers, who are again about 71 million people, are spending an incredible amount of money on health care. But they're not really spending it. It's coming through insurance companies or when they get to a certain age, medicaid medicare, where they're not even paying those bills. In that graph you saw we're up five, six-fold by the time that we get to the age of 80 in terms of expenditures.

So you might ask, why is this happening? I like to call it the Burger King effect. When I was a kid, and I have to be honest, I don't eat a lot of Burger Kings anymore but they had an ad and not where's the beef, that's maybe what you were thinking, but their motto was have it your way. And in some regards our baby boomers are just that. They want it their way. They want what they want, when they want it, how they want it, and in particular, when they're in retirement, and in particular when it comes to health care. If we think about this, and I think about it because I have two wonderful parents who are right in the middle of this generation, smack dab, maybe a little on the front side and, they have that mentality. It's not that they're bad people but they're like, we paid into this, we, this was the deal. We would pay in. We paid for, you know, medicare, for our parents. You're paying for us. Hey you should be taking care of us. And they've had their way with the world over the last 30, 40, 50 years. There was a reason Burger King picked that slogan, have it your way, because as the world industrialized we got more individual choice. We could choose, unlike Henry Ford the Model T, you can have it in any color as long as it's black cars, colors, houses, everything became a choice. And now they want all of those choices, and the costs involved with that are astronomical. It doesn't make them bad people. I'm not blaming them for all of this, but society, culturally, this is where we're at.

So you have almost the largest population, generationally, in our country needing the most amount of healthcare, and hospitals, clinics, doctors don't really get to choose their pricing. And we have a system where people generally don't pay for it themselves, which is the fourth issue. And that's transparency. We don't know how much things cost. Now there's been recent legislation out of congress and CMS to force hospitals to produce their actual hard costs on different procedures and supposed to be listed like an excel spreadsheet. The problem is they listed it the first time and nobody could read it or understand it because they were using codes. CMS got back involved and said, "No, no, that's not what the legislation says." Now we're reading about hospitals who are just saying fine we'll pay the $5 million penalty. We're not going to tell you what our pricing is because it puts us at such a disadvantage that we won't make it. Transparency has affected the decisions of how much things actually cost and because insurance hides in that nebulous, that we don't know, we can't make good consumer choices. And by the way they don't know what everybody else is paying anyway.

So you have four issues that are driving this conversation of health care and the church. And by the way, no there's no one's to blame, but we got to make decisions because we can't continue this way. You have a large population of which they are the first, the second largest population in our country who need the most amount of health care, when it's most expensive. And they want it the way they want it because that's the way they've always done it. And we have no idea what the costs are because things aren't transparent. That, in a nutshell, is the problem. The question becomes how we're going to solve it. I'm not pretending here to have all the answers, but how we do things today isn't going to solve the problems that we have today. We've got to solve these issues, these challenges, with new ways of thinking.

So let me give you a couple of examples. The transparency issue, I think, is paramount. Where is it that we go in life and we can't see the price? Grocery stores, cars, houses? I love football season. Tickets, cable, internet, my business model, you get to know what it costs before you sign the contract, and if you don't like it you can do something else. We need a more transparent system because that then may alleviate the issue of medicaid and medicare being paid, being a lower pay rate than commercial pay because we're hiding behind all of these walls. That's going to help with the consumer choices. The problem is that's not going to help with the health care that many, health, that many Americans need.

There are other things we're going to have to get used to. Let me jump to which we, I think learned during the pandemic, really works well, is this idea of tele-health. When you have a big office, lots of equipment, and a lot of people it costs a lot to manage all of that. Now if you're having a heart attack or it's a cancer diagnosis, that's really not what I'm talking about. I'm talking about the ability for someone to have something simply diagnosed without all the rigamaroll that goes into going to an office. And what we learned through the pandemic is tele-health, the ability to talk to a caregiver, a doctor, a nurse practitioner, a nurse, through video, zoom, go-to-meeting, iPhone with FaceTime, pick your medium, it doesn't make a difference, is a much more cost effective way of doing entry-level health care needs, primary needs.

The second thing is that what we've learned is that testing and getting out ahead of the health care before it's really bad is quintessential, so you might think about it while you go in for an annual physical and they draw blood and they run some tests just to make sure everything's okay. I do that in particular quite often because I don't have a thyroid and I have them required to take a little pill every morning to to replace the, what the thyroid produces, and I need to know if there's another issue. So I'm doing this quite frequently. We're jumping into the next evolution of that, which is going to be scary for some people but may be necessary from a cost perspective, what we're talking about is pharmagenetics. Snd you're maybe saying pharma, what I've never heard of it, pharmagenetics, pharma genetics is really where they look at your genetic makeup and they do two things. Number one, based on certain chromosomes or DNA they become predictors of certain issues that maybe they can be kept away or chronic rather than becoming a real enormous health care issue. Think about the ability, and this is not my expertise but just from a basic perspective, think about the ability if they could predict that your genetics lead you to be more likely of a heart attack and that there were medications pills or regular testing that would make that more easier to deal with before you have it, and you didn't know it was going to be a problem. Think about the stories, and I'm sure you've seen them, where someone's running 10 miles a day and all of a sudden they dropped dead of a heart attack and was like I can't believe it, the guy the guy was healthiest guy, no healthiest woman, I know. Can DNA genetics help predict some of those things so that we catch them before they become a problem we could deal with cancer this way we can deal with cardiology issues, heart, pulmonary, neurology, aneurysms we could deal? I think about one of my dear friends who's working in this area for from a fundraising perspective. She says it's the coolest thing in the world if they get enough DNA to do predictive modeling in terms of who has certain genes or DNA sequencing. They could say, look you need to do some things and we're going to save you a problem.

Tele-health and pharmagenetics also do something else. They can be done from a distance, as we see a reduction in the last 10 to 15 years of physicians and hospitals in rural areas. Tele-health and pharmaceutics doesn't require a face-to-face visit so it can provide better health care for people who are more away from or distant from providers. Pharmagenetics does something else. It also will allow you to get away from, or the system to get away from, a one-size-fits-all drug so if you have, I'll take me as an example, don't have a thyroid does everybody need the exact same kind of synthroid or the different variants? Well I don't know the answer. That, and maybe that's a bad example. I'm not a doctor, but what I do know is that, let's take an antibiotic, there are various kinds but, which one's best for you? Which one's going to be the most effective? Which one can keep you out of the hospital? Well, most people start with a very generic kind and then when that doesn't work they go to the next one, and then the next one. What happens if we knew the third one was actually one that would work with your DNA and would solve all the problems of whatever that particular infection was, but you don't know that until we have the DNA? And so there's a part of this you got to give of yourself because they need them for sampling to be able to do these predictions.

It's very complicated but it's something that could make a big difference in getting out ahead of some of the problems. Remember that curve that you either saw on my on the screen in YoutTube or you're listening and I talked about where at about age 54, 55, 56 it starts spiking straight up because the costs go through the roof? What happens if we could predict some of those things and lessen that cost? If we could find a way to do more testing and less treatment what we'd find is a cheaper system. And by the way, probably a more effective one. Our health care system has been built, not just here in the United States, but around the world, on when bad things happen we take care of them. And really what we need to get into the model of is, we got to figure out what might be bad in the future and how do we help people not get into bad situations, health-wise, that will lower our costs.

The unknown is what does that. Do for the way in which we pay hospitals and doctors and other things. And I don't have an answer for that. But what I do know is that if you're in health care and in philanthropy you've got CEOs and executive teams that are wondering what to do. They're afraid to pull the trigger on caught on on expansion. And I'm not talking about buildings. But in programs and outreach they're apprehensive about spending any more money. We're the most effective and efficient way to bring in revenue into the organization. We got to cut our budgets and we don't understand, and today was just an attempt to give you a bigger picture of what's going on so you can understand what the mentality of the CEO is as they're trying to figure all of this out, and hopefully have a conversation with them about what it means and what philanthropy can mean for them, a broad stroke but may be valuable for you as you think about what's going on in our country, in particular, with healthcare.

Don't forget, recommend this podcast to a friend. You can get it on any of the platforms from a podcast perspective, certainly on YouTube, with googling Hallett Philanthropy. You'll find them all there in the YouTube channel. And if you'd like to get a hold of me, email me at podcast@hallettphilanthropy.com. Even though times are trying and it's frustrating and a lot of stuff's going on coming out of the pandemic, you're important to what you do. And if you're not in healthcare you're doing something else pretty great. You're making a difference for people who need help. That's the definition of philanthropy: love of mankind. Don't forget, some people make things happen, some people watch things happen, then there are those who wondered what happened. You're someone who makes things happen. You partner in the community with others who want to make things happen for the organizations that are doing the important work in our communities, making the world a better place. Thank you for what you do. Know it's important and don't forget that every day you show up and do your job. It's affecting someone who's wondering what happened, and that is a worthy way to spend a life professionally. I'll see you back right here on "Around with Randall" and don't forget make it a great day.