Allen Moseley of Noro-Moseley: Investors Keep Eye on Health-care Costs, Reform
Viewpoint by Allen Moseley
Atlanta, GA (Atlanta Business Chronicle) -- Health-care reform. Those two words strike a chord with so many. Two words that certainly can be interpreted many different ways. However, one thing is absolute; those two words are met with a strong point-of-view from those in the business of health care. As a venture capitalist focused on health-care investing, I’m in that business and so are many Atlantans.
We should all pay attention to the proposed health reform. It impacts us all — those in the business and those who are recipients of health care.
Health-care reform sounds like a good thing. As Americans, we should all be very concerned about our need to reduce health-care costs. We do need health-care reform in many areas, but the way we go about reform in this country could have serious implications.
First of all, I recently heard from someone that any country’s health-care system is a reflection of that country’s values. When I hear the constant comparisons of our system to other country’s systems, I have to remind myself that our country has very different values, which makes our health system quite different from those of France or Denmark. For better or for worse, the United States has a unique set of values as a country and these values very much impact our health-care system. I believe much of the discussion in Washington right now is as much a debate about our values as it is about health care: What are the rights of an individual? What role do we want government to play in our lives? What are our social responsibilities?
I do believe we will see a health-care bill this year out of Washington.
My first observation about the current versions of health-care reform is that none of them do much to address the rising costs. We have to assume that mandating health-care insurance for most of the U.S. population will also increase the utilization on the system. This will put significant strains on primary-care access. Also, when you look at the taxes being proposed by the various bills on managed-care companies and medical device companies, it is clear to me those taxes will only get passed along to the end users.
When will we have the political will to begin to truly address cost? The answer to that is very unclear . . . health care is a unique animal, and the moral, social and political issues associated with it make the decrease of costs and potential rationing of care very controversial.
My second observation about health-care reform is we should be thankful a public plan appears to be off the table. I believe a proposed government plan could negatively affect the entire health-care chain from commercial insurance companies to providers to patients. Why is this? As much as we all love to pick on insurance companies, they essentially subsidize the entire system by paying providers more than government plans (Medicare and Medicaid). In other words, hospitals, physicians and other providers make their money on commercial insurance reimbursement, not on Medicare and Medicaid. This is known in the industry as “cost shifting”.
I spoke to the head of a major East Coast multibillion-dollar health-care system who told me his profitability would go from a yearly $100 million profit to a $300 million loss if commercial insurance went to Medicare rates. This includes the added revenue he would get from everyone being covered by insurance. He would have to shut his doors.
Where do all his patients go? How do we handle the delivery of care if major health systems go away? With a tremendous decrease of system capacity, it would be a terrible crisis for our entire system.
My last comment relates to the real costs of health care – the general health and wellness of our population.
Health-care reform needs to be as much about keeping us all healthy as it is about treating the sick.
The future model of health-care delivery will have to marry individual accountability with competitive cost delivery. This will be the only way we are ultimately able to reduce costs and provide the best care to as many people as possible. Only then will we have real health-care reform.