John Falatko D.O.
It’s no mystery to Americans that health care costs have risen steadily for quite some time. Health insurance is one of the largest liabilities for employers, medical bills are the #1 cause of personal bankruptcy and there is no sign of this trend slowing. There have been many theories postulated to explain this inflationary phenomenon. Theories to explain this inflationary phenomenon may be intricate and aggravating, but the simple fact is, healthcare costs are high because of high engagement with the system.
Innovation within the healthcare sector is a major contributor to price inflation. Over the past thirty years there have been advances in the treatment of heart disease, cancer, arthritis, and many other diseases. Since 1980, life expectancy for the average American has increased from 73 to 82 years old.
No group has benefited more from this innovation than those over 65. Treatment for these diseases cost money. With more individuals living longer the prevalence of disease increases. More patients are using the system increasing demand. Supply is clearly constrained. More people, more diseases, more innovation, without matched growth in resources results in inflationary pressure.
Few innovations in healthcare can claim the dual benefit of improved health and reduced cost. The only intervention that comes to mind is the campaign against tobacco use. Smoking is the leading cause of lung disease, heart disease, cerebrovascular disease, peripheral vascular disease and 13 different cancers. Smoking cessation, or never starting, costs very little, with immediate benefits that compound over time (convexity), reducing cost to individuals, communities, and the system.
Costs are further complicated by the way the American healthcare system pays it bills. We call it “insurance,” but it’s not actually insurance. It’s more of an aggregation of funds from loosely affiliated groups brought together under the guise of an insurance company. The “insurance company” makes money by growing the pool and managing disbursements. Some individuals take great risk with their health and are high utilizers of the system. Some take thoughtful care of themselves and rarely interact with the system. Some have very bad luck and are stricken with a horrible disease to no fault of their own. This latter group truly benefits from the “insurer” model. The other two groups are on opposite ends of the barbell. The high utilizers are thankful for their counterparts because of the funds available to pay inflated prices. The pain is spread out across many.
Add in government funded plans that pay fixed amounts for services and mandate participation, and you have further inflationary pressure. But that’s ok. We are a compassionate society and there must be resources for the impoverished and disabled.
These pressures have no sign of abating. As the healthcare industry continues to innovate, more diseases are brought into the fold. As governments mandate health insurance for more citizens, the system accumulates more patients with more diseases to care for. But there is hope. For the first time, ever, we may have a class of drugs that are deflationary.
Similar to how the iPhone combined your phone, personal computer, music player, video player, camera, messaging service, fitbit, and 100’s of other features for a mere $1000; GLP-1s are beginning to aggregate health benefits time disrupting several high-cost diseases.
I’ve written before about the arms race between pharmaceutical companies and human behavior. As we continue to tackle diseases that are a product of our lifestyle, the pharmaceutical companies will rise to the challenge of treating these diseases. Most treat the disease. Very few eliminate it root and stem. The root for most diabetics is obesity/metabolic disease.
At $1200 per month, my initial thought was these medications would increase inflationary pressure. The sticker price would be beyond the reach for the average patient. Insurance companies would face immense pressure to add them to formularies, hiking premiums, and spreading the cost across the cooperative.
It was expected that medical loss ratios for insurance companies would escalate for fronting the cost of these medications. United health recently reported a medical loss ratio of 83% compared to the expected 88%. They also were able to pass on a 6% premium hike across its customer base with minimal fear of attrition. Whoa!
It’s no surprise health insurance companies would find a way to make larger profits, but I’m beginning to realize this is just the beginning. From a practitioner’s perspective, access to these medications has improved across most insurance payors. Even Medicare advantage plans are opening up their wallets to help patients.
You may be asking yourself; how can this be? Given the fact that 40% of adults are obese, and over 50% are overweight, this should be a significant financial burden on the system. However, these medicines have completely disrupted metabolic disease and every subsequent disease born from it. They are on an unprecedented winning streak. Two recent studies confirmed this class of medicine reduces the risk of heart disease in patients with diabetes. Last week a paper was published demonstrating a reduction in renal disease in patients with diabetes. Very important develops in the prevention on complications from this disease. Dialysis alone costs roughly $90,000 annually. A renal transplant is $440,000. (Image from Advancing American Kidney Healthy)
There will likely be further benefit in other areas of medicine. It is postulated, and likely true, that these medicines will be future treatments for non-alcoholic fatty liver disease (liver transplant; $820,000), neurocognitive disease due to vascular dementia and Alzheimer’s, as well as some substance abuse disorders, most notably alcoholism.
There have been a few counter arguments. There is concern that hip, knee, and back surgery due to arthritis pain will increase. Most patients are excluded from these procedures due to obesity. After treatment they will be eligible. However, I suspect most arthritic pain will improve since they no longer carry so much weight, and thus put off the procedure.
I’ve also heard experts say the side effects are intolerable, which I have found to be untrue. Many of my patients are more than willing to live with the nausea and abdominal pain for a chance to have their body back.
Clinical trials investigating their use in pediatric obesity are underway. Unfortunately, this is a serious issue in the US, as well as other developed countries. Pediatric obesity is linked to earlier onset of heart disease, metabolic syndrome, diabetes, and poor mental health. These kids have a significant uphill battle to live a healthy life.
Much likely tobacco use, in the 60’s and 70’s, metabolic disease has resulted in significant deterioration in the health of Americans. Our bodies evolved during a time of scarce resources. We are driven to consume as much as we can, when we can for fear we might starve. We no longer live this way. We live in a time of abundance. Our urges have turned against us.
Now we have a potential off switch, which may help prevent overconsumption, the driver of much that ails our society. This class of medications will have significant impact in the diseases above, preventing significant downstream costs and benefiting the entire healthcare system. A once in a generation innovation.
Full disclosure: I am a Novo Nordisk and Eli Lilly shareholder. I’m no naïve to think that my dinky blog, or my small practice in Indiana have any degree of influence on these companies. But you can feel free to scrutinize this post for the obvious financial conflict of interest. I am not advising to go buy the stock. Do your own due diligence.