Monday, April 04, 2005
Consumer takeover in health care
[Scott Gottlieb, M.D., "Banks: The New HMOs," Forbes, 1 April 2005.]
The overwhelming changes that are likely to occur as consumers begin making more of their own health care decisions is highlighted in this recent Forbes article. As the author points out, the future of health care may have more to do with financial institutions than insurance companies:
A transformation is under way in health care that will displace the entrenched giants among the ranks of America's HMOs and pharmacy benefit managers. In their place will be millions of consumers linked by their financial services companies to accounts. These new accounts will allow them to manage their full range of medical benefits in the same fashion that they direct their 401(k)s.
The impetus for this change is a Trojan horse buried inside the new Medicare law. Explicit language in the new law enables a health plan and drug plan to be offered by any well-capitalized outfit adept at marketing and able to bare some financial risk.
If you think this describes a financial services company, not a health maintenance organization, then you are ready to glimpse the future of health care.
These drug plans will become active in 2006. So far, traditional health care companies such as HMOs have been scrambling to link up with traditional drug providers--pharmacy benefit managers, for example--to develop all the business relationships they'll need to structure, market and service a drug plan.
The real opportunities for a realignment in our health care system will occur when companies that have already mastered the business of providing retirement benefits to seniors get into the fray--namely, financial services giants like Fidelity, Vanguard, Citigroup and perhaps even Charles Schwab.
Considering the recent deal between pharmacy chain Walgreens and the HMO United Healthcare, in which the two giants joined forces to offer one of the new Medicare prescription drug plans, a collaboration between Walgreens and Fidelity Investments may not be unthinkable in the future.
Another feature buried in the new Medicare law is health savings accounts, which--similar to IRAs--allow investors to build tax-sheltered nest eggs to cover out-of-pocket medical costs.
The new accounts are linked to high-deductible health insurance plans. The accounts are designed in part to help consumers pay for health expenses until insurance benefits kick in. These accounts also put consumers, rather than HMO middlemen, in charge of managing health benefits. Many financial services giants such as Schwab already offer health savings accounts, and more firms will surely follow.
A drug plan can be piggybacked on top of the health savings account, turning firms like Fidelity or Schwab into one-stop shops for health care benefits, investment, savings and retirement needs.
With a health savings account and a drug plan to offer retirees, suddenly Citigroup, Fidelity and Vanguard begin to look a lot like a private substitute for our entitlement system. They would be able to combine retirement benefits in the form of 401(k)s with health benefits, which aren't subject to government budget cycles but rather are backed up by the real assets people have accumulated over a lifetime.
[William C. Short, "HSAs treat ills of health care payment system," The Business Journal of Kansas City, 25 March 2005.]
[Scott Gottlieb, M.D., "Banks: The New HMOs," Forbes, 1 April 2005.]
The overwhelming changes that are likely to occur as consumers begin making more of their own health care decisions is highlighted in this recent Forbes article. As the author points out, the future of health care may have more to do with financial institutions than insurance companies:
A transformation is under way in health care that will displace the entrenched giants among the ranks of America's HMOs and pharmacy benefit managers. In their place will be millions of consumers linked by their financial services companies to accounts. These new accounts will allow them to manage their full range of medical benefits in the same fashion that they direct their 401(k)s.
The impetus for this change is a Trojan horse buried inside the new Medicare law. Explicit language in the new law enables a health plan and drug plan to be offered by any well-capitalized outfit adept at marketing and able to bare some financial risk.
If you think this describes a financial services company, not a health maintenance organization, then you are ready to glimpse the future of health care.
These drug plans will become active in 2006. So far, traditional health care companies such as HMOs have been scrambling to link up with traditional drug providers--pharmacy benefit managers, for example--to develop all the business relationships they'll need to structure, market and service a drug plan.
The real opportunities for a realignment in our health care system will occur when companies that have already mastered the business of providing retirement benefits to seniors get into the fray--namely, financial services giants like Fidelity, Vanguard, Citigroup and perhaps even Charles Schwab.
Considering the recent deal between pharmacy chain Walgreens and the HMO United Healthcare, in which the two giants joined forces to offer one of the new Medicare prescription drug plans, a collaboration between Walgreens and Fidelity Investments may not be unthinkable in the future.
Another feature buried in the new Medicare law is health savings accounts, which--similar to IRAs--allow investors to build tax-sheltered nest eggs to cover out-of-pocket medical costs.
The new accounts are linked to high-deductible health insurance plans. The accounts are designed in part to help consumers pay for health expenses until insurance benefits kick in. These accounts also put consumers, rather than HMO middlemen, in charge of managing health benefits. Many financial services giants such as Schwab already offer health savings accounts, and more firms will surely follow.
A drug plan can be piggybacked on top of the health savings account, turning firms like Fidelity or Schwab into one-stop shops for health care benefits, investment, savings and retirement needs.
With a health savings account and a drug plan to offer retirees, suddenly Citigroup, Fidelity and Vanguard begin to look a lot like a private substitute for our entitlement system. They would be able to combine retirement benefits in the form of 401(k)s with health benefits, which aren't subject to government budget cycles but rather are backed up by the real assets people have accumulated over a lifetime.
[William C. Short, "HSAs treat ills of health care payment system," The Business Journal of Kansas City, 25 March 2005.]
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