Economics, Health Care, Pethokoukis

Can the US private sector outsmart Obamacare?

Image Credit: Shutterstock

Image Credit: Shutterstock

Two probabilities: Obamacare isn’t suddenly going away and it isn’t going to fix US healthcare. If America is going to have a more medically effective, financially sustainable healthcare system in the future, it will require plenty of disruptive innovation by the private sector. Now that’s not just some overused business conference buzz phrase. “Disruptive innovation,” coined by Harvard Business School’s Clayton Christensen, is how new competitors steadily move upmarket and supplant established players by deploying some new technique or technology to make goods and services cheaper, simpler, and easier to access.

For instance: the first PCs were less capable than mainframe computers, but they were good enough and a lot cheaper for consumers and small business, the low-end of the market. Then as the technology improved, PCs moved upmarket and grabbed market share from Big Iron.

In healthcare, disruptive technologies allow complex, expensive procedures and treatments for well-understood medical problems to be done in places other than hospitals by less credentialed and less expensive doctors, nurses and technicians. This could mean, for instance, nurses sometimes substituting for anesthesiologists or using telemedicine so photos of skin condition could be sent to a physician.

So does the Affordable Care Act make disruptive innovation harder or easier?

Well, some of both, according to Seize the ACA: The Innovator’s Guide to the Affordable Care Act by Ben Wanamaker and Devin Bean of the Clayton Christensen Institute. On the plus side, the individual mandate will likely create the need for new delivery models at the low end of the market such as retail clinics. And the employer mandate creates incentives to split true insurance from routine reimbursement by providing on-site clinics or similar services to cover primary care and contracting directly with healthcare providers for catastrophic care. On the negative side, the essential health benefits provision establishes a floor at the low end of the market that creates a barrier to entry for new and disruptive providers. Same goes for the insurance exchanges themselves, which mandate health plan actuarial values and force providers to offer plans at Silver and Gold levels thus making new providers compete directly against incumbents.

Wanamaker and Bean:

In an effort to disrupt the defunct system, we recommend that innovators focus their efforts on areas where the legislation creates opportunities for disruptive innovation, specifically the Individual and Employer Mandates, ACOs, Wellness Programs, and the CMS Innovation Center.

While these provisions are far from silver bullets, innovations positioned with the right business models and value networks will yield exactly what legislators were hoping to create: more affordable and accessible quality health care.

In contrast, where provisions of the ACA discourage disruptive innovation—namely, Insurance Exchanges, Essential Health Benefits, Cost-Sharing Requirements, Medical Loss Ratio, and Medicaid Expansion—we appeal to policymakers to focus their efforts on making the legislation more innovation-friendly.

Quality health care will not become affordable and accessible on its own; we need to be proactive in creating room for the innovations that will transform the current state of the industry.

This outline for innovators also provides a deregulation road map for legislators, such as letting nurses do more of what doctors do: diagnosing and treating patients, as well as prescribing medications — all without a doctor’s involvement. And exchanges are ripe for deregulation, especially the essential benefits and medical loss ratio requirements. The goal is to create space for innovation and new players to gain a foothold and expand against the desires of incumbent players. But the ACA is all about Big Government and Big Medicine coming together — hardly a promising situation for upstart companies and new competitors. Once Republicans tire of delay and defund, they can start on deregulate.

Credit: Clayton Christensen Institute

Credit: Clayton Christensen Institute

19 thoughts on “Can the US private sector outsmart Obamacare?

  1. If Obamacare “sticks” in any reasonable form – it will be the beginning of the end of employer-provided health insurance.

    you’re going to see an avalanche of companies who are going to send their employees to the exchanges to get their insurance.

    the 2014 elections will decide it and if Obamacare does not get stopped – the GOP is going to be in the position of explaining how they are going to take pack insurance from people if they are elected.

      • Larry’s really talking about the subsidies, not the exchanges. As a freeloader himself, he understands the lure of something for nothing.

        • we’re already paying the subsidies guy. When folks without insurance go to the ER – who pays for them?

          If you guys actually were serious – you’d not let people use the ERs if they could not pay – but then the folks that did that would all be voted out of office so they play dishonest little games about it.

  2. “If America is going to have a more medically effective, financially sustainable healthcare system in the future, it will require plenty of disruptive innovation by the private sector.”

    You can stop writing right there Jim – Obamascare destroys private sector participation in healthcare delivery. Game over.

  3. I have been part of the Singapore health care system and I am EXTREMELY pleased with it. I get world class health care at reasonably affordable prices.

    Bill Haseltine has summed it up very nicely in his book “Affordable Excellence-The Singapore Healthcare Story”

    What concerns me greatly is WHY our elected officials felt they had to “reinvent” a system which has been tested and proven to work? Says to me that they were not looking out for our best interests but bending to pressure from Lobbyists…..

    Either way, we need to FIRE THE LOT OF THEM and start over.

    Dr. PDG, Singapore

  4. This is a bunch of crap. We could have instituted those kind of improvements WITHOUT Govt intervention. Let’s face it. Obamacare is a huge SCAM perpetrated on the people for the benefit of the Federal Govt Monster and their Big Insurance donors. The only ones who will lose here…as usual are we, the people.

    Defund and Repeal.

    • we had 40 votes to repeal and not one vote to replace and not one vote to reform.

      re: we could have done what Singapore did without govt.


      you need to go look at the Singapore health system.

      It has a hefty payroll tax, price caps and forced disclosure of prices.

      and… it works…

      name one country on the planet that does health care – without govt – better… it just don’t exist.

    • you are entitled to your own prejudice opinion about Obama care. it has helped people that I know that’s what matters.

  5. Let’s set aside the question of how disruptive innovation helps people who have no insurance (no money).

    The stumbling block before and after ACA is the regional hospital/hospital network that dictates terms in its area of dominant influence. And, no, ACA won’t be much more effective dealing with it than the employers’ groups, HMOs and doctors’ groups who have tried to rationalize healthcare and failed.

    But to tout disruptive innovation is a bad joke considering the market and political power of these dominant players.

    In my part of the world, nurse practitioners handle anesthesiology for minor procedures; Nurse practitioners do most of the work at my GP. Ditto for the specialists I see. These changes took place because the major hospital made them happen. If you don’t see them where you live, it is because the major player PREVENTED change.

    This is the real tension in healthcare. An industry as specialized and capital intensive as medicine benefits from monopoly. That said, we put ourselves at the mercy of monopolists,

    • In the current system – if you took away, EMTALA, Medicare and MedicAid – what would happen?

      would it make hospitals and doctors “compete” and prices come down or would just a bunch more people die who could not afford/obtain any kind of care?

      we have a template for this – it’s called 3rd world.

  6. Obamacare is aimed to secure, in perpetuity and absolutely the black vote, the Hispanic vote, the female vote (via the faux “war on women” and free birth control items). I would have included the young but they are so stupid (dumbed down in the “education” system with useless degrees) and ignorant that they wilfuly ignore what their surroundings are until they get older and then maybe an Archimedes moment. Notwithstanding the democRATS already have these groups locked up, this will carve it in stone and guarantee the fall of the Republic. That is it in a nutshell. And that is why the democRATS are fighting against truth and reason – abetted by the lame stream media), for absolute power in perpetuity. So long to the greatest country in the history of mankind.

    • Oh, I dunno. I suspect that Ted Cruz and his handful of idiot supporters are winning more converts for the Ds than Obamacare. And, with the success of Obamacare in the hands of milennials, whose participation will make or break it, saying that they are stupid to know where they are may be a tad counterproductive as well,

      • re: blacks/Hispanics/Women/et al

        all of the above go to ERs to get their care if they don’t have insurance – and guess who pays?

        yessireee… there are 30 countries in the world with universal health care – and it’s all about blacks, Hispanics and women…

        this is the kind of logic that passes for “intellect” these days.

  7. -Can the US private sector outsmart Obamacare?-


    Folks, wake up!

    The pieces of the puzzle are all found and the picture is there for everyone to see it.

    However, Americans are being slowly turned (since 1913) into a society of intellectually mute, blind and deaf “sheep.”



  8. What should be the role of government vs. the private sector in meeting the needs of those who have limited access to health care?

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