Health Care Current: July 8, 2014

Three major shifts in the U.S. health care system

This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

From formation to reform: The construction of the U.S. health care system

From formation to reform: Three major shifts in the U.S. health care system

I am a Philadelphian. And as the home to our nation’s first capital, Philadelphia is a great place to celebrate the Fourth of July holiday. This Fourth I found myself reflecting on how far the U.S. has come in health care since its founding―and where we still need to go. With that lens in mind, as I look back at some of the major milestones that have shaped our health care system, three stand out to me as major shifts—shifts that have made the U.S. health care system one that might be unrecognizable to our founding leaders.

From coughs and cholera to coronaries and cancer
At the founding of our country, people died young—and quickly—from infectious disease or violence. Over the course of the last century, advances in public health drove substantial changes in the nature of illness and death. Public health (clean water especially), antibiotics and wealth all combined to change the very nature of the health care problems we see and have helped to nearly double life expectancy from the early years of our country. Now, the diseases plaguing more of us are those of a longer, comfortable (if unhealthy) lifestyle that our forefathers could never have imagined in 1776 Philadelphia.

From debt to deductibles and dependents
Given all the work I have done with health plans over the years, I thought I was aware of most of the history around health insurance. But it turns out that the first official sickness coverage came before the Civil War, in 1847 with the Massachusetts Health Insurance Company of Boston. Today, there is no question that the rise of employer-based health insurance was a fundamental game changer that led to many characteristics of the health care system we see today. This includes the positives (a banking system for patients that created the financing for health plans, hospitals and physicians) and the negatives (shielding people from the high costs of health care can make them less concerned about whether they are getting good value as they access care).

From superfluous spending to states and services
When Medicare and Medicaid were signed into law in 1965, few could have probably predicted how many people would enroll in the programs or how much they would end up costing. But over the years, these programs have had enormous influence on the health care ecosystem. They have helped to change incentives through innovations in payment systems, such as diagnosis-related groups (DRGs) in hospitals. They have also helped to drive the adoption of technology and private sector innovations like managed care through the Medicare Advantage program.

Past, present and pending
While the U.S. health care system has traveled a journey as long and old as our country itself, there is no question that problems remain. Today we spend nearly one-fifth of our gross domestic product on a system that is often plagued with gaps in quality.1 Today, how to get to value-based care is on everyone’s minds. Tomorrow, if we continue the trend of high spending paired with low quality, we could see health care expenditures reach more than $5 trillion by 2022.2

Overall, when I look at the timeline below, I get excited about the future of health care in our country. We may have challenges, but those challenges could be pending opportunities:

  • The advances in sickness and dying in our population have created opportunities for consumer engagement to improve health and health care. Done right, greater engagement could help drive down the obesity, disease and poor health behaviors that are causing the U.S. to lag behind other advanced nations in life expectancy.
  • Through new payment models and technologies, insurers, providers and life sciences now have more opportunities to focus on population health and care management.
  • Federal programs have the opportunity to incentivize and test new payment and care models while states take advantage of alternatives to the traditional Medicaid program.

Through technology, new innovations and creative solutions to old problems, I think we’ll continue to see forward movement across the industry. As we reminisce about the fireworks finales and head back to work after the 238th birthday of our country, it seems as good a time as any to begin looking forward to the next 238 years.

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1 CMS, National Health Expenditure, 2012
2 CMS, Projected National Health Expenditures

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My Take

By Bill Copeland, Vice Chairman, U.S. Life Sciences & Health Care Leader, Deloitte LLP



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From formation to reform: The construction of the U.S. health care system

1. Penn Medicine, “The Story of the Creation of the Nation’s First Hospital”
2. Randolph Fillmore, “The Evolution of the U.S. Healthcare System,” 2009
3. Linda Gorman, Wisconsin Policy Research Institute, Inc., “The History of Health Care Costs and Health Insurance,” October 2006
4. Employee Benefit Research Institute, “History of Health Insurance Benefits,” March 2002
5. U.S. Department of Health & Human Services, “Historical Highlights,” June 6, 2014
6. Jean C. Whelan, Penn Nursing Science, “American Nursing: An Introduction to the Past”; Bureau of Labor Statistics, “Occupational Employment and Wages,” May 2013
7. Christopher Intagliata, Science Friday, “Science Diction: The Origin of the Petri Dish,” December 16, 2011
8. National Institutes of Health, “A Short History of the National Institutes of Health”
9. Clayne L. Pope, National Bureau of Economic Research, “Adult Mortality in America before 1900: A View from Family Histories,” January 1992
10. National Center for Health Statistics, “Health, United States, 2013: With Special Feature on Prescription Drugs,” May 2014
11. American Hospital Association, “A Century of the AHA,” 1998
12., “1920s Medicine: Nobel Prize Winning Medical Discoveries,” 2012
13. Charles Grossman, Physicians for Social Responsibility, “Reflections on the First Use of Penicillin in the United States”
14. Public Broadcasting Service, People and Discoveries, “Salk produces polio vaccine: 1952”
15. Clifton D. Bryant, “Handbook of Death and Dying,” 2003
16. Centers for Disease Control and Prevention, “Leading Causes of Death, 1900-1998”
17. Centers for Disease Control and Prevention, “Deaths and Mortality,” 2010
18. Houston Neal, Software Advice, “History of Electronic Health Records (EHR),” January, 10, 2013; Dustin Charles, Jennifer King, Vaishali Patel, and Michael F. Furukawa, The Office of the National Coordinator for Health Information Technology, “Adoption of Electronic Health Record Systems among U.S. Non-federal Acute Care Hospitals: 2008-2012,” March 2013
19. Federal Register, “Health Care Finance Administration”
20. Lauren Cox and Peggy Peck, Medpage Today, “The Top 10 Medical Advances of the Decade,” December 17, 2009
21. Centers for Disease Control and Prevention, “New Cases of Diagnosed Diabetes Among U.S. Adults Aged 18–79 Years, 1980–2009,” August 1, 2011.
22. Centers for Medicare & Medicaid Services, “National Health Expenditures Selected Calendar Years 1960-2012”
23. Centers for Medicare & Medicaid Services, “National Health Expenditure Projections, 2012-2022”
24. American Hospital Association, “Fast Facts on US Hospitals,” January 2, 2014
25. Kaiser Family Foundation, “State Decisions For Creating Health Insurance Marketplaces, 2014,” May 28, 2013
26. Administration on Aging, “A Profile of Older Americans: 2011”
27. Congressional Budget Office, “Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April 2014,” April 2014

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