Getting the Most Out of America's Sickcare System
Updated: 1 hour ago
As an economist, I apply the tools of my trade for getting the most out of the American medical system. This is a personal journey, very much close to home as an American citizen, husband, and father. Though I admit to some distaste for the medical system as it is.... the point is to get the most out of the medical system to a) maximize our long-term health and b) with the hope that it will someday change. Like so many of life's important decisions, our health and insurance decisions have a long-term financial impact. How we manage and fund our health is one of the most important personal finance decisions we make.
Economists view systems via the lens of self-interest and incentives. Economists accept systems as they are and seek to understand the rules that drive them. Based on those rules, economists seek to understand how participants will respond to systems via their incentives.
This article's core assumption is that all people seek to maximize their chances of living a long, healthy life. The journey starts by exploring the current medical system and why its incentives are not aligned with enabling people to live long and healthy lives. I demonstrate the current system emphasizes life quantity at the expense of life quality. Following the grounding in our current medical system, I provide a priority framework to help you achieve a long and healthy life. Then examined is how to deploy a high-deductible medical insurance strategy as a means to lower costs and provide a health-promoting commitment device. This is akin to a boil-your-own-frog approach to healthy behavior. Long-term, healthy behavior is your countermeasure for a medical system deriving revenue from sickness. Finally, a close-to-home, cancer-beating example is provided for how to successfully engage the current sickcare system.
About the author: Jeff Hulett is a behavioral economist and a decision scientist. He is an executive with the Definitive Companies. Jeff teaches personal finance and the decision sciences at James Madison University. Jeff is an author and his latest book is Making Choice, Making Money: Your Guide to Making Confident Financial Decisions. His experience includes senior leadership roles in banking and bank risk consulting. Jeff holds advanced degrees in finance, mathematics, and economics. Jeff and his family live in the Washington D.C. area.
The table of contents:
Our medical system is a sickcare system
An economist's approach to maximizing healthspan
A high deductible helps commit to your health
A close-to-home sickcare success story - beating cancer
2. Our medical system is a sickcare system
Words matter. That is why marketing and brand advertising are so successful as a means to sell products and services. Certain words stick in people's minds, promoting an image desired by purveyors of the advertising. Let's take today's medical industry.
Healthcare - the medical system's advertising slogan: The word "health" connotes positive and wholesome feelings. People desire to be healthy - thus people's incentives promote seeking healthcare-enabled solutions.
Sickcare - the medical system's incentive-aligned purpose: The word "sick" connotes negative and fearful feelings. The medical industry generates revenues from the sick - thus medical industry incentives promote seeking sick people in need of sickcare.
Sickcare and healthcare are NOT the same. As demonstrated throughout this article, they are not even close to being the same. So in the context of the name for what the medical industry DOES, let's call it for what it IS - SICKCARE. Truth in advertising is part of the answer supporting our hunt to live longer, healthier lives. Words matter.
This following medical system's view may seem complex, and it is. The primary agents are the patient, insurance companies, the government, and the hospital and medical services industry. In addition, the pharmaceutical industry is a high-impact system agent. In this picture and though not explicitly listed, pharmaceuticals are found as part of the medical services provided, funded, and regulated by the system. Beyond these agents, there are many other smaller agents that participate or depend in some way on the medical system. According to the CDC, total national health expenditures are almost 18% of GDP. This makes the current U.S. medical system one of the most powerful economic forces in our economy.
The current medical 'sickcare' system
Economists and medical system participants recognize this system has mostly devolved into a sickcare-only system. Next is a graphic designed by Dr. Peter Attia, a longevity expert [i]. The distinction between sickcare and healthcare is overlaid in his framework. His framework describes both:
Lifespan - relates to quantity - or the length of our life and
Healthspan - relates to quality - or the health quality of the years of our life.
In the main, the difference between the solid 'no intervention' space and the outer dash line called 'Medicine 3.0' is the impact of chronic disease. Dr. Attia identifies those chronic disease categories as including the heart, metabolism, cancer, and the brain. The more we can proactively prevent chronic diseases, the better we are able to "square the curve" and make our healthspan equivalent to our lifespan. [ii] Notice our current system 'Medicine 2.0' is only barely better than not intervening at healthier times of our life and then extending life when we are at our sickest. The current medical system helped us get where we are today. But most of those benefits, have been absorbed into the 'No Intervention' space, like the benefits of the microscope, infectious disease treatments, improved water and municipal health systems, vaccines, and the scientific method. However, the current medical system's incentives are not aligned to take society to the next level -- which is a healthcare system's focus on reducing chronic disease and extending healthy life.
Another way to look at this is that our current medical system has moved away from a holistic version of the Hippocratic oath or "First, Do No Harm." For this article, a more accurate interpretation of the Hippocratic oath given decision uncertainty is -- "Do Less Harm." [iii] Medical system incentives encourage the medical system to focus on "less expensive but only in the short-term" solutions to health problems. Sickcare is the classic example of Abram Maslow's famous "hammer looking for a nail" situation causing systemic over-reliance on favorite, familiar, or most profitable medical remedies. The system encourages those medical remedies, like procedures and pharmaceutical solutions, likely to deal with more current symptoms. [iv] Preventing chronic diseases, by their nature, require a long-term, proactive health focus. To be effective, solutions preventing chronic disease often need to come decades before symptom presentation. It is true, an astute observer could find examples of when the current medical system provided more preventative care. Unfortunately, these examples are swim-against-the-incentive-tide minority exceptions.
Healthspan is like curling example: The sport of curling started in Scotland. Today, this sport is showcased globally every 4 years at the Winter Olympics. The objective of curling is straightforward -- players slide stones on a sheet of ice toward a target area which is segmented into four concentric circles. Teams score points for how close they get to the center of those circles. Curling is like the ice version of shuffleboard.
Think of healthspan as the teammate that starts the stone moving on the ice. Getting the start right is essential to success -- as all-important direction and energy are created for the stone. As the stone gets closer to the target, each curling team deploys sweepers. Think of the sweepers as the sickcare system. By sweeping, they create friction that makes small stone direction adjustments as the stone slides toward the target. As in the case of our healthspan, it is critical to get the initial stone's direction and energy correct. The sickcare sweepers can only do so much!
To take this curling analogy one step further and to compare the wage incentives between healthcare and sickcare - if curling were like our current medical system, the all-important curling teammate starting the stone (healthcare), would get paid almost nothing. Whereas the small-incremental-change sweepers (sickcare) would get paid $millions.
One only needs to follow the money to understand the source of the medical system's self-interests and its associated incentives. Proactive steps to prevent chronic disease provide little financial benefit to doctors, hospitals, or pharmaceutical companies today. In effect, treating a today-sicker-you is competing with preventing a future-sicker-you. In the current sickcare system, the current-sicker-you is more profitable, plus, today's "only treat the symptom" approach builds a future-sicker-you patient pipeline.
The best-trained medical practitioners -- like doctors and nurses -- are dedicated to the more profitable sickcare system. Given the cost and debt associated with medical school, many aspiring doctors see little alternative to pursuing the procedure-focused sickcare route. This is where the money is to pay back the student loans.
Thus, you can see why current medical system incentives are dramatically misaligned with chronic disease prevention. Sadly, a chronically sicker you is good for the sickcare business.
The Today You vs. Future You Competition
How incentives impact chronic disease and long-term health
Another name for our current system is long-term iatrogenics [v]. An iatrogenic approach is defined as 'relating to illness caused by medical examination or treatment.' Iatrogenics is the opposite of the Hippocratic oath. The current medical system is able to justify its actions because technically, in the very short term, sickcare treatments do show some patient benefit.
"Iatrogenics has both delayed and invisible consequences. It is hard to see causal links, to fully understand what’s going on."
- N.N. Taleb, Antifragile: Things That Gain from Disorder
As shown in Dr. Attia's diagram, that very small space marked as sickcare is the value created by our current sickcare system. By only focusing on the short-term, it creates an environment of chronic disease and a less healthy, more painful future life. This is why our current medical system, in the long term, is an iatrogenic system that creates greater net harm. But the greater net harm is harder to see.
In reasoning, an error of commission is an error of action, something done incorrectly. Alternatively, an error of omission is an error of inaction. Something that should have been done. In this case, the error of omission is the failure to facilitate a reduction in chronic disease. In complex, data-intensive environments like chronic disease, errors of omission are often more dangerous because of their opacity. In this case, it is the hard-to-see errors of omission enabling an iatrogenic outcome. Ironically, it is possible to DO nothing wrong and still cause significant errors.
Based on the "Lifespan vs. Healthspan" diagram, the incentives of the sickcare care system point to a shorter healthspan. The outcome for many sickcare participants is found in the bottom of the graphic -- in the space showing a longer but sicker life. Of course, people commonly desire to 'square the curve' by moving healthspan to the upper right. In the context of maximizing our healthspan, the current sickcare system's lack of chronic disease attention is a dangerous-to-your-long-term-health error of omission.
I admit it, this is depressing. It makes many wonder 'How the heck did we get here and how can we make the most of a bad situation?!' I am friends with many doctors, nurses, hospital leaders, insurance leaders, and more in today's medical system. In the main, they are wonderful, caring people. They got into medicine for the right reasons -- to help people. Game theory is the branch of economics concerning systems and incentives. My game theory experience suggests it is entirely possible for the system to create negative incentive-based outcomes -- called a 'Nash equilibrium' or an 'Evolutionarily stable strategy' -- and for individual participants to be altruistically motivated. They are good people caught in a bad system. Also, professional services employees, such as in the medical services industry, may suffer from the Greedy Work syndrome [vi]. This creates incentives for employers to work their professional, labor law-exempt employees far beyond the historical 40-hour work week. Additional hours may wear down and cause workers to be less sensitive to their patients' healthspan needs.
A greedy work syndrome example: I am a client-patient of Kaiser Permanente ("KP"). KP has a unique medical services business model that vertically integrates insurance, medical, and pharmacological services. I experience it as a central "one-stop shop" for all my medical needs. Presumably, the integration provides more revenue levers and cost control to manage profitability. I had a candid conversation with one of my favorite KP doctors recently. I asked an open-ended question: "What is it like to work here?" They answered as long as I would not reveal their name. The answer I received:
"I am part-time, thank goodness. I get paid for my hours. I self-manage my benefits. The typical KP model is to dangle a decent salary and a big pension in front of a young doctor, then work them to death! It is not right. They ask me to work my patient follow-up for free. I refused. I might be leaving soon."
This is the greedy work syndrome in action. While I did not ask, I can only imagine the hours worked over 40 hours for "pensioned" medical personnel is high. Perhaps 2x or more during high volume times. The call option of being "always on" is probably stressful. The KP employee hours leverage approach is the rule, not the exception in professional services.
To some degree, it is the misalignment between system outcome and individual participant intent that enables a bad system. Many of these individuals seek to bend system rules and do the best they can to improve patient healthspans. Unfortunately, well-intended medical professionals are losing the battle within today's medical system.
3. An economist's approach to maximizing healthspan
Next, I share my experience as an example of how to approach maximizing healthspan. I acknowledge everyone's health situation is different -- so think of my example as more of a how-to-think-about-it framework suggestion than a specific healthspan prescription. The goals are generally in priority order, based in part on the influence one goal has for preventing all chronic diseases.
First and foremost, I own my personal health and I seek to inform myself. The internet is a useful tool for gathering and evaluating curated medical information. Also, amazing books like Dr. Attia's mentioned earlier are incredible resources for what to do.
My first goal is to manage my metabolic health. Simply, I seek to keep my weight down and seek to avoid 'empty calories.' Empty calories are calories from foods that do not provide the right balance of nutrient-rich calories. Some carbohydrates are examples of empty calories. A sweet roll may taste good, but it provides little nutritional content. Admittedly, I am in the 'eat to live' camp, rather than the 'live to eat' camp. In fact, I have made an effort to 'utilitize' food and its associated caloric and nutritional benefit. I do respect food in the context of its caloric and nutritional content. This framework encourages seeking life's pleasures from other sources. By the way, to my friends reading this, please still invite me to your dinner parties. Just because I utilitize food, does not mean I will not appreciate a tasty meal -- especially with your amazing company!
I do my best to balance the calories consumed with the calories needed. [vii] I've learned how much I need to eat to be healthy and do my best to ignore hunger pangs when more calories are not needed. Keep in mind, hunger pangs are mostly an evolutionary and genetic holdover from a time when food and nutritional information were scarce. In general, we will live a healthier life with less calories than our evolutionary-ancient hunger pangs signal. Metabolic health includes:
Keeping my weight down with a nutrient-balanced diet. I eat a Mediterranean based diet with little carbohydrates, lots of veggies, fruits, nuts, and proteins from fatty fish and low fat meats (poultry);
Managing my blood pressure in the normal range;
Avoiding insulin resistance or becoming pre-diabetic;
Exercising regularly for cardio, muscle mass, and balance benefits. Exercise has tremendous benefits and is the highest weighted activity for not just metabolic health, but as a preventative for cancer, heart, and neurodegenerative chronic diseases;
Regular testing to check key measures that may identify an emerging chronic health challenge. I am a testing nerd. I love learning from the doctors, the testing, and connecting the dots to my long-term health.
Metabolism is like the heat produced by a campfire. A fire with green, poor-burning wood will produce unhealthy smoke and not much heat. The idea is to create a white-hot burning metabolism fire. A fire that is so hot that periodic wet wood, like that sweet roll, will get quickly consumed. As we age, our metabolic fire has the natural tendency to cool. But it does not have to if we focus on our metabolic health.
I view poor metabolic health as the gateway to other chronic diseases. As Dr. Attia mentions: "Few die from diabetes, but many die with diabetes." Metabolic health challenges are the biggest comorbidity. Dr. Attia unambiguously states: "Getting our metabolic health in order is essential to our anticancer strategy." By focusing on metabolic health in the main, I am less likely to have chronic brain, heart, or cancer problems.
My second goal is sleep hygiene. There is an old macho saying that "I will sleep when I'm dead!" This suggests people should prioritize sleep below other important work activities. Neuroscience teaches us a significant cause of brain disease is poor sleep hygiene. As such, I prioritize sleep as part of my work discipline. I work and think better when I am properly rested. Some of my sleep hygiene routines include:
Create a sleep habit. It try to sleep 7 hours a night. There is usually a 10 on the left side of the clock when I go to sleep and a 5 on the left side of the clock when I awaken. Just like any habit, every once in a while the situation requires me to not get enough sleep. I minimize missing my sleep commitment by making it a priority.
No iPhone, computer or other interactive devices an hour before bed. This helps to calm my brain.
If an issue is turning in my consciousness, like a work problem, I right it down. The act of committing it to a saved media helps my brain relax, knowing it is safely waiting for me.
I create a sensory free environment for sleep. This includes a head wrap and white noise. This helps since my wife goes to bed at different times.
A comfortable, closed foam mattress and pillow.
If I am physically sore from working out, I may take ibuprofen to relax muscles and reduce body swelling. I do not make this a habit as regular ibuprofen use has its own negative side effects.
A rested brain will naturally be environmentally ready for increased neuroplasticity. Neuroplasticity describes our brain's synaptic operations when "learning something new." Neuroplasticity is essential for outrunning brain disease. Neuroplasticity is essential for building cognitive reserve. It is cognitive reserve that acts as a savings account to help us outrun brain disease. Notice, I said "outrun" and not "prevent" brain disease. Many people die with -- but not from -- synaptic death associated with amyloid plaque buildup. It is a matter of whether those plaques will build to the point that they present with brain disease symptoms, like Dementia or Alzheimers. Via neuroplasticity or "learning something new" we can generate enough new synaptic connections to offset those lost to amyloid plaques.
The cool thing is that good sleep hygiene works on both sides of the reduced-chance-of-neurodigenerative-disease equation. Good sleep hygiene both increases our ability to outrun brain disease AND reduces the chances of building amyloid plaques in the first place. Brain science teaches that deep, delta-wave sleep is where spinal fluid is released to cleanse excess amyloid-beta generated earlier in our waking hours. Excess amyloid-beta is the building block for those synapse-killing amyloid plaques. Deep, restive sleep is a preventative for brain disease.
Keep in mind, the brain is an incredibly dynamic and still not fully understood. There is evidence that amyloid-beta may cause neurodegenerative disease. There is also evidence that amyloid-beta may be the effect of genetic or environmental causes leading to neurodegenerative disease. Thus, the causality arrow may point in either direction or both directions related to amyloid-beta. My attitude is, regardless on the causality arrow direction, amyloid-beta relates to neurodegenerative disease. That is why it is good to work prevention on both sides of the equation.
Also, owing to the interaction between chronic diseases, good metabolic and heart health are essential for preventing neurodegenerative disease. The brain requires energy. In fact, it is the greediest organ in your body. Your body's systems protect energy sources to the brain. To the point that all other body systems will sacrifice themselves to preserve brain function. Without the brain, there is not life. Thus, think of metabolic and heart health as the means to feeding the brain it's needed energy via blood flow. Metabolism is the energy system, via glucose production and the vascular system is the delivery vehicle.
Working both sides of the brain health equation is a win/win for sure! And YES -- old dogs MUST learn new tricks. You are NEVER too old to learn! [viii]
My third goal is to respect my mental health. I do so by recognizing my unique brain operations and I seek life activities that align with my brain strengths. For example - my personality skews toward introversion and I generally lack tribalistic motivations. These are expressions of my unique personality [ix] but have a basis in my naturally occurring brain neuroplasticity operations.
A mental health example - personality and neurobiology: Our unique brain operations leverage neurotransmitters such as dopamine, acetylcholine, and oxytocin in the synaptic formation process. How our neuron's receptors absorb those neurotransmitters is the essence of our personality expression. For example, my brain weighs the acetylcholine-impacted neuropathways of an introvert a bit more than the dopamine-impacted neuropathways of an extrovert. We are all a little different. As such, I look for ways to express my creativity and curiosity in a manner best aligned with my personality and brain operations.
For example, I seek more introvert-sensitive paths to be productive - like utilizing curated communication and transforming it into improved thinking. [x] This article is a great example! To optimize my personality, I either a) associate with smaller organizations that do not require high degrees of tribal sensitivity. Alternatively, b) in larger organizations I look to surround myself with people that are more tribal-literate and lean on them. [xi] I have been a leader in several large organizations. I have been very fortunate to work with amazing and diverse teammates. Our diverse, unique skills are the source of success! By the way, this does not mean I am insensitive to social cues, rather, it means I appreciate and rely upon friends and co-workers with finer-tuned tribal tendencies. In economics, this is known as seeking 'comparative advantage.' [xii]
My mental health approach provides a lower stress life. To be clear, this does not mean I do not work hard. Because I do. It is how I work that impacts stress. Aligning my personality to my work is helpful. Stress creates the hormone cortisol. A little cortisol and its stress hormone partner adrenaline is good for a quick "fight or flight" response in a dangerous situation. Chronic stress creating consistent cortisol production is bad. Really bad. Chronic stress is very much a modern problem. Our evolution has not caught up to handle stress beyond an immediate emergency situation. Chronic stress may cause any of the "Big 4" chronic diseases. It also makes sleep more challenging.
Certainly, your approach to respecting your mental health will be different. The search is worth it! In the notes, I suggest testing services for identifying your unique personality as a means to understand your naturally occurring brain neuroplasticity operations. This understanding is the first step toward aligning your life activities to those best aligned with your brain.
By owning our health, we can all minimize exposure to the sickcare system. I am glad they are there when we need them. Also, I am glad I do not need the sick care system often.
4. A high deductible helps commit to your health
Our goal is to square the curve. We want to live a long AND healthy life. Naturally, achieving a long healthspan helps us reach our lifespan potential. On average, people live into their 8th decade. Some may even make it to triple digits. In this section, we focus on the very real challenge of funding. How do we pay for the healthcare and sickcare we need to square the curve?
In the prior section, I focused on metabolic health. sleep hygiene, and mental health. Notice, none of those healthcare tactics require big financial outlays. Some of those outlays include the time to research and plan your healthy habits, such as your diet. Since I have utilitized my diet, the cost of nutritional, calorie-appropriate foods is not too high. Plus I have become a wizard at using online services for home delivery. I do like to get fresh foods when possible, but my food-utilitizing approach enables me to follow an 80/20 rule -- which means I stop at good enough for my food. Great food, as associated with delicious or gourmet cooking, is not necessary to reach my healthspan goals. Food simplicity is a guiding principle for reaching my healthspan goal. My exercise routine includes hiking or biking in a nearby park and I have a small home gym for my muscle mass and strengthening needs.
The real secret to my health focus is discipline and habit. Healthy habits take time to build but do not require significant financial outlays beyond my time investment. By making my health routines a habit, they just happen every day. My health routines have become so routinized that NOT doing them seems weird.
Being an ambassador of our own health includes regular health evaluations. For many, this is the annual physical. Also, in the event of a medical emergency or unforeseen illness, we need access to sickcare. This takes money! This is where medical insurance comes into play. This section is geared toward those earlier in their lifespan. Per Dr. Attia's diagram, these are people above the 50% line. This section is also for people that do not have and are currently at low risk of having chronic diseases. This section is about leveraging insurance as part of your healthy, proactive, and preventative habits. Even if you are further down your healthspan curve, I follow the optimistic belief it is never too late to start. Healthy habits help, whenever you start.
Traditionally, we may think of "good insurance" as medical insurance that gives us quick, low or no-cost access (aka - a low deductible) to doctors and nurses needed to solve our current medical symptoms. This is sickcare thinking. This section challenges the notion of "good insurance." We turn the table on how we traditionally think about good insurance. This different way of thinking about insurance is essential to promote our healthspan. I submit that truly "good insurance" is insurance that encourages us to seek long-term health habits as a means to reduce the chances of chronic disease and to be an ambassador for our own health.
My economist-based behavioral approach concerns making the medical system salient. Salience motivates us to seek information to minimize our engagement with the sickcare medical system. I call this "boiling your own frog" and is a form of a commitment device [xiii] mentioned by behavior economists. As much as possible, I seek to only use the system for preventative care and catastrophic medical situations.
A commitment device example: A common example comes from mythology: Odysseus' plan to survive hearing the sirens' song without jumping overboard. Economist Jodi Beggs points out "Commitment devices are a way to overcome the discrepancy between an individual's short-term and long-term preferences; in other words, they are a way for self-aware people to modify their incentives or set of possible choices in order to overcome impatience or other irrational behavior. You know the story of Ulysses tying himself to the mast so that he couldn't be lured in by the song of the Sirens? You can think of that as the quintessential commitment device"
The behavior approach includes using a high-deductible insurance policy. [xiv] The idea is to leverage sickcare insurance to:
Use preventative care like annual exams and other testing services to manage and understand our healthspan, and
Achieve top-end protection from financially catastrophic medical events, like an accident or some unforeseen illness.
The medical insurance business, like most insurance, is very much a statistical game. Insurers are trading a current revenue stream (premiums) for a future cost (claims after deductibles or copays) Their profitability occurs from how a pool of insured people behave. Conceptually, this is like the "Treat a current-sicker-you" vs. "Prevent a future-sicker-you" framework presented in section 2. It is our ability to handle the uncertainty that creates challenges. More on this below. The statistics occur by the insurance company predicting how the pool will behave based on what is being insured. In this case, from a medical standpoint. An essential part of the business model, medical insurers are trading today's certainty (a premium) for future uncertainty (a potential medical claim). Psychologically, people really dislike uncertainty. In general, that is why there is profit in the insurance business. Individually, people are willing to pay more for uncertainty avoidance than it is statistically worth across a pool of insured people. That difference is the insurers' profit.
Medical insurance for the twenty-something example: My two youngest sons are David and Daniel. They are both in their twenties and run a small business. They are both committed to their long-term health along the lines of section 3. Leading a small business means they need to get their own medical insurance. They used the medical insurance marketplace provided by the U.S. government -- healthcare.gov. They were able to easily research many options and see the tradeoffs between the total cost of care, deductibles, and potential out-of-pocket expenses. They each chose a high deductible plan at about $200 / month. This achieves the 2 sickcare objectives mentioned at the top of the last paragraph. They are able to actively save to build up a "rainy-day" health fund. This insurance provides additional financial motivation. The high deductible is a nudge to help them stay focused on their healthcare. The last thing they want is an unexpected and expensive tangle with the sickcare system!
There are different deductible levels -- ranging from very low to very high. Most standard employer-provided plans use lower deductible plans. Let's face it, employers want people on the job and doing work today. A lower deductible plan means they can get their short-term medical issues handled quickly with little additional cost --- then back to work. When it comes to deductibles and the chance of loss, insurers are very aware of predictable insured behavior called "moral hazard." [xv] If people have a low deductible, they have a disproportionately higher chance of loss. This is because, other than the sunk fixed premium, there is so little marginal cost to the insurance that the insured will naturally behave riskier as to that which is being insured.
Moral hazard - a home insurance example: You have not insured your house from any future damages. It implies that a loss will be completely borne by you at the time of a mishappening like fire or burglary. Hence you will show extra care and attentiveness. You will install high-tech burglar alarms and hire watchmen to avoid any unforeseen event.
But if your house is insured for its full value, then if anything happens you do not really lose anything. Therefore, you have less incentive to protect against any mishappening. In this case, the insurance firm bears the losses and the problem of moral hazard arises.
This moral hazard behavior is why the premium to deductible trade-off is non-linear. This is also why low-deductible policies could be contrary to long-term health. These policies are more likely to encourage you to behave riskier when it comes to your health. You may be wondering - "This is not my reality! I will be healthy regardless of my medical insurance!" Good for you. The point is, based on the statistical average, low-deductible policies encourage higher risk relative to the risk insured. You are one of the lucky ones! Another reality is that our decision environment is ruthlessly relentless. Even if today you have healthy habits regardless of insurance, what about tomorrow? The idea of a high-deductible and healthy living commitment device is that it is always on. Even in weaker moments, the commitment device will activate your healthy behaviors!
In the general case of high-deductible insurance policies, insurance companies have the capacity to reduce the total cost of insurance by trading a lower premium for a higher deductible and copay. That is trading away more of today's certainty and being willing to accept more future uncertainty. In the case of high-deductible medical insurance, this means you are willing to manage your future uncertainty by being a healthy person. High-deductible insurance is a win/win trade! You have aligned a reduction in moral hazard with your long-term health.
Win 1 - Your commitment to ongoing, healthy behavior is a long-term win for reducing the chances of chronic diseases.
Win 2 -This is being compensated by a lower premium - another win!
I endeavor to acquire health insurance outside my employer. This is tricky since most employers provide incentives to participate in their insurance program. Over time, employers have decreased health insurance benefits. I like the idea of not being financially tied to a single employer for health insurance coverage. This is along the lines of why the U.S. started the 401(k) retirement program. This made retirement savings portable (i.e., defined contribution) and not employer-pension dependent (i.e., defined benefit). I am hopeful the medical insurance system will ultimately separate from employers. The short-term employer incentive for you being on the job is not necessarily aligned with your long-term incentive to manage chronic disease.
You may be wondering --"Many people are not properly saving for retirement. Does this mean a defined contribution employer medical contribution approach may not work?" The answer is today, as a society we are much better at managing these kinds of choices. Behavioral economists like Nobel Laureate Richard Thaler have provided research to greatly improve the defined contribution retirement approach outcomes. For example, Thaler developed simple nudges like making saving for retirement a default option. [xvi] Changes like this made a tremendous difference in savings. The point is, in the last 20 years or so, society has learned how to better manage the choice environment to achieve the best long-term outcomes. The same could be applied to a healthcare employer contribution choice environment
A high-deductible insurance plan enhances personal healthspan behavior. Such as:
Motivation: It keeps me motivated to manage my healthspan by leading a healthy lifestyle. Knowing an illness could cause a higher annual payment under the deductible, causes me to seek a healthy lifestyle.
Cost vigilance: Paying medical bills below my higher deductible makes me more attuned to medical costs. It causes me to find less expensive sickcare solutions. I have even considered a medical vacation, to go to another country to pay significantly less for the same procedure from qualified medical personnel.
Be medically informed: It causes me to seek information, like Dr. Attia's book. It keeps my medical curiosity higher.
Seek fairness: Living a less healthy life when a more healthy life is achievable causes higher social health costs to us all. Unfortunately, the sickcare system has created moral hazards for many. That feels unfair. We can all do our part to reduce social costs by leading a healthy life and minimizing the chances of chronic disease.
Seek agency: I avoid 'concierge doctors' or similar agency-reducing, high-cost services. To me, using a concierge doctor is moving the wrong way. Owning my personal health means curating medical information from various public sources. My objective is to be a self-motivated ambassador of my own health.
You also may be wondering -- "What is the long game? If most people use this high deductible / improved long-term health strategy, then the only people paying higher-cost insurance will be chronically sick people. That can't be good!" To flesh out this question further -- Even though there will be more healthy people, they will be outside the higher premium paying low-deductible pool. The remaining chronically sick people will suffer even higher costs. This occurs because there are fewer healthy people willing to participate in the insurance pool by paying the higher private insurance premium sickcare costs. Eventually, the medical system may collapse under the weight of higher private insurance costs.
Good question and yes, that question gets at the core challenge of privatizing a public good like human health. Keep in mind, this article is about how to make the most of today's medical system as it is. This question addresses my thesis and recommendations for the future.
At some point, if this high deductible / improved long-term health strategy is used by enough people, it could be the undoing of the current sickcare industry. I mentioned before, medical insurance is a statistical game. It only works if the revenues [which are the premiums paid by the entire insured population, sick or healthy] are greater than costs [which is the numerator (sick people) divided by the denominator (the total population of sick and healthy people) times the total cost of care]. [xvii] Most countries in the world have some form of social health system, for that very reason. Private insurance of public goods may not work because of adverse selection - this is where the population insured is more likely to claim the risk being insured.
Today, most countries manage adverse selection with public policies encouraging and creating accountability for long-term health. This puts upward pressure on the healthy denominator - which causes reduced costs for the insurer. That is good! Healthier people mean lower insurance premiums.
As opposed to the U.S. system, which prefers public policies encouraging sick people as necessary per the private sickcare industry incentives. This puts upward pressure on the sick numerator - which causes increased costs for the insurer. That is bad! Sicker people mean higher insurance premiums. There are 2 ways to make the calculation balance, either through sickness/higher premiums or through health/lower premiums -- the math is inescapable.
I realize this is a bit of a political lightning rod, but if our goal is to motivate people and provide services encouraging a long and healthy life, and do so at a reasonable cost, aligning the social health good with a social healthcare system may be our only answer.
5. A close-to-home sickcare success story - beating cancer
My wife had breast cancer. Based on the 4 chronic diseases contrary to achieving the squaring of the lifespan and healthspan curve, she now has a strike. It is true the probability of cancer increases for cancer survivors. However, I believe she has positioned herself well to avoid a decreased healthspan. She has done this because of her past investment in maximizing her healthspan. Her cancer-offsetting benefits and investments include:
The cancer was caught very early. It was small and not aggressive. The margins around the cancer were cleared and the cancer did not reach her body's super highway transportation system - the lymph system. As Dr. Attia mentions: "... early detection is our best hope for radically reducing cancer mortality."
She had a competent sickcare team, which includes medical staff plus supportive friends and family that helped her along the way.
The cancer was handled quickly. The time including diagnosis, confirmation, consultation, surgery, and post-op care was only 3 months.
She has a great mental outlook as per her focus on her unique mental health needs. She knows how to feed her joy. If anything, since her diagnosis, she has doubled down on her already significant healthspan investment.
Most importantly, she has spent the previous 55 years of her life investing in her healthspan. She follows many of the same 'own your health' activities mentioned earlier. Her approach is unique to her, but the investment outcome is the same -- to maximize her healthspan. At the time her cancer occurred, she had no healthspan-reducing comorbidities.
You may be wondering -- "Ha, got you! See, you can do everything right and still get cancer. It seems like it is not worth trying." The answer is, pursuing healthspan habits is absolutely worth the effort. Remember, healthspan is a statistical game. This is all about reducing the chance of chronic disease and squaring the curve. It does not mean a chronic disease event will not happen. Dr Attia mentions:
"(Cancer) is the chronic disease where bad luck in various forms plays the greatest role..."
We all get unlucky at times. Just like when playing poker with your friends, you can play the best hand ever and still lose that hand. The idea is to maximize your chances of winning over the course of all your poker hands. My wife's approach to her healthspan is what made her cancer experience a minor blip in an otherwise full and healthy life.
In terms of cost, you may be wondering -- "Do you wish you had a lower deductible plan? It must have been expensive to handle the cancer treatment." The answer is, not at all. The good news is, our healthspan focus enables less need to access the sickcare system. That is, we rarely have a big medical issue that max's out our insurance plan deductible. This is a positive reinforcing feedback loop. For each year of maximum pay, we anticipate at least a decade of minimum pay years. The lower premiums of the good years offset the rare bad year. We find the increased focus on our health as a healthspan maximizing commitment device, plus the lower premiums, to be well worth it! This does require us to save for a rainy day. In the U.S., there are tax benefited Health Savings Accounts ("HSAs") or similar to make health savings easy.
We were glad the sickcare system was there in the rare case we needed them. Our plan is to keep it rare!
[i] Attia, Outlive: The Science and Art of Longevity, 2023
[ii] A similar concept to 'squaring the healthspan curve' is discussed in the article connecting time to entropy. In this case, entropy is offered in a similar vein as healthspan.
Hulett, Fight Entropy: Living your best life by using the practical physics of time, The Curiosity Vine, 2022
[iii] Doctors and medical personnel must make decisions under uncertainty. Situations may require immediate intervention, such as in the Emergency Room. Even given more time to provide thorough diagnostic tests, there is an element of uncertainty in every treatment decision. As such, medical personnel always make treatment plan decision tradeoffs. From a practical standpoint, being sure a medical decision will "Do no harm" is not possible, given the decision is made under uncertainty. Even "doing nothing" is a decision carrying a set of potential outcomes and risks, often worse than the "doing something" route. Thus, at best, medical personnel must optimize decisions based on the information they have. "Do less harm" is a more practical suggestion. In the context of this article thesis, 'Do less harm by optimizing long-term outcomes" is a more fulsome, Hippocrates-consistent objective.
Attia, Outlive: The Science and Art of Longevity, 2023, chapter 2
[iv] Dr. Attia points out that heart health has improved from a proactive and preventative standpoint. However, Attia suggests proactive or preventative metabolic health is sorely lacking.
Attia, Outlive: The Science and Art of Longevity, 2023
[v] Taleb, Antifragile: Things That Gain from Disorder, 2012
[vi] A Greedy Work example from Kaiser Permanente is provided:
Hulett, The "Greedy Work" syndrome: Helping the Professional Services Industry solve investment challenges, The Curiosity Vine - Section 4, 2021
[vii] Hulett, Weight change and rules of thumb for a healthy lifestyle - a mathematical framework, The Curiosity Vine, 2021
Hulett, “Boil Your Own Frog” ... and other high-energy eating habits, The Curiosity Vine, 2021
[viii] Hulett, Dreams are a window to our memories and healthy thinking, The Curiosity Vine, 2022
[ix] For personality and related testing: If you have not taken the Meyers-Briggs or MBTI, I recommend it. It is especially useful to do with your work team or with your spouse. This helps identify personality alignments or compliments. In the context of work, it is helpful to understand when assembling a complementary team. While skill sets are usually more obvious, personality complementarity can be nuanced and more difficult to fit together. Ray Dalio has a nice treatment of this concept in his book Principles. Also, another good test is called a conative test. This describes how one takes action. It is related to, but with some important differences from, personality testing. I took the Kolbe A assessment and found it helpful. The Economist wrote an article called The link between personality and success. It suggests people should work to moderate their personality, not going too far out in either extreme. An ambivert is someone who is more in the middle between an introvert and an extrovert. Personality does evolve as we age. I’ve heard it compared to erosion. While younger, we may have sharp peaks like the Rocky Mountains, but over time, our personality “rounds” and is akin to the Appalachian Mountains. Perhaps this relates to our adaptability.
[x] Hulett, Creativity - For Both Introverts and Extroverts, The Curiosity Vine, 2022
[xi] Hulett, Origins of our tribal nature, The Curiosity Vine, 2022
[xii] Ricardo, The Principles of Political Economy and Taxation, 1817
[xiii] Thaler, Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness, 2008
[xiv] When choosing an insurance plan, it’s good to consider total healthcare costs (including the premium, deductible, and copayment/coinsurance amounts), the health and drug services you'll use, the health plan category that works best for you, and plans with easy pricing. Most people overweight the premium because it is most salient as a monthly charge. Co-pay and deductible occur after the policy is in force and there is a medical event to fund. This is less salient. All three of these costs together are known as the total cost of insurance. I recommend trading off a worse co-pay and higher deductible for a higher premium. It helps drive the healthy behavior discussed in the article. Please see:
Editors, How to pick a health insurance plan, Healthcare.gov
[xv] There is a rich research base concerning medical insurance and moral hazard. "Predictably, those who enrolled in the most generous plan spent the most on health care."
Powell, Goldman, Disentangling Moral Hazard and Adverse Selection in Private Health Insurance, National Bureau of Economic Research, 2016
[xvi] Thaler, Benartzi, Behavioral Economics and the Retirement Savings Crisis, Chicago Booth Review, 2013
[xvii] The formal statistical notation for the medical insurance business case looks like this:
From a policy standpoint, I highlighted and boxed:
The sickcare system policy is focused on increasing the number of sick people in the numerator (red box), this puts upward pressure on insurance costs (a net bad) or
The healthspan policy focuses on increasing the number of long-term healthy people in the denominator (green box), this puts downward pressure on insurance costs (a net good)
The math is inescapable, revenue must be more than costs to make the private medical system work. It is a zero-sum game.