Why is health insurance in America such a bad deal? (Part 2)

Decent wants to fix it, first for freelancers who buy their own.

In Part 1 of this post I wrote about how healthcare costs are bankrupting the American Dream, especially for freelancers who buy their own insurance. Today I’ll share the root cause and what Decent is doing to fix it.

The root cause of healthcare’s problems is that all key stakeholders except the patient benefit when costs go up.

If you’re used to shopping in other industries, healthcare can seem irrational.

“The most frustrating part of insurance is paying too much and not getting great benefits. I am giving a huge piece of my income each month, but I still pay a lot for doctor visits and such.”

“I just don’t have a good sense of how costs are determined. I like to know what something will cost me before I get treatment.”

“The most frustrating thing about my current insurance plan is the difficulty of navigating through bureaucratic mazes of conflicting information that is often not up-to-date.”

“My health plan doesn’t cover my acupuncture treatments, which seem to be the only relief I get for my chronic pain.”

— Anonymous freelancers from Decent’s 2018 health insurance survey.

What the hell is going on in healthcare?

• Why is price and quality data so hard to find and understand? These days you can comparison shop for most things online and check prices before leaving your house, if you have to leave your house at all. Reliable price data is hard to find in healthcare, and that’s just the beginning. Which doctors are good? Why is your doctor making that recommendation? What treatments are most likely to keep you healthy, and when is care needed at all? Why do common medical procedures like MRIs cost 13 times as much at one hospital vs. another in San Francisco? What does your insurance cover? How does your plan work? What do all the charges on your bill mean? Most insurance forms are written at a college reading level or higher, but the average American reads at a 7th or 8th grade level. Without good data you can understand, it’s hard to make good decisions, or even feel motivated to try.
• Why do customer satisfaction and service not seem to matter? How can the net promoter score for health insurance be so bad, with so little variation? Why does it take so long to get an appointment, or to be seen when you show up for one? Why do you have to fill out the same information in the waiting room over and over? Why is it hard to coordinate care between clinicians, or to move your health data from one to another? Why don’t all clinics have online appointment booking? Why is the ER often your only option for fast care?
• Why is there so little real choice? Despite evidence that drugs and acute interventions address problems after the fact and are not the best way to maintain health, very few insurance plans cover alternative methods of care — our system is one size fits all. One third of US adults use and benefit from some form of alternative medicine, and most pay for it out of their own pocket.
• Why are primary care doctors so rushed? Many doctors have appointments scheduled at 15 minute increments. With administrators running wild, no wonder more than half of doctors are burning out. One doctor commits suicide in the U.S. every day, contributing to the highest suicide rate of any profession. What can they do in that window _except_make a referral to a specialist or write a prescription?

You may have heard cost escalation in healthcare is unavoidable, or unexplainable, or too complicated to fix. Don’t believe it. Dig deeper, and it all makes awful sense.

Profits, not patients, are driving healthcare.

Everyone but the patient benefits when costs go up.

• Traditional health insurance companies are governed by a medical loss ratio: they have to spend 80 cents of each premium dollar they receive on care, and can hold up to 20 cents back to cover administrative costs and profit. This means they can only make more profit when the total cost of care goes up — they’re taking a fixed percentage of a growing pie. If I told my 5 year old son Boone “You can have 20% of any donut at the bakery,” he’d walk to the counter and pick the biggest one he could find. Once prices are set and your premium dollars are in the bank each year, they are incentivized to deny claims (they also pay out slowly when they do pay out, since your premium dollars are earning them interest). But each year they have to justify price hikes based on the expected aggregate cost of care, so when those annual hikes come around, they’re rooting for the aggregate cost of care to go up. And they work in alignment with fee-for-service hospital chains and others to make that happen.
• Brokers earn money on commission, and get more of it on bigger deals.
• Fee-for-service hospitals, clinics, and clinicians get paid every time they do something to you, whether it helps you or not: they profit when the price and volume of care increases, and earn more treating acute health symptoms than addressing the root causes of disease.
• Pharmacy benefit managers (PBMs) take a cut of drug prices as fees.
• Pharma companies profit when prices go up, raising a question asked succinctly by Goldman Sachs in its April report for biotech clients: “Is curing patients a sustainable business model?”

Everyone except you makes more money when you’re sick. In this light, a lot of the “irrational” things about U.S. healthcare make perfect sense. The other stakeholders are working against you, the patient. You are not their customer. They are each other’s customers. They are making more and more money at your expense. Don’t expect them to transform the healthcare system. It’s doing what they want it to do.

Patients deserve better.

Decent aligns incentives throughout healthcare, so all key stakeholders including the patient benefit when costs go down.

We’ve talked with thousands of freelancers about their insurance, and learned that they want it to be affordable, transparent, and flexible — so that’s our value proposition at Decent. Our mission is affordable healthcare for all, and we’re starting with freelancers because we’ve felt their pain and their numbers are growing fast. We believe what freelancers want is what you want too:

• Affordable: You want high quality insurance without breaking the bank.
• Transparent: You want up front data on your care, from price to quality.
• Flexible: You want to have options, so you can choose what works for you.

We don’t have affordable, transparent, and flexible health insurance in the U.S. today because the business model of traditional insurance companies works against it. So we are building a new kind of healthcare company that aligns stakeholder incentives so everyone benefits when members are healthy. We have designed the plans we administer to maximize value to the patient, rather than cost. We will use emerging technologies including blockchain to squeeze waste out of the $3T US healthcare market, incentivize behaviors that lead to better outcomes, and deliver more affordable coverage — initially for the 52MM Americans who buy their own insurance. Some have called it a modern health insurance co-op. We just call it Decent.

Decent is on track to administer affordable comprehensive health insurance for freelancers in 2019, starting in Austin, Texas.

Freelancers are a relatively healthy group who are not insulated from skyrocketing healthcare costs by an employer or the government, and they tend to be early tech and crypto adopters. Serving them first will let us kick the tires on our model with an ideal population before expanding over time to serve new geographies and demographics.

Centralized insurers run healthcare. We don’t mean to antagonize traditional insurance companies — there are many good people at those companies just doing what they are incentivized to do. But Decent will help freelancers band together to get better rates and more flexible coverage.

We will initially use blockchain technology to make prices transparent, accessible, and tamper-proof, and to reduce premiums for members who make smart health choices. We plan to win on affordability and transparency now, and on flexibility later. We will make the health information our members need available and easy to understand. We’ll be honest about how things are going. And we’ll be open and responsive when you need us.

Decent will decentralize core insurance functions over time to create a peer-to-peer health insurance protocol.

What a mouthful!

Decentralization is not as complicated as it sounds. Big insurance companies do a lot of work. Some of it is custodial work — “referring to or having the responsibility of protecting, caring for, or maintaining something or someone” — in this case, your money. For better or for worse, big insurance companies take big fees to hold and protect your money. And some of it is functional work: reviewing claims as they come in, investing your premium dollars so they earn a return, answering your customer service questions.

Over time, blockchain technologies will eliminate the need for custodial work so you don’t have to trust a big insurance company to hold and protect your money and your health data — you just have to trust math. Not having to trust a big insurance company — what some people would call “removing the middleman” from insurance — reduces the risk that something bad will happen to your money, due to greed, fraud, theft, or waste. Transparent operations that comply with legal standards like HIPAA will let you see how your money and data moves around and make sure everything looks right. Done well, all of this will mean better healthcare and less risk for you.

Someone will still need to do the functional work, and they’ll need an incentive to do it. Individuals and groups with the appropriate training for each function can do this work, in exchange for crypto tokens that are worth money, using ways of reaching agreement on the truth called “consensus mechanisms.” A stay at home mom in Seattle with claims management training could reach consensus with a novelist in Baltimore and a freelance developer in Austin that your claim is valid — all working independently without communicating or even knowing about each other — and it will be paid out immediately. No waste. No administrative overhead. No big insurance company required.

Decent will responsibly decentralize core functions over time, until people around the world can band together and use the Decent protocol to create their own peer-to-peer health insurance pools. Some pools will cover treatments outside of the “one size fits all” model of health insurance today: truly flexible care. And if those treatments help to keep their members healthy, the cost of being in those pools will go down. As pools form and operate across geographies and demographics we will begin to approach a ground truth about what keeps us healthy, with strong financial incentives to reward people who make smart choices. Over time, we will work with all like-minded stakeholders across the ecosystem, including clinicians, to align incentives in service of high-quality affordable care.

These changes will collectively reduce waste in the healthcare system to deliver more value back to you, the patient. And with roughly 1 trillion dollars ($1,000,000,000,000) wasted every year in U.S. healthcare alone, the opportunity for improvement is tremendous.

Best of all, this is all happening under the hood. You won’t need to understand or even think about blockchain and crypto tokens to use Decent, or to benefit from the efficiencies they create. You can pay for your premiums and your healthcare in dollars. We will use blockchain technologies and many others to deliver on our value proposition of affordable, transparent, and flexible healthcare.

We’re not a blockchain company, we’re a healthcare company.

Decent’s mission is to offer affordable healthcare for all.

Each member of our team has personal experience with health issues, and since we started Decent, people ranging from close friends to Lyft drivers have told us their insurance horror stories. One friend of our team got married just to get access to her husband’s health insurance. Another moved to Berlin to get out of the U.S. healthcare system.

Our mission is global, but it starts here in the United States. Members of our team came here as recently as this generation in pursuit of the American dream: the idea that each person should have an equal opportunity to achieve success and prosperity through hard work, determination, and initiative. Rising healthcare costs have compromised the dream. But it doesn’t have to be this way.

We think Franklin Delano Roosevelt had it mostly right when he said all Americans deserve “the right to adequate medical care and the opportunity to achieve and enjoy good health” — but we believe that right extends to every human. The idea of risk pooling as an expression of our shared responsibility for each other is exactly right: without it, we’re all just hoping not to be the one who gets really sick. But the numbers in this country don’t work because of waste and misaligned incentives, and traditional insurance companies have power disproportionate to their function.

We chose the name Decent because we believe making healthcare affordable for everyone is the decent thing to do. It’s a happy accident that “decent” appears in “decentralized” too.

It’ll take time, but the mission is to serve everyone.

Affordable healthcare for all.