The Legal Cavalry Has Arrived

The “worst” result Health Rosetta team has driven is a 20% absolute reduction in per capita spending while health plans/outcomes dramatically improved. The secret behind that has been Health Rosetta’s largest investment — assembling the Dream Team of attorneys who have leveled the contractual playing field.

The Case for Open Sourcing Healthcare’s Local Laws

By Dave Chase, Health Rosetta-discovering archaeologist

Transforming employee health plans from being 🇺🇸 ‘s #1 inflation, debt, poverty & bankruptcy driver to well-being driver

August 3, 2023

To understand the U.S. healthcare system, think of it as a metaphorical nation. After all, if it was a nation, it would be the third largest economy in the world recently surpassing Japan and Germany.

Let’s call it “Healthcareistan.”

In any nation, there are federal/national, state/provincial and local laws.

In many regards, it’s local laws that impact us the most day to day.

In healthcare, there are federal and state laws that are important but the de facto “local laws” are health plan legal documents.

After all, what is a health plan other than a bunch of legal documents? Health plans don’t deliver care. However, the way care is delivered is governed by these legal documents.

Well-functioning nations have laws created by and for the people. Unjust nations have laws created to enrich a small group of extremely powerful individuals. Sound familiar?

Josh Rosenthal, PhD 🌱 said nations are “imagined communities instantiated by currency and contracts.” That could easily be applied to Healthcareistan.

For this reason, we need to democratize the legal documents governing Healthcareistan.

The first two buckets transcend payment category (Medicare, employer, Medicaid, ACA, etc.):

1️⃣ Contracts to pay for care (e.g., pay $x for a hip replacement)

2️⃣ Vendor contracts (e.g., who processes medical claims)

The third bucket is specific to the regulations in the payment category such as

3️⃣ Plan documents for employer-paid plans (technically, they are trust documents)

Contractual capture

Regulatory capture (the healthcare industry spends more on lobbying than financial services, aerospace & defense combined so it’s able to control politicians’ and regulators’ behavior) is real but “contractual capture” is at heart of America’s healthcare dysfunction.

In other words, regulatory capture establishes federal and state healthcare laws while contractual capture establishes the de facto local laws.

National Academy of Medicine and PwC estimate healthcare’s waste at 1/3 to 1/2 of all healthcare spending, respectively. Many people are baffled about how this is possible.

Trillions of dollars of waste is not an accident. It’s all codified in these legal documents.

The experience from Health Rosetta style health plans bear this out as many employers are spending 30-50% less per capita with the best health plans in America (e.g., 7×24 access to advanced primary care, access to Centers of Excellence, no cost for members, etc.).

Given all the needs in society, it’s grotesque that our healthcare system wastes more than the entire economy of Russia. How is this possible?

Reason #1: Mega carriers/PBMs/health systems have armies of smart lawyers codifying the >$1.5T annual waste. It’s a safe bet that oligopolistic PBMs and carriers have more lawyers than many nations.

Reason #2: Contract counter-parties (employers, civil servants running state/fed health plans) are massively outgunned so they get rolled over.

Here’s what we’ve observed results in 6 years since Health Rosetta launched:

  1. Brokers paid by carriers/PBMs (hello, conflict-of-interest!) tell employers these terms are “standard”
  2. Most employers treat legal docs like I treat Terms of Service on a consumer website. Analyzing 1000s of employer health plan strategies, we found that over 95% of employers never review health plan legal documents. Employers treat them like oxygen in the air. The problem is that “air” is highly toxic.

Financial toxicity is a killer

In medical circles, there is growing awareness of “financial toxicity” such as in this JAMA, Journal of the American Medical Association. For example, West Health recently released a study projecting that just the cost of medications will be the 10th leading cause of death in America by the end of the decade. Sadly, we hear stories all the time of people not being able to afford life-saving medications. Making matters worse, already-expensive medications are made even more expensive due to PBM profiteering memorialized in legal documents that put ancient Egyptian hieroglyphics to shame (thus the need for healthcare’s Rosetta Stone to decode). As depicted below, it’s not unusual for PBMs to make more money per prescription than pharma companies.

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For example, PBMs (Fortune 15 companies most people have never heard of) create so many revenue streams, they’re bigger than pharma (there isn’t one pure pharma company in the Fortune 50). Naive employers join “PBM coalitions” mistakenly thinking they will save money (the opposite is true).

PBM make more than pharma! How do they do it?

One of the challenger PBMs the Health Rosetta community works with created the following graphic outlining the revenue streams enabled by severely toxic legal documents:

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Employers sign profiteering-laden agreements without any transparency on data, understanding of terms, ability to audit, etc. The following quote from Stacey Richter was insightful:

“One of my mentors often said price is irrelevant. He said he would sell anything for any price as long as he could define the terms of the deal.”

The Rise of the Functionally Uninsured

The human impact on the “citizens” of Healthcareistan is devastating. When your life savings are less than your toxic health plan’s deductibles, you are functionally uninsured. The couple pictured in this Wall Street Journal article is an example of the pain inflicted by unfair “laws” in Healthcareistan.

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Sad result: Working/middle class has had 30 yrs of wage gains stolen.

One definition of an economic depression is 2+ yrs of wage stagnation/decline. In other words, half of household are in an economic depression more than twice as long as the Great Depression or 1930s Germany. The results of status quo health plans is brutal.

The graphic below is from the same 2016 WSJ article. I’ve wallowed in this graphic 100’s of times thinking about the pain inflicted by the healthcare system on middle-class families and it’s surely gotten worse in the subsequent years.

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That’s not all. Thus, why Chapter 1 of my first book was titled “American Has Gone to War for Much Less” (PDF) listing other “achievements” (i.e., misery) inflicted on the average American. Among other things, the opioid crisis (I wrote an entire book on that) and preventable medical mistakes being the third leading cause of death demonstrate a new set of “laws” are required in Healthcareistan to liberate the American Dream.

The Legal Cavalry Has Arrived

The “worst” result Health Rosetta team has driven is a 20% absolute reduction in per capita spending while health plans/outcomes dramatically improved. The secret behind that has been Health Rosetta’s largest investment — assembling the Dream Team of attorneys who have leveled the contractual playing field.

For Health Rosetta to achieve its mission to empower community-owned health plans that dramatically transform health plans, open-sourcing several years of this intellectual property ensures new contractual norms can be established that extend well beyond Health Rosetta to the entire industry.

For this reason, we established a new non-profit with extraordinary board members and a project leader second to none that will oversee this expanding as broadly as possible. The details and first deliverables will be released at RosettaFest (you can register in-person or virtual).

If you are curious why Health Rosetta would give away its crown jewels, read this post. It boils down to it’s better to own 1% of a watermelon than 100% of a grape.