The Healthcare Cliff

The term ‘fiscal cliff’ is one familiar to most Americans and many outside observers of this periodic political posturing around the need to address hardcore financial issues facing the country.  If both political parties hashed out their differences and came to a (very) hypothetical agreement of significantly higher taxes, markedly reduced spending (including modest cuts to Medicare providers and Social Security), with a plan that would be estimated to decrease the deficit to almost zero, there would still be a large elephant in the room: rising healthcare costs. We have a healthcare cliff which has contributed significantly to the fiscal cliff.  US healthcare spending  was estimated to be 17.9% of the GDP in 2011 and costs are estimated to rise 7.4% in 2014 when a significant portion of health care reform legislation takes effect.

According to a report from The Commonwealth Fund published in May 2012, Australia’s per capita healthcare spending was one half ($3,445) that of the US ($7960).  Interestingly, according to the same study, Australians pay 51% and 60% less than Americans for all drugs and brand name drugs respectively.  Australia spends 8.7% of its GDP on healthcare compared to our 17+%.  When looking at tax rates, Australia has a 30% corporate income tax rate and an individual maximum income tax rate of 45% as well as a 10% VAT.  In the US, corporate rates are 0-39%, individual rates 0-35%, and no Federal VAT.  I am not an economist and don’t even play one on TV.  What I do know is that it doesn’t make sense to me or anyone to have this degree of healthcare disparity with the countries mentioned in the Commonwealth Report and at the same time have significantly inferior outcomes with regards to studied quality indicators [mortality from asthma in 5-39 year olds, myocardial infarction, diabetes lower extremity amputations, in-hospital fatality rates (w/in 30 days of admission) of heart attack and hemorrhagic stroke.] This brings to mind the comparison I’ve made in the past between healthcare and education systems and costs.  Throwing money at a problem is not the answer. Bigger newer technology isn’t the answer.  MRIs on every corner have not improved healthcare (and some might argue have harmed it) but have markedly driven up costs.  mHealth technologies will become an important part of healthcare.  This needs to happen soon. They won’t be the complete answer to a healthcare cliff but will certainly do a lot to change thinking about the way in which care is delivered and paid for.

So what should legislators do? Sen. Mike Honda recently proposed legislation called the  Healthcare Innovation and Marketplace Technologies Act  The bill “establishes an Office of Wireless Health at the Food and Drug Administration (FDA) that will coordinate with other governmental agencies and private industry to provide recommendations to the FDA Commissioner on how to develop and maintain a consistent, reasonable, and predictable regulatory framework on wireless health issues. This office will not expand the mandate or responsibilities of the FDA, but rather it will seek to better clarify and simplify existing regulations.  Though well-meaning, it would seem that such a framework could increase the bureaucratic path rather than shorten it.  Consider if a technology is being looked at by multiple government agencies to determine if the FDA framework is relevant to it after it is submitted.  One could see this delaying the submission or approval process.

In addition, the Bill would establish an HHS program to support mobile health developers “build their devices in line with current privacy regulations.” Are mobile medical apps included in this program? Will this process involve only apps falling under the FDA mobile medical app scope? If so, how is privacy ensured with the other estimated 85% of mobile health apps? If it does not, then how is regulation enforced? Would Happtique’s App Certification Program (which will have publicly available standards soon addressing not only privacy, but safety, operability and content from which developers can blueprint) be more appealing in scope (By way of disclosure I am Sr Medical Advisor at Happtique)?

The bill would also create a low-interest small business loan program to encourage clinics and physician practices to purchase health IT technology and services.  Sound familiar? Have we not already seen the backlash in Congress with regards to Meaningful Use incentive payments? In addition, the bill would establish a tax incentive program to help health care providers deduct the cost of certain health IT systems, excluding electronic health record systems. This is possibly a good idea but is a tax break really a solution to mhealth adoption? Rep. Honda’s bill proposes to set up a grant program to provide support to health care providers who retrain employees for new health IT-related positions. The bill suggests new prize and grant programs like the Tricorder X prize. There are plenty of small and big prize competitions out there.  In my opinion,  the biggest prize should go to the technology that increases any X Prize type technology patient engagement to 100%. Exclusive of the last item, I believe all the previous proposals by Rep. Honda will create bureaucracies and add significant costs to government.  I understand that Rep. Honda is from Silicon Valley and represents technology businesses.  But the need is for legislation on the patient care side of things.  I would recommend reimbursement for proven mHealth technologies, Federal licensing for physicians to increase telehealth, FLEX spending account approval for mHealth, and incentives to payers and patients to adopt mHealth technologies where applicable.

The fiscal cliff will not be solved if the cost of healthcare is not tackled with the same intensity and at the same time.  It is my hope that mHealth technologies scaled to the needs of millions of patients are addressed soon by legislators and regulators in a meaningful way.  I understand the difficulties of mHealth start-ups.  But I believe if patients become the focus of these government bodies, development and adoption of mHealth happen faster and will be less costly. The healthcare cliff is here  now and 2014 will be a watershed. Let’s prepare earlier for it than we have for other cliffs by addressing patient concerns and needs, and realize that if we don’t, we will assuredly have many fiscal cliffs to come.

About davidleescher

David Lee Scher, MD is Founder and Director at DLS HEALTHCARE CONSULTING, LLC, which specializes in advising digital health technology companies, their partners, investors, and clients. As a cardiac electrophysiologist and pioneer adopter of remote patient monitoring, he understood early on the challenges that the culture and landscape of healthcare present to the development and adoption of digital technologies. He is a well-respected thought leader in mobile and other digital health technologies. Scher lectures worldwide on relevant industry topics including the role of tech in Pharma, patient advocacy, standards for development and adoption, and impact on patients and healthcare systems from clinical, risk management, operational and marketing standpoints. He is a Clinical Associate Professor of Medicine at Penn State College of Medicine.
This entry was posted in digital health, FDA, health insurance, healthcare economics, healthcare reform, informatics, medical apps, mHealth, mobile health, technology, wireless health and tagged , , , , , , , , , , . Bookmark the permalink.

1 Response to The Healthcare Cliff

  1. Pingback: Adding another chef to the government regulation kitchen (US)

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