Tuesday, August 30, 2011

Bad Consequences

"Bad consequences often follow even the best-intended government action," notes a commentary in Perspectives. Although Hurricane (and later, and more damaging, Tropical Storm) Irene may cost billions, the financial burden could have been worse—much worse.

In yet another example of government intending to protect the less fortunate but doing the exact opposite, the state of Florida in 1993 established two insurance funds to offset planned rate hikes by private insurers. Nearly 20 years later, both funds, despite having become the insurer and reinsurer of first resort, lack anything close to adequate capitalization.

Had Irene barreled into Florida, its impact could have forced a federal government bailout amounting to billions of dollars.

The fact that Florida remains at continuous hurricane risk only adds to the future cost.

What's more, Florida's subsidized insurance overwhelmingly favors the wealthy, those folks most likely to own waterfront properties. In classic big bank fashion, it evokes "heads I win, tails you lose".

The alternative, an environment advocating personal responsibility, would put risk and return into proper balance, and eliminate unnecessary cost.

Read "Case Study: Florida Catastrophic Insurance Funds" here.

Tuesday, August 23, 2011

Individuals Taking Charge

"Government needs to foster an environment of resiliency, innovation, and risk taking, and enable a population willing to commit time, labor and money," notes a Perspectives article. "It cannot shield success from failure."

Beyond malicious bankers and politicians, we all need to look hard in the mirror to realize the full extent of blame for the 2008 financial crisis. For decades now, the United States has been losing its sense of risk and return.

Today, most people believe simply that the economic system will heal itself and things will get better. In times past, folks distrusted system solutions as infringements on personal freedom, and endeavored to take direct control of their own livelihoods.

Entitlement programs such as Social Security and Medicare have accelerated this moral shift from responsibility to dependency, and, at the same time, skewered financial judgment. Had consumers possessed better acumen it's unlikely they would have closed their eyes to downside risk to the extent they did throughout the housing boom.

The United States now confronts the difficult task of rediscovering and affirming individual responsibility. Failure to do so damages the nation's future competitiveness, especially against China, India and other emerging countries and their brands of capitalism and democracy.

We can begin by putting consumers more in control of health care, breaking apart massive concentrations of capital (institutions, for example, that are too-big-to-fail), and reforming the tax code to emphasize long-term investment and business building.

The fact that we can no longer afford top-down measures provides some hope that the shift away from dependency will begin sooner than later.

Read "A Deeper Problem in the Credit Crisis" here.

Monday, August 22, 2011

Biosimilars on the Brink

Biosimilars—follow-on products of innovator biopharmaceuticals—will transform the drug marketplace, according to Steve Grossman writing in Perspectives. This despite substantial skepticism.

Starting as early as 2014, FDA approval of biosimilars could begin to accelerate. Once price competition kicks in, industry economics will transform.

Although the FDA may not issue guidance for several months, recent publications and industry interactions suggest that key officials are already laying the groundwork for these products. Drugmakers, meanwhile, are considering new business models, and, in some cases, committing substantial investment dollars and defining a new product line.

Read "Biosimilars and Market Transformation" here.

Wednesday, August 10, 2011

The Brick Wall

We often ask Lyceum participants to speculate on the moment when health care hits the brick wall—that point in time when the reimbursement system goes from unsustainable to insolvent.

Consensus typically points to Medicare and argues five, maybe ten years. Real reform (the kind that truly transforms the industry), folks continue, won't happen until the current system hurtles headfirst into the wall. All other policy action is too watered-down, too constituent-wary.

Fast forward to last weekend (August 5th). Calling a spade a spade in political ineptitude, Standard & Poor's finally published its historic downgrade of US long-term debt. Symbolic, perhaps, but not without considerable consequence.

Yet again, as giant global banks reel, we confront the systemic challenge of too-big-to-fail, painfully realizing that lawmakers and regulators had done nothing to contain its malignancy.

But the fear this time that policymakers have nothing left—no more QEs, exorbitant stimulus packages, or magic bullets—in fact gives 2011 a certain hope that did not exist in 2008.

This time, we might just have to bite the bullet and reconsider how the whole damned system works, from tax law to entitlements.

As no time before, this new reality stands up—like a brick wall—against the great unfunded onslaught of government health care.

What degree and what duration of pain, then, are policymakers willing to exert on the electorate before taking action? Trillions more in stock market losses? Days, weeks, or even months of deliberations?

The sooner the better, we say. Any longer, and the shattered brick wall might just bury us.

Thursday, August 4, 2011

ACOs Beyond Payers and Providers

Accountable Care Organizations (ACOs) don't just represent new business opportunities for payers and providers. Diverse stakeholders from pharmaceutical companies to employers could realize significant business gains in forming targeted partnerships, according a recent Lyceum newsletter article.

"[T]he opportunity is significant for new entrants willing to provide the capital, organization, governance, and leadership to create new relationships with physicians that could dramatically change the health care landscape."

The fact is, most physician practices can't organize themselves into ACOs alone, due to limited resources. They want to realize an ACO's business and clinical control, but fear that partnerships with health plans and hospitals would compromise that control.

As defined in the Medicare Shared Savings Program, ACOs could feature a range of stakeholders as the principle organizer—not just deep-pocketed payers and providers. Such structures could channel substantial benefits to all parties.

Read "Help Wanted: ACO Leadership" here.