Saum Sutaria, M.D.
Appearances
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
For the remaining dollars, about a third goes into hospitals, hospitals and infrastructure-based care. About a third goes into physicians' offices and other clinic-type activities. And about a third goes into drugs. Again, simplification from that perspective.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
In the drug, and I would add to that maybe drug and device category, I'm including the cost of pharmaceuticals that might be administered in a doctor's office or a hospital. So just think about it as a third, a third, a third.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And that's how people can think about when I go spend my money or I go into the healthcare system and I'm spending money, on average, a third, a third, a third is happening there. Obviously, some people never end up in the hospital. Small proportion of people end up costing us a lot in hospitals, for example. Some people are not on any drugs. Some people may be on five or six drugs.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The system has a variety of what I call cross subsidies in it.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The delivery industry is a pass-through to other things in some ways. And the 3-2-1 framework was probably an older framework. If you look at the rise of the total drug costs, which I'm sure we'll get into, the third of third of third is absolutely a more transparent and simplified way of looking at how we're spending our dollars.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The one piece of context I would add to that introduction is that at the same time, the U.S. economy has grown robustly since then. Proportionally, I think that's an important factor in affordability, which is had the U.S. economy stagnated and others grown, this affordability question would be a very different question than what we've seen happen, which is the U.S.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
economy has grown incredibly robustly. But if you go back to the 1950s, and by the way, this is a global phenomenon. In and around the late 40s and let's say into the late 1950s, in many places, significant investments in social welfare programs and healthcare were made. So we'll talk about the US, but just as context, the NHS in the UK was created in 1948, okay? Okay.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So the systems that were designed to increase coverage originated in that timeframe, roughly. Now, for us, it was 1965 when Medicare and Medicaid came into being, but it was somewhere in that range. So you go back to the 1950s. I mean, first of all, we were spending less than 5% of GDP on healthcare, okay? Put that in context versus 17 and a half.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Almost 20 from that perspective. More than half of those dollars were spent out of pocket, meaning you went to the doctor and you paid your bill. Which is today 25%. where some of the dollars that you're putting in are going to cover your insurance premium, it's really 15%. So your direct exposure, what you see and feel in terms of what you're spending on healthcare is down to 15%.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's important because the socialization of coverage of costs has made the American consumer less sensitive to the price points. that they're seeing for everything, for drugs, for doctor's offices, for hospitalizations, etc. The other thing that's interesting is today, that means 85% of healthcare expenditures are covered by a third party, whereas it used to be about 50%.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So again, that sensitization phenomenon is real. The federal government contributed about, say, 12.5% to expenditures back then. Today, it's north of 35%. We've already been through that. When you add direct spend plus tax benefits and other things that lost taxes for the federal government, et cetera, when you look at that, you're about a third of the expenditure being the federal government.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So the rise of the federal government's role in healthcare has been material and almost as rapid as the rise in healthcare costs from that perspective. So it's a very different system of consumption.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, I think there are all kinds of things in the ecosystem, including geographic diversity, state versus federal rights, and even fundamentally the drive that the American consumer has in determining their own outcome. If you look at our system today, much of its construct is based on a desire for consumer choice.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Many of these programs, these coverage programs, or some would say welfare programs that evolved like Medicare and Medicaid, were designed to solve some substantial problems. So if you go back, what happened at that time? Two things happened in the 1950s. One was there was a significant commitment to investment in hospital capacity at the time. I mean, there were people in America...
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
not just rural, but suburban, that did not have easy access to acute hospitalization. And the technology and ability to intervene and save lives in that setting was improving significantly. And I think at the time, there was a belief that it wasn't fair or equitable, that that access wouldn't exist.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's called the Hilbert Act, you referred to it earlier, which if I think about it in simple terms, it guaranteed a hospital within every 10 miles or 10 or 15 miles of every American in concept. And that's what happened. And that legislation drove our thinking in terms of access all the way until it expired in close to 2000, 1997, if I recall, from that perspective.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So we made a massive investment in infrastructure from that perspective to provide people access. Okay, and that's important. The second thing that happened, of course, is that by the time you were in the 1960s, there really wasn't a coverage mechanism for seniors.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, there was patchwork stuff, and there wasn't really a coverage mechanism for those with less means, what we today call Medicaid. And it got to the point, especially with the importance of the senior's power, not only of the purse, but from a political standpoint, where on average, seniors were spending a quarter of their retirement income from Social Security on healthcare.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That wasn't sustainable. So they neither had consistent coverage. It was inequitable. And on average, a quarter of the Social Security check was being spent on healthcare. And so why Medicare and ultimately Medicaid associated with it was you had a country whose economy was growing rapidly. We could afford to take care of our seniors. And that was the decision at the time.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And it was met with great support, obviously, at the time. And so you created a system in which that coverage existed. And therefore, the federal government's expenditure jumped up significantly.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, well, we do pay Medicare taxes today. I mean, now there are special taxes to help fund Medicare, but it's really, it's a solvency issue.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Absolutely. In hindsight, it's 100% clear. If you think about when the legislation was put in, I'd say in 1950, we were like 4.5% of GDP in healthcare. At the time Medicare came about in 1965, that number was in the mid-sixes, mid to upper sixes at best. So who would have guessed that it would have risen to 17, 18, potentially in the future, 20%?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think, I mean, the US healthcare system in many ways is a story, an optimistic story of well-intended policies that now are questioned based upon the way the expenditures have increased. There's another thing that's important to understand, which is as the US healthcare expenditures increased as a percent of GDP, so did the rest of the developed world. So every developed nation
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
that put in place programs, their version of Medicare and Medicaid, I understand more state-run than privately run, their expenditures increased. They started like us in the fours, and they've landed in the 11% to 12% range. We've just accelerated up to 17%, 18%. Think about it this way. From that time forward, the U.S.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
economy relative to the healthcare economy, the healthcare economy has grown significantly. roughly 2% per year faster than the US economy. And the US economy has grown robustly, better than the rest of the world. So that's why the expenditures have gotten so high. And there have been periods where that's been slower, and there have been periods where that's been faster.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Every time there's a new coverage event, Medicare or Medicaid, some of what happened with the Medicare Modernization Act in 2000, we'll get into that when we talk about drug costs. And then obviously the Affordable Care Act, which created significantly more coverage, that rate of increase for healthcare expenditures relative to GDP growth has widened.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, yeah. CMS, Center for Medicare and Medicaid Services, as it's called. Medicare covers people over the age of 65 and a bunch of special categories of people with severe chronic illness, take dialysis as an example, that it might be hard to find coverage on the private market over a long period of time given their needs. It is more than what I would describe as a safety net program.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's a coverage program for people over the age of 65.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Everybody qualifies for Medicare at the age of 65.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The benefit doesn't vary.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's right. And so Medicare, another interesting piece of context, think about life expectancy. I mean, we're going to get into life expectancy differences in the US. I mean, the fact is- What was life expectancy in 1965? Yeah, and I don't know what the exact number was in 1950 or 65. It wasn't what it is today.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And the other thing you would say is that, look, I think you would agree over the last 100 years- In the broad context and scheme of things, life expectancy in the developed world has improved remarkably, 2x. And yes, there are now differences at the top of the spectrum between the US and others, which we'll get into.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But this is in the context of a very, very rapid improvement in overall life expectancy. Health status may be a different thing. And I think that's also something to talk about.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So Medicaid is a safety net program. It is a program designed for individuals below different definitions state by state of certain measures of federal poverty level. And the idea behind the coverage is that for those people, not only are their needs unique, but their ability to access health care services can be challenged.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And the benefit of having programs like Medicaid is it increases, I won't say it makes it entirely equitable, it increases their ability to access the healthcare system in a reasonable manner with a coverage system that avoids taking those least fortunate down a path of severe medical debt that would be overwhelming to their personal financial situation. That's how I think of Medicaid.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The cutoffs range somewhere between 100% and 200% plus of federal poverty level. And we'll get into maybe with the Affordable Care Act, the exchanges and whatnot. Medicaid covers a lot of people. If you think about this, it now today covers 90 million people in the U.S. more than Medicare.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Of those covered, think Rust Belt states or Medicaid today. So this is a very large program. Medicare covers probably, I would guess, 65 million or so today and growing. As the population ages, we forecast that that 65 million will become close to 90 million at the peak of the baby boomer aging, which is around 2032 in terms of timeframe. But Medicaid today covers about 90 million people.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's a big number.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I don't know. We can look that up in terms. I can tell you that the income level that defines federal poverty is pretty low. You or I would not consider that to be a reasonable living wage or income for a family in this environment with the cost of goods being what they are today.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And who will be underinsured. And that's where things like the exchanges from the Affordable Care Act have stepped in to provide at least options for additional coverage so that people's healthcare costs can be offset. Okay, that's helpful. Bringing back to Medicare and Medicaid. So if you really look at, you have these programs that came into play. So what drove the rapid expansion?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Another view of the world would have been that you had this coverage, the healthcare system stood still, and maybe the costs increased, but they didn't increase beyond 6%, 7%, 8% of GDP.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The employer-sponsored insurance system was already entrenched because of the tax benefits that existed.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That is right. And so that was entrenched. And why does that matter? I think this is an important point about our belief in consumerism and choice. The marketplace provides choice in a way that many of the nationalized healthcare systems that exist in other countries don't.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And if you really look at many of those other countries, while they have a nationalized healthcare system that purportedly has universal coverage, they also have a private system that no differently than ours, where people with more means can procure better insurance and better access and a private healthcare system, etc. It's just not as widespread as it is here.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
In this country, there was a belief that was institutionalized by incentives that employer-sponsored insurance was working. And remember, at that time, it wasn't that expensive. Meaning employers often covered 100% of the premium. So the employee did not end up having to contribute like they do today to the cost of their insurance as an employee that they're receiving from their employer.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It was a comfortable system, if you imagine, at the time. And based upon the system, you got choice. Which product do I want? What kind of network do I want? Et cetera. What happened as a result of that expanding, especially employer-sponsored insurance expanding, is that insurance moved from being an individual product based upon your or my individual risk to group insurance.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
What are you doing with employer-sponsored insurance? You're aggregating all the employees and all their risk, and you're socializing that risk among the whole group and saying, look, in order to protect each of you individually, we're going to share the risk as a group.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
We're going to buy the insurance collectively, and it'll spread the risk among us to avoid individual catastrophic loss from a healthcare perspective, expenditure perspective. That's what we did. We socialized in group insurance. That was a big move in the insurance industry as employer-sponsored insurance took off.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Of course, Medicare, the concept of Medicare itself by bringing all seniors together was also socialization of healthcare costs across all seniors. Not all seniors spend equivalently, as you can imagine. So that was one. What happened on the other side is absolutely a story of incredible innovation over the last 50 to 75 years in healthcare.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And we can all debate what's resulted from that, but development and maturity of the Development and maturity of the medical device industry, innovation in procedures and services that have allowed people to have invasive procedures in manners that used to hospitalize people for three weeks and now it could be three days.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And in some cases, if you're having a knee or hip replaced, it's at best three hours in and out the door. is amazing. And yet the impact of that, along with the socialization of healthcare costs, and therefore removing the individual from understanding or feeling that cost directly, because they're insured, together was a virtuous cycle that just drove up consumption.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I'm not an economist, but people would look at this and say, OK, there's moral hazard and concepts like that that exist with an insurance system like that. And we should spend a minute on what was insurance designed for back then and what is it now?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think that if you look at the concept of insurance, I mean, insurance is for random, infrequent and unpredictable events. And when the primary role of insurance was to prevent catastrophic loss, if you had a heart attack or you had an accident or you had an appendicitis or yes, or you had a cancer, which back in those days was less of a chronic disease, the concept of insurance made some sense.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Now, if you look at what drives expenditures from a health status standpoint, it's a lot of chronic illness. And in many cases, it's multiple chronic illness. We'll get into obesity, diabetes, heart disease, lung disease. Even the innovation in HIV care in this country, AIDS has become a chronic disease. Cancer is becoming more of a chronic disease. We try to insure somewhat uninsurable events.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
You don't wake up every morning and think, oh, I've got car insurance. Let me go figure out how to use my car insurance to get an oil change. But when we think about we're going to go to the doctor to get a preventative checkup or refill my regular diabetes medicine, which I'm going to be on for the rest of my life, we think insurance. But it's not really an insurable event.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Insurance today is a discount card. It's not insurance in healthcare. Insurance traditionally would be in other parts of your life where you procure insurance for random, infrequent, and unpredictable events.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
No, no. They function differently from that perspective. I mean, obviously they have a tremendous amount of expertise in managing risk, but the nature of that risk they understand isn't random, infrequent, and unpredictable events.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's right. The fundamental understanding that the insurance companies have to have to be successful in their risk business is understanding their risk pool. So you're going to have a thousand people in insurance. 5% may cost you 50% of your total spend. 20% may be 85% of your total spend. And then you'll have a large group of people that really on a unit basis don't spend very much.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And they have to understand that risk pool.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's very hard because the number one thing that would create the foundation beyond all of the infrastructure and systems and other things required to function in a complex ecosystem would be a large enough population of patients with a risk pool that you can understand.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, look at all of the folks who've gotten into the newest exchange products that offered an opportunity to do that are the exchanges that have come out of the Affordable Care Act. And there have been insurance companies that have popped up and have failed, and there have been some that have struggled but still exist, and there have been some that have been gobbled up.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The vast majority of success on the exchanges has been through traditional insurers who have the foundation of the systems to do so. And the innovation in that space has come from the Medicaid insurers who adapted their processes and systems to be able to come onto the exchanges at a lower cost point. So it would be very hard. It would be very hard to do that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Remember, the other thing you'd have to have if you had an insurance pool, given that you have to make payments timely, is you've got to have enough capital backing the insurance risk. And so where do you raise all that capital? That's another thing.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So the two things, we got a $4 trillion system. It's almost 20% of our GDP. It was not anything like that in the 1950s. There are a number of coverage welfare programs, if you will, that have been put into place. Many of them done in that context in that time, not only with good intention, but reasonable projections that things would not have grown like this.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Medical innovation, I mean, just look at the number of patents in the industry and how they've grown. The combination of medical innovation, drugs, devices, service innovation, procedures, along with coverage, coverage that was disconnected from individual accountability, created a virtuous cycle of spend increase that has gotten us to this place. And it has been faster than GDP.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And at the same time, it hasn't broken the system because the US economy has been thriving. I mean, the arguments about affordability that we may get into would be, well, at this level of expenditure, it's draining the US economy from being competitive. Well, I'm not sure that that's actually true yet. And we can get into forecasting where it's going to go. I'm not sure that's true yet.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
All of the dollars and benefits that have gone into creating a healthcare system have created millions and millions of jobs. If you look back over the last 20 years, healthcare has probably created more jobs as a sector than in any other sector in the United States.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And what's unique about those three, putting aside the defense industry, energy, agriculture, and healthcare are the three most subsidized industries by the government. Three most subsidized industries by the government. By far, right? I mean, agriculture has been for a long time.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Energy is very much so today, not just from a national security perspective, but in terms of the innovation needed there. And healthcare has been so, again, as we said, in the US, probably since the early 1950s, certainly since 1965, when you had Medicare and Medicaid come about. And so the expenditures have just grown. Obviously, aging contributes a bit to that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
There are some differences we can outline with other countries if we have an interest in it, but aging contributes a little bit to that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And then obviously, as business has grown, the value of this pre-tax benefit, as more and more people are employed, has grown to continue employer-sponsored insurance as a vehicle of private insurance to match the public programs, Medicare, Medicaid, and otherwise. And so the expenditures have grown significantly.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
One of the things that comes up is what have the industry participants done to actually help with this problem? And the argument will always get made, well, it's grown so quickly they've done nothing. And I don't think that's even remotely true. Sadly, I think you could be in a situation where expenditures would have grown even faster. So think about this.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
From a hospitalization perspective, the number of bed days per thousand, so how many hospital days per thousand population have fallen by a half since 1980? The number of physicians per thousand people has more than doubled. The industry has added significant physician capacity in order to help with access. Do we have shortages still in certain areas? Of course we do.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But the number of physicians has doubled from about one and a half per thousand to 2.8 per thousand. So the industry has expanded its capacity. The insurance companies through their managed care programs have demonstrated the ability to manage cost.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
If the consumer were accepting of some of that management, that's a different issue to get into, which is how to do managed care in a way where it doesn't reduce and frustrate consumers or physicians with respect to choice and professional freedom. But make no mistake about it, tight managed care has controlled costs for a short period of time until there's been a bit of a revolt in terms of that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And product choice within insurance companies has created choice. So if you go back, you had Medicare for a very long time. Sometime around the late 90s, 2000, Medicare Advantage really took off. Why did Medicare Advantage get created? Medicare Advantage was a way to create product and benefit choice for seniors that wasn't just traditional Medicare.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Right. And the government gave an incentive. I mean, I think that payments to private insurers as an incentive to get into the Medicare space were almost 115% of regular Medicare expenditures because they were trying to incentivize bringing people into the system, privatizing part of the system, providing better benefits, giving them choice.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And ultimately have that managed care hopefully reduce cost. And the jury's out on that in terms of whether it's really reduced cost or shifted cost or whatever. But it is a highly functional private system built on government dollars called Medicare Advantage. And increasingly managed Medicaid is doing the same thing.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So the industry participants have done a lot in many ways over the last, in particular, 30 years in this space to try to curb costs without necessarily reducing this fundamental driver that defines our healthcare system, which is the desire for immediate access and choice. And that defines our system, is that desire for immediate access and choice.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, and the number of hospitals has declined.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, the U.S. has the highest physician salaries relative to other countries. But I would tell you that physician compensation on a real basis since the 1990s has been flat or declining. That is a stunning fact. It grew rapidly from the 1950s roughly until the early 90s. But since then, physician compensation... has been flat or in many cases declining.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That has a lot of implications given the medical training debt that you're describing about our ability to continue to grow the pool of physicians to meet the growing demand of healthcare services as the population is still aging. but also aging with chronic illness so that their needs are more intensive rather than not.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And I'm not even yet getting into mental health, which has been an area that's been under-invested in for the better part of three or four generations, which, you know, as we now realize, actually costs a lot, not just for mental health, but the impact on physical health, which drives our healthcare costs, especially in the context of chronic illness.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, the way I would think about a PPO plan is it's one in which you're procuring insurance where you have relatively open network choice. Okay, so there may be a preferred network where you get somewhat of a discount, but you have the choice to go wherever you want, however you want, etc. HMO, a health management organization, is one in which that choice is narrowed.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
You're making a choice upfront to come into a program with less options such that the penalty for going out of that set of options is high and theoretically comes at a lower cost. And then you have systems within those that kind of operate in the frame of one of those two models, if you will.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
In the US, the PPO business has been growing significantly faster than the HMO business, back to the point around choice. Let's use the right word. It's more important than cost right now and has been more important than cost to consumers.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's not to say that people aren't feeling the costs of healthcare increasing and the burden of healthcare costs increasing in the way that they're getting their healthcare, but they're choosing PPO more than not, the marketplace is speaking.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The simple answer on an example like Kaiser, Kaiser is largely a closed network health management organization where what you're doing is you're buying an insurance product through Kaiser. It's a not-for-profit that you're buying an insurance product through Kaiser, and you're agreeing to stay within their network of hospitals, doctors, etc.,
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
They have a physician group that is largely bilaterally aligned to them on an exclusive basis that's a for-profit entity, the physician group. And the two of them together produce a product that ought to cover the vast majority of your healthcare needs. And in theory, based upon that integration of care, you either get lower cost or better outcomes or both.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And again, I think the jury from a long-term perspective relative to other models is out, but it's innovative. It's worked in some places really, really well.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, my personal example, my mother had a rare form of brain cancer. We had terrific oncologists at Kaiser who were incredibly dedicated and knowledgeable about oncologic care, who without hesitation sought expertise from UCSF. when they needed it for the more sophisticated parts of her care, including letting her go there.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So my personal belief from personal experience is that clinicians do make a lot of the choices at Kaiser. They get knocked sometimes that somehow there's a corporation sitting there telling them what to do. And yes, it is managed care. And yes, there are restrictions on, in some ways, how they construct their system. But when you have an esoteric problem,
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
No one stops a physician from sending you to the right place there, in my experience. And all systems that are in managed care have out-of-network expenditure for rare things. I think that's a really important point and worth bringing up from that perspective. But you have these systems then that work in certain places and don't work in other places that effectively.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The vast majority of the country today, from an employer-sponsored standpoint, is working in some form or another of a PPO system where people have choice because that's what they want. And again, that choice comes with a cost, as we've talked about, that maybe explains some of the differences between us and other countries.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, I think you have to be careful about that. You're paying- You're paying for it, of course, through your taxes.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think there are excellent physicians around the world and developed countries all over the place. There's no question about that. I would tend to agree with your description of the top physicians in both places. I would draw one distinction, which is I think emergency care is accessible everywhere. on an emergent, immediate basis in most developed countries.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Now, the interventions that they may take, how interventional it may be, how aggressive they may be using the most modern technologies or modern devices or whatever may be different. But emergency care is available. If you had a heart attack immediately in Canada, went to the emergency room, you're going to get treated very well. I think where things change is the elective care.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And by the way, heart surgery can be an elective. You might think of elective as cosmetic surgery. No. A hip replacement, a knee replacement when you can't walk, a cataract replacement when you're half blind, or heart surgery can be elective. You're just scheduling it in advance. And you're absolutely right. In many parts of the world, the wait times for those things are much longer.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The cynical view of that is, of course, that it's a cost management system. But what I would say is they've made a choice.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's an infrastructure choice. So the way you would describe this in economic terms is that you have universal coverage, which creates the same moral hazard problem that we described here. People would consume infinitely, but they choose to cap it with supply side interventions, constricting the supply or available supply of services in order to manage the demand. And what does that do?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It creates wait times, right? Or accessibility problems. And you have a lot of Canadians who come into the US for healthcare on a more immediate basis, or they buy private insurance, which can reduce the wait times from that perspective if they can afford it. I mean,
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
For better or for worse, right or wrong, nowhere in the world, no matter what healthcare system you're in, in a developed country, do you have fully equitable access. Those with means, there is always a system to procure better access from that perspective.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The thing that's different in the United States at scale that I think is interesting is not just the focus on consumer choice, but the United States has become comfortable in healthcare being the driver and leader of innovation.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So in healthcare services, that is the proliferation of academic health science centers that conduct research, much of which used to be supported exclusively by the NIH, which is a brilliant construct over the history of the United States, to really fund basic research and innovation, now clinical research and innovation, and increasingly funded through private industry.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And that has driven a large proportion of the innovation in the world. The science that supports pharmaceutical development, for example, comes out of U.S. academic health science centers, largely speaking. And then you have U.S.-based pharmaceutical companies that develop 75, 80 percent of the world's pharmaceuticals. And you can keep going and we can get into drug costs.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But it is a unique feature of this country. that we have chosen to make that investment for the rest of the world. As I said the other day, it's no differently than we've seems to have made that choice in defense. And there are differences between the two.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, first, I think you got to look at this in the context of when it developed. You're back to the question of, could anybody have predicted that we were going to go from 4%, 5% of GDP to 17?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Could anybody have predicted that the drugs that were going to be developed and the advances in science would result in multiple therapies for common diseases and orphan diseases, which are rare diseases, that might cost over a million dollars a year? Could anybody have predicted that?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think the system as it was set up, especially because drug development at that time was new, in particular small molecule development. And then somewhere in the late 70s, early 80s, you had the advent of biologics, which then grew into commercial products, especially in the mid 90s. raised the bar on innovation pretty significantly.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And also, everything that happened with respect to genetics opened up a whole broad range of therapeutics that didn't really exist before when you were just taking small molecules and at scale testing them against targets. The cost of drug development went way up. Therefore, the price of drugs went way up, at least in the United States where you have a market.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Now you end up in a situation, if you just fast forward to what people are thinking about today, especially because it's all over the news, you got GLP drugs that may have broad benefit for the population in one form or another. Why? Fundamentally, the drugs may be effective, but it's because our health status is poor. In a country where the health status wasn't so poor,
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
as it is in the United States, which chronic illness, the cost of those GLP drugs might not be projected to be so high because less people would need them. And we can get into that a little bit around healthcare policy and what the national objectives for health would be. But you have common drugs now for common conditions. that are extraordinarily expensive.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, there are alternatives that are much cheaper that might do a significant fraction, if not for many people, all of the job. Metformin would be a simple, generic example that might take care of many of those things for people at a price point that's a thousandth of what.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But nevertheless, you have this innovation and you have also a culture that's obsessed with things like medical approaches to weight loss and that has proven to be difficult to achieve through other means.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, remember, there's one thing that's important to understand is that the Medicare Modernization Act that was passed in circa 2000, okay, which we've talked about some of the other aspects of it, forbade HHS from negotiating for drugs as an entity as CMS. I mean, we legislated that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The Inflation Reduction Act, which was passed in the Biden administration, has cracked that door open a bit for negotiation because the dynamics of drug pricing, the nature of the drugs.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Explicitly.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, how it came about in the lobby, I don't know the details, but it was an absolute direct concession that forbade HHS from negotiating this.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, there were a whole set of other things that were part of the Medicare Modernization Act that we talked about, like Medicare Advantage was created and scaled up, which created a way to potentially have managed care, maybe manage the utilization of drugs, and therefore maybe curb the expenditures, create formularies.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
that might encourage people to use generics rather than branded drugs if they were equivalent. There were other mechanisms put in place to try to control what people did understand as rising drug costs. They've just risen more substantially in the future. Again, I go back to context at the time, what should have been well-intended, and what were the unpredictable consequences in some ways.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, we live in a political system in which our representatives that we elect vote for us, and they are subject to lobbying. That's the nature you would hope that that would be superseded by good policy decisions at some point in time. And I'm not saying Medicare Modernization Act wasn't a good policy decision, but I don't think it was a predicted effect what would happen.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, I'm sure with good questions, I'm going to learn a lot too. So I'm looking forward to it as well.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And so I think cracking that door open is good. Look, we get into these philosophical debates about we're a free economy, a free market economy. The government should not be engaged in price controls. But think about this. Doctors are price takers for Medicare. Medicare sets their reimbursement. It's price controlled.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Hospitals take Medicare prices as they're given. So Medicare is a monopsonist. They're a monopsonist at the end of the day. They've applied it to doctors and to hospitals and other infrastructure-based care where they set the prices based upon their purchasing power. It just hasn't happened yet on the drug side.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And you have to think, obviously, the debate is, how do you do that in a way that doesn't deter innovation? Is there a sharing with the rest of the world that needs to happen? Or how do you do it in a way where if it's just the US, it doesn't deter innovation? Because that innovation has been incredibly beneficial to us in a number of different ways.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And again, we're going to get into health status and outcomes and why they aren't so good. But it has been helpful. And at the same time, leave enough of a return that actually the innovation won't stop and start to take advantage of some of that purchasing power. And I think that that's going to be an ongoing policy debate now that that door has been cracked open.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And I think what's new is that both the more, and I really don't want to get into politics, but both the more populist brand of Republicans and Democrats seem to have a understanding drug prices are on their radar screen on both sides, maybe in different ways. The industry will evolve and we'll see how that goes.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So let's talk about what a PBM is because there's two issues with the PBMs that we should talk about. One is what do they do and how effective are they? Let's start there. Then there's the question of who owns them and how do they work and is that vertical integration helpful or not helpful to the system, which we can get into. But the PBMs, in essence...
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
are organizations that formed as intermediaries between pharma companies, insurers, and pharmacies, where you get much of your medication, in order to help manage an increasingly large complexity of drugs. I mean, today there are probably 15,000 pharmaceuticals available. The PBMs were designed to do a few things. Understand the market for those drugs.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Make formularies that were either broad or restrictive. Manage benefit plans for employers who were looking to have preferred pricing on certain drugs versus other drugs. So they were created to try to say, OK, we've got a lot of expenditure here in the drug arena. The choices are complex. The number of drugs has gone up 15 or 16,000, whatever that number may be.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And we need entities that help people make more informed decisions in some ways at scale through employers or insurers. and in some ways at the retail pharmacy level when individuals are going to fill prescriptions, by the way, which includes things like generic substitution and things of that nature when that's appropriate and is allowed. That's what they were created to do. What did that create?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It created a complex payment system because it used to be you buy a drug, the money goes to the pharma company from the pharmacy, the pharmacy buys a drug, they pay the pharma company, you have a direct interaction or...
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
in a hospital, you get a payment, the hospital buys the drug from the pharma company, you pay them something for that drug, you administer the drug and you get paid as part of your global fee for taking care of that patient, whatever the case may be. The PBMs came in the middle. When did they show up?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
PBMs showed up, forms of them showed up in the 80s, but the growth of PBMs has been in the last 20, 25 years and really has taken off recently for reasons that we'll get into about their ownership structure, if you think about it that way. which has brought more scrutiny to them than used to be there.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
You've created a system in which now money is flowing less directly in many cases through the PBM. So the pharma companies may sell product, but depending on what the PBM is doing in terms of committing market share to the pharma company, the PBM may earn a rebate. Okay. So you have a rebate that the PBM can earn.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Now that rebate, the PBM may share with the insurance company or the employer who's signing up for that PBM service because they're saving them money through that rebate. So you have this new flow of dollars. Again, the idea behind this was to have better formularies, better understanding, allow people to have choice. Do you want a broad formulary? Do you want a narrow formulary?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Of course, incentives are incentives. And part of what's happened is that with a rebate structure, you can imagine incentives can exist for higher price product to move through a PBM and pass through, and some of that being offset with rebates on both ends.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think in some ways, it's what we've said about most of the US healthcare system, which is well-intended, reasonably constructed structures that might have been effective in one setting as things have changed, become less successful in this setting, and economic incentives can sometimes change to drive behaviors like you're describing, which I hope is not the norm.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, I think you're getting at some of the more fundamental questions around what is innovation. So do we reward the innovation of a statin itself as the innovation, or do we reward the Me Too's that come after it, which sometimes grow to be larger than the original statin? And sometimes they're better. Terzepatide is better than semaglutide. Absolutely. They could be better.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Let's start with how the system works from a financing perspective, and then I think we can talk about how that's different than other countries. We can talk about the impact on outcomes, and we can probably even start to set up the framework on, as you say, the things people are interested in, why, and what can we do about it.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But how do we reward that innovation? What happens oftentimes is a floor is set in terms of the reward for the initial innovation. As things get better, rather than competition with more molecules driving price down, it often drives price up because the market moves to the better and better product. I mean, this gets back to supply-side intervention in other countries.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's just not going to happen. And so there's a limit. And you have to qualify with certain criteria that are stringent to get to that more expensive for the incremental 10% benefit. We don't work that way in this country. Physician choice around physician decision making around those choices. And we've made the decision that we want to be able to afford that type of choice.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
For the incrementally better drugs, sometimes better from a side effect profile standpoint, it can drive some of these decisions. We've made that decision on an individual basis rather than a population basis. And I think the point that we're talking about today is it's getting expensive. And it's getting expensive to the point where... 17, 18, approaching 20% of the GDP may be okay.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But the next 50 to 75 years, if that grows to 35% of the US economy, I think then you have some very, very serious arguments about how sustainable is that if the US economy doesn't grow as rapidly as it has been growing.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But it's hard to start anywhere other than this is now close to 20% of the US economy, healthcare, 17, 18% currently.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Or a devaluation of the currency.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's right. And that's the issue, right? Which is that ultimately, that's a very difficult proposition to actually get your head around and believe. And in particular, I think we should get into the outcomes in the US to explain what we're getting for all those dollars. You're right. It's very difficult to fathom expenditures getting to that level. Now, one...
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
optimistic point of view on healthcare expenditure growth out there is that if you just look at the aging curve of the population, in particular the boomers and how they're growing and even with increasing lifespan, the aging of the population in the U.S. peaks at about 2032-ish timeframe. You can look at different projections.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So in the next eight years, we're going to kind of reach the peak of aging. In other words, when I say aging, the number of people will grow every year that enter the above 65 Medicare world. And that number will peak and then will start to come down.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
We will be right there. That's right. And then that number will start to come down. It's not just the boomers, obviously, but I'm just giving you the demographic. And the question is, when that comes down, will that mitigate this long-term trend of healthcare expenditure growth? So that's the optimistic view, that there is a mitigant built into the system just with the aging of the population.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Now, think about all of what you do. If at the same time, the consciousness and awareness of just basic interventions in health status can improve health status even a little bit from a chronic condition standpoint, because that's not going to be a one-year or two-year phenomenon. It takes a decade. Those two could together make a big difference in U.S. health care cost expenditures.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The challenge in terms of what's happening on the other side, especially in this context of debate around immigration, is we're not growing the population of people under 65 who generate the economic productivity to fund the system to get to 2032.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, we're talking about a US economy gross domestic product that's probably $28 trillion. That's 20% of the world, 25% of the world's economy. With about 7% or less. And another way to think about it, that's almost $90,000 per person in the US. We spend $11,000 to $12,000 per person in the US on total healthcare expenditure.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
If you go back a number of years, like the 80s, and you look at the number of people pre-Medicare, so call it 40 to 65 years old to Medicare, it was two times the population.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Two times we're paying into- Well, I'm roughly saying highest economic productivity is 40 to 65. 40 to 65, yep. Two times the number of people as you had Medicare. That number is trending towards 1.0 by the time we hit 2032.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So the generators of economic activity, and economists will get into this discussion of, well, one of the reasons the US can afford to spend more on healthcare is we tend to work longer than much of the rest of the developed world. 65, people talk about working into their low 70s and others.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So we generate more economic wealth to subsidize this healthcare system and other things that we may want to subsidize in the country. But that drop from two to one is significant. And that's happening at the same time that we continue to have this aging. So while it's interesting to think 20 years out, I actually do think for the next 10 years, we got a problem.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
We've got expenditures that we know will grow because of the continued aging. The demographics are clear and we have a reduction in The only way to fill that is, of course, to have the US economy still be an attractive place for immigrants to come and work of all types at all levels of work in order to fill that demographic hole. And we've got to get our head around that problem.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, who would have thought immigration is related to healthcare? We talked about this election. People are talking more about immigration than healthcare. Actually, it's relevant to healthcare because healthcare is such a large part of the economy. Everything comes back to it in the end when you think about it at a macroeconomic level.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Let's talk about life expectancy. And I think the most important context to consider here is that whether you look over the last 50 to 75 years, we've used 1950 as a marker, or 100 years, life expectancy has improved remarkably. A lot of that has to do with infectious disease and other things, and that's fine.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So when we say our life expectancies in the US are – I think what we're really asking is why are we three years- Behind everybody else. Behind everybody else.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And I think you make a really good point, which we've talked about before, which is somewhere between 60 and 75, the equation slip. We go from dead last to first because the medical system we've created that optimizes for access – quality, sophistication, technology, the best drugs, flips. And it's actually quite effective at creating longevity from that standpoint.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
We can all discuss whether or not, to use your language, the lifespan is improving with or without the healthspan, but nevertheless, the lifespan is the best in the developed world. So what's going on in the younger population? I think you hit on some of it. Look, infant mortality is two to three times the rate that we see in the rest of the world. Why? We have a higher rate of teen pregnancies.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Just to put that in context, $4 trillion of expenditure in the healthcare sector. If you added up all of the exports that the United States sends out across all industries, you're talking about $3 trillion. We import more than we export. We're a consumer culture. That's close to $4 trillion, but not quite at $4 trillion today.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
There's a higher rate of sexually transmitted diseases. You've got drug and substance abuse issues that play into that. And some of it is just, again, going back to this notion of access for care in the prenatal window. And that's really important. Two, which you didn't really touch on, I would describe as, broadly speaking, injuries and homicides. I mean, the rate of those in the U.S.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
is significantly higher. I mean, homicides seven times the rest of the developed world. I mean, some of that goes back to gun violence. of course, that's unique in the United States versus others. If you look at this over a long period of time, by the way, some of the mortality in the younger generations had to do with wars. But put that aside is not something as relevant today.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Drug and substance abuse issues and just the flow of things like fentanyl and others that are creating a different generational impact of mortality is quite significant. Obviously, the penetration of things like HIV and AIDS, and even though that's become a chronic disease over the last 25 years, it's been a significant driver of mortality.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So you have these features that create excess mortality in the US, especially under the age of 65. Now, when you combine that with the fact that our rates of obesity leading to things like diabetes and heart disease when you're older are higher than the rest of the developed world, you have these unique issues, plus you have a fundamental health status issue.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
that we're now recognizing costs the healthcare system money. Obesity and its consequences don't just emerge when you have out-of-control diabetes 15, 20 years later. The expenditures, the lost productivity in the workplace, all of those things happen earlier. So when you put those two together, you have a health status problem.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And by the way, they overcome and overwhelm the things we're better at. I mean, oddly enough, we're better at getting our vaccinations. We're better at cancer screening. We're better at treating blood pressure and cholesterol in this country. Back to the pharmaceutical culture, we smoke less significantly. But guess what?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's being overwhelmed by these other factors, in particular under the age of 65 or 70, whatever that range may be. And if you look at those conditions, unlike how effective the public health model was in infectious disease, in reducing mortality over the last 100 years, it's kind of been ineffective.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, the combination of public health and nutritional science together in the way that they've evolved in the last 25, 30 years have been ineffective in managing or dealing with these issues. Now, you can get into debates about were they adequately funded or not funded and the quality of the science and all that. But the fact is they haven't been that effective relative to other interventions.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And we've got to deal with that. This isn't an insurance coverage problem. I mean, we pretty much cover everybody other than undocumented today in the US or people that choose not to get covered because there are options now for everybody. And in some states, we're even covering undocumented. It's not a coverage problem. This isn't a system problem in many ways.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The healthcare system can accommodate the illness. It's the question of what led up to the illness that we haven't really fully dealt with in the country. And there's two forms, again, societal issues, whether that be gun violence or poverty leading to bad access to prenatal care, injuries, et cetera, or the chronic diseases that seem to be more prevalent here.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
How you fix that, you and I have talked about this for years. I mean, it's hard to change behavior. If you really want to change trajectory, you really want to improve health span, it's hard to change behavior. And the more of that that can get built into the background...
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, you just put that in context in terms of how much we spend in healthcare in the US. It's a huge... huge number. And I appreciate the comments about how healthcare is a topic waxes and wanes with respect to being top of mind. But any discussion about the economy, about inflation, about jobs, you're really talking about healthcare in many ways.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
that just changes the way people eat or changes the way people engage in physical activity, which could mean designing cities where you have to walk to work the vast majority of time rather than drive like many European nations have done. Those interventions themselves must have some benefit because you're seeing different outcomes between the countries and it overwhelms all these other factors.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I don't know that the healthcare system as it stands today is going to solve our cost problem. that's driven by the factors I just described. It's certainly not going to change materially our outcome problem. Tinkering with the different parts of the system, we might be able to affect cost. The outcome problem is a more fundamental problem.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
By the way, it gets back to this issue. The border is a healthcare issue. It just is. You can't escape it. Everything ties back in one form or another to healthcare.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It may not be as direct as talking about healthcare policy, but you're really talking about healthcare given that it's almost 20% of the economy. And there's no escaping that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That is right. And I think you can't underestimate the power. I think, by the way, choice sort of fits in a broad framework of access. If you have enough access points and they're differentiated, that allows choice.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, there are probably 15,000 pharmaceuticals available today in one form or another. Some of them are repeats, but my point is there's a lot of choice.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Why is that is one of the questions that I think comes up. So I think, first of all, I agree with you. We cannot underestimate the power of choice. I mean, we learned that in the 90s with managed care when it was quite constraining. And by the way, as I said before, that system lowered healthcare inflation. It only proved it for a short time because the backlash was so vicious against it.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And I don't think we can go back there. Politically, even from the standpoint of not politically, but just the way the system has evolved to create more options and more choice, it will be difficult to go back there. Limited supply-side constraints, I think, at this stage, have and are becoming a part of the dialogue. As I said, Medicare sets prices for doctors and hospitals.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
They probably will start doing so for certain drugs. Okay, it's purchasing power. And one could argue that in some ways that's a form of supply-side constraints.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, it probably represents, in terms of wages, a little bit more than that, because the average wage in healthcare is higher than in other areas. And this is something that as we get into how you think about the future, we should talk about. Because as healthcare, as a percentage of the U.S. economy grows, you can't have that happen without considering what it does to the rest of the economy.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think we have to avoid looking at extremes.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, I would say this. I don't think the people who are talking about this in a rational way in terms of actual pricing, which is not you or me really in terms of the policy, I don't think anybody's saying let's bring it down to the average of the OECD, et cetera, from where drugs are priced.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The question is, are there ways to start to curb the inflation rate of price and actually rationalize some group purchasing capability? I think that the challenge with accepting the extremes is it will only fuel the discussion of innovation will stop. Nothing will happen any further. And that's not going to happen.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But think about, again, what you just said. That may be true in the short term, but the hallmark of American ingenuity is to take externalities. This is an externality that might be relevant. Take that pressure. In that ecosystem, better models emerge. More efficient drug development will emerge. More efficient distribution mechanisms, more efficient sales and marketing, et cetera, will emerge.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean- It's always the case as companies have life cycles that shareholders succeed and at times suffer. But the innovators come out the back end stronger and sometimes they're a new entrance, which changed the game. I mean, that's the hallmark of the free market economy.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, right. I mean, this is what people get into. But there's two issues there. First of all, I don't think that – remember, we took all the time to describe the entire complex pharma ecosystem. It's not just the pharmacos. There are companies that do basic research. There are pharmacos, there are PBMs, there are pharmacies, there's insurance.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
By the way, the insurance companies own the biggest PBMs. So there's a vertical integration point there that is important to understand. My point is that when you talk about this in terms of Medicare purchasing drugs with their scale, it is absolutely the case that that that can be done in a market-based way. By the way, Walmart is one of the biggest retailers in the country.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And that's going to be an important discussion around U.S. competitiveness, U.S. affordability, U.S. coverage, et cetera, given the nature of health care and health care issues today.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Arguably, they have one of the best procurement functions based upon the scale of what they're purchasing that gets them better pricing from their suppliers. Auto manufacturers manage this in auto supplier, part suppliers. It's not un-American to use scale as long as that scale is not anti-competitive, to drive better pricing in what you purchase.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It creates innovation across the entire value chain. Medicare, in this case, because it has become such a large source of expenditure in a private healthcare marketplace, behaving more like a primary buyer at scale is not anti-American. How How it gets implemented and how they do it could turn anti-American. I'm using your term, anti-American, free market versus not.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But purchasing at scale is not an anti-American or anti-competitive concept.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think it'd be very difficult to move in one move to that level legally. of purchasing price given what the starting point is in the marketplace. I don't see how you could do that without really having a shock to the industry.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, let's remember, I think 80% of the pharmaceutical industry resides and generates profits in the US as large employers, but not just large employers, large magnets for talent coming out of our universities. We have to remember between them and their supply chain, they create a lot of innovation, right?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, a tremendous amount of innovation in this country that has advanced, you can call it health 2.0, but it's advanced health 2.0 because that's the construct we have. So this has to be balanced. But the concept that a purchaser at scale can achieve better pricing, I would argue the time for that legislation from the 2000s to be revisited is here.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, cracked the door open for certain drugs. And I think we'll see how that goes. I mean, this is going to get mired in politics and lobbying and all kinds of things that you described. But if you step back and look at the big picture of where healthcare expenditures are going, let's just step back and actually look at just pharmaceutical expenditures rather than healthcare expenditures.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
In addition to extraordinarily expensive drugs that have broad application like the GLPs, you have a broad range of orphan drugs that have been developed. Orphan drugs meaning for rare diseases for very few people, sometimes miraculous benefit for them at extraordinarily high price. It goes back to what you said about we want choice and access and we value saving money.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
as Americans, that life more than what other countries may do in not saving that life and looking at it societally. And then the third thing is if you look at the pipeline of drugs for the next 10 years, I've done this, look at the PDUFA list or whatever at the FTA, the number of unique vaccines
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
biologic infusible drugs in particular for autoimmune disease and cancer that are slated to go through the process and get approved which again not having seen the data it's hard to know whether they'll transform the care of those diseases or marginally improve them but if they get approved they'll be doing some benefits will create another massive explosion of drug costs here.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So the proportion that's going to hospitals and doctors relative to drugs, if you look out over the next decade, is poised to change again based upon the pipelines.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The inclusive version of the third where it's everything. And that's something we're going to have to grapple with.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
may not be designed to accommodate that cost without passing it back to employers and Medicare. And so then there's going to be a question again, what are we going to cover? What are we not going to cover? The way that healthcare costs are rising, we're being pushed to ask the supply side questions that the rest of the world has already asked and answered.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Let's do that because I think we can do it quickly and give people a sense of what happened. But let's just start with painting the picture of where we are today. And then let's back up and say, how did we get here? So $4 trillion, just to keep this simple, about a trillion of that, okay, one fourth comes from consumers.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
We're just grappling with it, and it's hard because of what we've talked about. We don't want to give up choice and access in the process of grappling with those decisions. For other countries, when new drugs come online, it's easy for them. They have an established framework.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, it's an established framework. The citizens are used to that established framework. Here, we haven't established the framework. I mean, this goes to the point of it's not obvious that we have national health goals, a different topic. And I know that gets a little bit up in the sky a bit.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But we're at a point where what we spend and what we get for what we spend is really, really good in some ways. Obviously, not so good in other ways when you look at some of the outcomes. But many of those outcomes are not driven by the healthcare system, as we've talked about. And so the question is, where are we going to put our incremental dollars? That's the question.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Because the incremental dollars going straight into the current system, which I'm a participant in and everybody else, that's going to be necessary just because the population's aging. Fact of life, we're going to have more demand for roughly the next decade. But are we going to do that at the exclusion of resources into these other things? which in, again, in your language impacts healthspan.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
In my language, it impacts the two things which sit in the background that seem to be different than the rest of the world, which is just basic nutrition and basic physical activity that seem to be major differences in how the US works versus others. Some of it because of geography, some of it because of our obsession with driving cars and whatever the case may be.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's not clear how we're going to approach that over the next decade because we don't have a choice but to spend for the people that are going to continue aging in. After 2032, 2033, if the pressure on the aging portion reduces, we may have some choices, but we got to get there first.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So you and I used to mark our birth years roughly sometime in the 70s and talk about what the prevalence of diabetes or obesity was then relative to now. It's what, three, four fold up?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Much more than.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
We've talked about it. I mean, it's a generational failure of nutritional science to really understand what creates obesity and its sequela.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Some of that is spent in you and I both would contribute to the insurance we procure. And some of that were directly consuming health care by spending money on health care services out of our pockets. But think about it as one fourth or one trillion. Employers put another trillion into the system. So how do they do that? Largely through employer sponsored insurance. So that's the second trillion.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I generally agree that these drugs are very effective. I get concerned about muscle loss in particular when I think about consequences for elderly people, especially from an orthopedic. Everybody knows that a hip fracture or whatever due to muscle loss creates a very high degree of mortality. But in general, I agree with the concept that these drugs are very effective.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Now, if you look at this from a crass economic point of view, remember, what's the fundamental problem we have in terms of generating the wealth to pay for the system is that we've moved from a period where we had twice the number of economically productive people from 40 to 65 and above to now the ratio approaching one to one.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So the best application of the drugs, if the idea is to improve health status, which then could improve economic productivity to support the system, would be applying them to the people who could still work, not the people over 65. Not that people can't work over 65, but generally, if you take that as a mindset of a period of retirement.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think if you're looking at it from the perspective of today's conversation around the cost of the U.S. healthcare system and how it interacts with the rest of the U.S. healthcare economy, that's the math.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And over 65, arguably, you may reduce the burden of disease, but you may increase longevity, which, as we know, creates additional costs over time because it's kind of unknown whether you can stay on these drugs or whether people will stay on the drugs. above 70, 80 into their 90s? And will there be a reversion? In other words, are you just delaying the spend?
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Or are you actually avoiding the spend? We don't know. What little I know about how these drugs work is that when you withdraw them, there is a negative effect from that perspective. How persistent that is and how that'll change over time, I guess, with new drugs, we'll find out.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I go back to the notion, though, that I think it's fundamentally not the right answer to wish that nobody innovated these drugs. I think that's crazy. And again, you can get into what it costs and who paid for it and who is paying for it given the price differences between here and the rest of the world. I will also say the prices for these drugs are too high.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
My view, personal view, they're too high. I also believe that they won't stay this high as the penetration grows across newer and newer indications and the population.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So now you've accounted only for half of it. So where's the other half coming from? The other half is coming from government, federal government and state government. These days, a lot of it is federal government. And the federal government contributes in two different ways, direct expenditures, and as we'll get into when we start talking about history,
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, I think the reality is that because they're so visible, they have ended up generating a lot of political attention. And I think this gets back to a lot of things in the free market culture that we live in, which is we have wide operating parameters in a free market. But at times when things go outside of those parameters, it's not entirely a free market.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's just a wide parameter free market. When things goes outside of those parameters, people take notice. And That leaves organizations with the choice. Do they proactively move themselves back into some acceptable parameters, or do they wait for somebody to do it to them? And by the way, the U.S.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
government, like any government, does have a history of moving things back into reasonable parameters. I mean, there's no such thing as a 100% free market economy.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
from that standpoint, especially when we've described our own healthcare system as being somewhat free market and choice driven, but the economic flows essentially shield the consumer from the actual cost of the care that they're consuming, meaning the insurance scheme and other things. So it is a difficult problem to solve.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I understand your point about follow-ons, but I suspect that in some ways this will come back into some reasonable parameters.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, they're owned by the payers.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, 25% is a big number.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think the concept of absolute cost reduction is very different than bending the trend. And we can get into whether there are absolute cost reductions that we can think about within the current system and what they would mean and what they would require.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But I think the other way to ask the question longer term is can healthcare inflation mimic GDP inflation as opposed to being 2% faster or could it fall below it? But just getting it to that level of being at the same level of GDP inflation would be an enormous, enormous move and curbing of the healthcare expenditures.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
employer-sponsored coverage being the dominant source of coverage is unique to the United States, which is that your employer procures health insurance for employees, which then provides a form of coverage.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So look, the first thing is the number one deterrent to absolute cut 25% out of the system is the extraordinarily negative shock on the economy of that type of job loss.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's not insurance.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
You cannot do this without cutting jobs. The U.S. actually spends less on infrastructure as a proportion in health care services, buildings and whatnot than many other countries, actually.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But the people aspect of this, both the number of jobs and also the fact that our doctors, nurses, et cetera, are on a real wage basis paid higher than in other countries, the two of those together and other health care workers respectively, They contribute to the gap. The administrative side is the biggest gap.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
No, no. The administrative payroll, meaning people.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, but it's the system of having to adjudicate claims and all that. Yeah, but it is mostly a people-based system.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, it's increasingly doing that. I mean, those of us who have more exposure to sophisticated, scaled businesses that work in the revenue cycle or the insurers who are increasingly doing this are using it.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's the poster child indication for more automation that requires controls, okay? And the government, of course, AI is new, and usually regulation doesn't catch up as quickly as the technology moves. So look at the last just seven days. You have an article in, I think, ProPublica that talked about
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
A business that is using AI and denying claims at an extraordinary rate because of the AI algorithms that are built in. All the insurers buy it, etc., etc.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, I think it's a question of how the system is being used today. I don't think the system was originally created to do that, most likely. I mean, there is a balance between cost management and denying people what they need on an indications basis. I always think about the organizations in the ecosystem as starting with good intentions, but things can get away from people.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
If you read what's in there and it's true, it's gotten out of hand. And I think many people, doctors, providers, et cetera, might feel that issues with preauthorization and denials and other things have gotten out of hand. And I'm not here to represent one side or the other, despite what I do. Look at the flip side.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
You had a major insurance company come out and say that, look, coding is getting aggressive. That's the provider side that maybe is pushing the envelope in a way that they see all the data and all the systems, and they're seeing something. I don't know how true it is any more than I know how true this other one is. Checks and balances in the system, when you have a private system, are required.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
AI can either be an accelerant to reducing cost and being more efficient and effective, or if not controlled, could take one side or the other and move them in a direction that actually have negative consequences, over-coding or under-authorization of what people need, as an example. So we have to work better as an industry to actually get the right balance here.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And that's why there's a lot of attention to this right now, because the balance is off. And you can't unilaterally blame one side or the other from that perspective, is my general viewpoint as I approach this problem. So If you think about the administrative cost side of it, yes, it's all people.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yes, it's built on a system that has gotten infinitely more complex in terms of paying and submitting and getting paid for claims, both with government and with private insurance and a whole bunch of other administrivia that does have an opportunity to be fixed. At this point, collaboration between the two sides doesn't seem as high.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Technology has the potential of reducing that cost, but it is at the expense of job loss. If it happens.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's correct. But it's coming through your employer. And most people would recognize that because of their annual enrollment. So they're picking Blue Shield or Aetna or Cigna or United, or if they're in a Medicare plan, they may be looking at Humana or other Blues plans.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yes. And does it have to be as large? No. But there would have to be some administration.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's just sitting in their government and it's in one entity rather than 50 entities.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Right. So then you have the other three components of the spend, and those are all essentially people or somewhat people-based. And the profiles of the three businesses are very different. So the only way you're going to actually, if you wanted to absolutely cut costs, I mean, you're talking about supply-side intervention and price restriction or CAPs. Some states have tried inflation caps.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
We're not going to go up more than 3% per year, 4% per year, et cetera. There has been no discussion of, okay, we're just going to cut a quarter of the spend out of the healthcare system. Again, because I think it would be catastrophic in terms of access and other things. That's not to say that we didn't wish we ended up at 3 trillion rather than 4 trillion.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
If you look back 50 to 75 years, but we're not there. We're Why hasn't this been a higher priority? So if we go back... Because the economy has done so well. One of the important things that's critical is the US economy has outperformed the rest of the world and the rest of developed countries. And we've done it despite the more rapid expansion of healthcare costs than any other country.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Arguably, an economist would say that as healthcare as a percentage of GDP and as a percent of expenditures, I mean, we talked very beginning how much of the consumer spend it is, employer spend it is, would have materially suppressed wages.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But let's ask the question, if it has suppressed wages because money has gone into that with this tax incentive, has that actually made in some ways the US economy more competitive? with wages that have been, again, somewhat suppressed, which makes the American worker more competitive for various types of things that have a global labor footprint rather than just domestic.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I don't think it's a given yet that healthcare costs on a net basis, increasing to where they have, have been a negative for the US economy. I mean, facts that are hard to escape from. The US economy is stronger and has grown more than other developed countries. Fact, the expenditure rate in healthcare is higher. Put aside outcomes for a second, depending on what we want.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Our access and choice, which we prioritize, are better. In fact, the diversity of what the US workforce is doing today is probably more than it was a decade ago. There's more manufacturing return, things like that. I think wage suppression may play a role in that. Again, you'd have to talk to an economist to really understand the quantitative effects there.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But I don't think we've reached the point yet where these healthcare expenditures at a macroeconomic level have deterred the US economy. I think we're in this conversation because the question is, will it?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, well, I think that's an important point. Look, the role of government we haven't talked about. I would argue from my experience, healthcare is overregulated by a lot. But you have to give the government credit when they work to create quality standards that people had to meet. Things like sepsis, when they work to create safety standards around basic problems that you see in healthcare.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Those regulations have improved the consistency of performance of the US healthcare system.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Right. So some fraction of what they've done has really, really helped. And you can't argue with that. And similarly, regulations that have been placed in other parts of the industry. So we may be overregulated, but you can't discount the value of some of that regulation.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
One of the things that I think we get very much caught up in is the concept that our system, which is more of a fee-for-service system versus some kind of value-based population health system would be the change that would be required.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And the interpretation is always, well, all these other countries who spend less, they must be a population health system or a value-based care system because everybody's in one insurance pool. What we've said in our discussion is, no, it's a supply-side intervention. They just constrain and limit cost and infrastructure. They just decide. what's going to be accessible.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So you've got a fourth that people are spending out of pocket in one form or another. Some of it, of course, to subsidize their ability to buy insurance. A fourth that's coming from employers directly out of their profits. Now think about that trillion dollars for one second. Total U.S. corporate profits are about, interestingly, coincidentally, just south of $4 trillion.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's what drives the difference in their cost. And by the way, for all those economies, again, remember, their healthcare expenditures went from 4 to 11 or 12. That's a massive increase for those countries too. It's just not as big as ours. So I think the concept here, you have to put this in perspective.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The interventions that have fundamentally tried to change the workflow in healthcare, value-based care, most of them haven't succeeded. I mean, look at the companies and other organizations that have been in this space, despite the best of creative intentions. Many of them have not succeeded.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I would argue Medicare Advantage is the most important at-scale value-based construct that has been somewhat successful. But most of the innovation in and around that has not been very successful. And that doesn't mean it's not going to get there at some point. Part of American ingenuity is trying and failing and trying and failing and trying and failing until you find a model that works.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And credit to those that are trying to do that. But it hasn't succeeded. Where I think there are opportunities that are more direct is modernizing where we perform healthcare services into a lower cost setting. That's direct cost savings. We built with the Hilbert Act all this infrastructure that is hospitals, okay? Let's point the figure at the industry that I'm most closely associated with.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And it has been happening. Some of that work is and could come out of hospitals into a lower cost setting.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I would give you the biggest example that has probably had the most impact on health status and colorectal cancer is that if you go back 20 years, most colonoscopies were done in a hospital setting. Sometimes people stayed overnight for them. Right. Just think about that. And they moved into an outpatient setting.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
You're in and out in 45 minutes plus recovery time from whatever anesthesia you have. What did that do to the hospital? Yes, it moved business out of one setting into another setting. But that's not what really happened. What happened is when it got into a more convenient, quick, high service, manageable setting, more people in the U.S. started getting colonoscopies.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Because it was easy and it had a screening benefit that's enormous. I credit the ambulatory surgery industry with actually preventing more colon cancers than any innovation in gastroenterology over the last... Because it's now normal to get these... Just to make sure I understand the implication of that, it's twofold.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Oh, I think the total cost is probably much higher.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Per unit cost went way down. And everybody got access, so to speak. More people got access. And it prevented more cancers, which have lots of downstream costs. So the idea of moving things into lower cost setting as appropriate is something we generally have to embrace as a way to manage the total cost, especially if the demand on hospitals is going to go up with the aging.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So what's the next version of that? The next version of that that we're in the middle of is, look, a hip and a knee replacement used to be a four-day hospital stay. Now a lot of it is done on a same-day basis in the hospital, but you can also do it in an ambulatory surgery center in an hour.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And again, you recover and you walk out the same day and you go home and you do your PT at home and other things.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It costs about half. That's a big difference. You got your 25%. It's significantly different. One of the interesting questions is why does the device not cost less in one setting or another, but the total payment is half, right?
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Corporate profits. Okay, post-tax. So the expenditure in healthcare is pretty significant when you think about it that way. Now, off of total revenues, of course, it's a lot lower as a percentage. But if you think about it from the perspective of total corporate profits, that's a big, big number.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Sometimes with choice comes complexity. You're getting into medical billing, which has some complexity. At the simplest level, we break things into professional and technical expenses. Okay, and I'm going to define technical. But professional may be easier to understand. The surgeon who operates on you gets paid a fee to operate on you for their skill and training and other things.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And that is their professional fee.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
There are others involved in the surgery. The anesthesiologist who is, again, trained to provide incredibly sophisticated anesthesia to go on heart bypass, et cetera, gets paid a professional fee for that service. Their personal fee for their time. The technical fee is the fee for having the surgery in the building and setting called a hospital in an operating room.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And in that setting, you may use the operating room. You may stay in a hospital bed for three days. You may be in the ICU for a day. You may be given a bunch of drugs and medications that are important for that. All of that cost goes into one bundle called the hospital DRG.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
In general, the reimbursement system, which used to fragment all that stuff, has moved into an element of single reimbursement called a DRG, diagnosis-related group. By the way, a government innovation from Medicare that applies in much of the commercial world today. And you get paid a fee for all that stuff.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Now, we make our lives a little bit complex because we often send patients confusing bills that lists everything that they had in that DRG and an individual price for each one of those things, even though at the end of the day, what's going to get adjudicated is one payment, very simple, and one copay if it even exists.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But we make it very complicated by sending this entire list of everything you had, which you can imagine as a patient who's just coming out of and recovering from heart surgery, the last thing you want to see is a line item of 60 different things that you had done and what the cost of those were, especially when those costs bear no connection to what your insurance company or Medicare may have actually paid.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The US consumer spends, you should think of it this way, for that $1 trillion, if you have a $20 bill, $1 of that is going into direct healthcare expenditure, like 5% of someone's expenditure in an annual average basis. And then you've got the government. The government's spending about $2 trillion. Again, it's direct spend plus there's tax subsidy for employer-sponsored insurance.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's a complicated system.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Oh, it's highly, highly variable.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Medicare, somebody is going to reimburse, let's say 20 something thousand, some number for that hospitalization.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, the pro fees, like I said, that's US the hospital fee. The pro fee may be separate. I mean, what a physician gets paid to do that could be 750 or $1,000, let's say.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, again, the number could be higher with other insurance companies and whatnot. But the point is, yeah, there's a big difference.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
People can't fathom that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Sure, but Peter, healthcare, the utility that people, again, using an economic term, the utility that people gain from interactions with different parts of the healthcare system vary greatly relative to the actual payments that are made. Another way to say what I said is this is why the American consumer trusts their doctor. When you ask much more than anybody else in the system,
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Doctor and nurse. The next would be their hospital where they had their care. The least would be the insurance company. That doesn't mean the economics flow that way within that. But the utility, which obviously has a qualitative personal component, is somewhat disconnected from those payments.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, but I think that's a bit of a red herring. I think that when you say the cost, so now we have this complexity of you have cost, you have price, and you have charge. So let me explain this. And again, I think this has almost no bearing on macro healthcare costs. The cost of the gauze is what the manufacturer who makes gauze charges the hospital to buy it. It is not $16 for a piece of gauze.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Of course, it's super cheap, as is a Tylenol pill or whatever. The price is bundled into that group payment that I said. So you're not really getting paid that much more than cost for the thing.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The charge is this artificial construct created by the way in which we bill because of the way insurance billing is constructed that results in the perennial $16 gauze or $4 Tylenol pill or whatever the case may be. Nobody's being paid that amount.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It exists because every hospital by federal regulation is required to have a charge master. By the way, so is every doctor's office that has charges off of which the free market negotiates contracted rates and brings that $4 Tylenol down to 20 cents. Or the $16 gauze down to, I'm making it up because I don't know, whatever it is, cents. And that's what happens. This gets administrative costs.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The system has evolved certain ways in which the administrative costs support nonsense like this at the end of the day. Remember what I said about insurance. It's not insurance in healthcare. It's a discount card, meaning you're getting the value of group purchasing so you buy things at a lower cost.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
We'll get into that because that's a unique feature. When you talk about 1950s, 1954, the tax benefits for providing employer-sponsored insurance were codified into law.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
If you apply that in this setting, if you come in to the hospital without insurance, you're not getting that group discount. That's the bargain made between insurers and providers that you're going to get a better deal. It's a discount card. So if you come in without insurance, uh-oh, you're going to be exposed to the $4 Tylenol or the $16 gauze.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And the reality is that's what turns into something that we never really talked about, which is bad debt. There's a lot of health care that's provided that has a charge associated with it. Nobody ever pays. Billions and billions of dollars. In fact, I think it's about $40 billion a year or more. And then there's, of course, underinsurance where people don't pay their portion of what they owe.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And again, with those kind of prices, you can understand some of that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yes, that may be the case. I don't know that for a fact, but I think the concept that medical expenses lead to medical debt that lead to personal bankruptcy is another difficult topic within this area.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And I think what happens as a result is that it either goes to nothing because people don't pay, or most organized healthcare systems have the equivalent of a compact with the uninsured that rapidly discounts that price, often by tenfold, in order to adjudicate that. And I think that's very appropriate. Yet you still have these unfortunate cases.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The healthcare system today, the insurance system today, the cost of drugs today, and the structure that's been created works a lot better if you're in the system, not out of the system.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah. And the uninsured today with the Affordable Care Act, the uninsured rates have come way down because it expanded Medicaid. So the people who could qualify due to whatever percentage of the federal poverty level. Employment has expanded. The job market's been good. So more people have insurance through that. We've already talked about Medicare is growing rapidly because of aging.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Medicaid has already hit 90 million people with that expansion. And then there's this gap where people, their employers may be too small to offer insurance. They don't qualify for Medicaid because they make too much money. And we created these things called the exchanges.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And what that is, is the way to take that market and socialize the risk away from individual risk to group risk and make it more affordable. And so a lot of people have been covered through that. Now, we had a bunch of legal debate. The idea was you would do that and then you'd have this thing called the individual mandate, which meant you're going to be forced to get into something.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And again, that got legally challenged.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And that's the incentive. And that's the incentive that started back in 1954, which is that giving people healthcare coverage through group-purchased insurance by your employer is a pre-tax benefit rather than a post-tax benefit.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Right. And that, again, requires an acceptance that there are many, many people who will sign up for insurance that won't need it, and they're subsidizing those that need it. The argument can be made. That's true in Medicare already.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, that's my point. I think that the legal challenges that occurred to individual mandate and ultimately disabled it, if you will. I'm not an expert on the legal issues, but from the perspective of what we were trying to do as a society, it didn't help the system. Nevertheless, the exchanges have grown. They've been more expensive than people thought.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
A little bit because of the risk pool, some of it because of the pricing of those insurance products, some of it because of whether they look a little bit more like commercial insurance versus Medicaid. There's two flavors out there, a lot of complexity. But the fact is they've created coverage and access for a lot of people. And more importantly...
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
they have created coverage and access for working class, generally voting American citizens. And that means it's a powerful group that has access to this insurance coverage. And so them losing it or losing their subsidies becomes a real issue for everybody who's in the environment that has to make decisions on this.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So what that leaves you with for uninsured, obviously undocumented people that don't have US citizenship or some legal ability to work here. And two, is there obviously people who choose, they just decide, hey, I'm young and healthy. I don't want to buy on this thing.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I don't know. It's not a large number, but it probably would be somewhere in the millions.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
First of all, it's a political name. It's a bill that went through Congress and it's a political name. I'm just such a literal person. I think it's a more respectful way to talk about it than the way people talk about it as Obamacare. I think it's a more respectable way to talk about it as the Affordable Care Act. I would just call it the Access Care Act is all I'm saying.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So it created an incentive for employer-sponsored insurance to grow and now, of course, ultimately become the dominant form of which people procure insurance today outside of government.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, the Coverage Care Act. I think there were a lot of big ideas thrown about, mostly by academics and others, that some of the policies within the Affordable Care Act would include affordability and lower cost. I mean, I just don't think it ended up happening that way for a few reasons. And then people will point at each other about, well, the legal challenges affected this.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The reality is that it has... Increased expenditures. Because we know coverage at a group level that removes you from the direct exposure to the cost of care creates demand and higher expenditures. We saw that with Medicare. Comes back to the American thing. And most of these exchange products have generally good physician and other choice associated with them. Some are narrow networks.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Many of them have a lot of choice. So again, you prioritize choice and access. The costs could be higher than one may have guessed. On the other hand, they have been, again, as I said, incredibly powerful tools to provide coverage because that was the purported goal of the act for those that didn't have it when combined with Medicaid expansion.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Not all states have expanded Medicaid, by the way, either. I mean, that was a state-based thing. But in aggregate, more people have been covered after the Affordable Care Act, and therefore expenditures also went up, which is what you would expect at a simple level. We also talked about the fact that some of the value-based care constructs that they had haven't been successful.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, CMS has spent more money in their Medicare innovation arm, CMMMI, in creating the constructs of innovation than they actually saved in the programs they launched. So it hasn't really worked yet. Again, American ingenuity, right? You keep trying and failing, trying and failing, and maybe one day you'll get it right. Just hasn't worked yet.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, I think the first question would be, do you want the federal government covering everybody when the whole purpose of the employer sponsored system is to have choice and to have access to different networks that you can pick from? I don't know that a one size fits all model would work.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think the second thing, and probably from my perspective, the more important thing, is that if what we've talked about here today bears some degree of accuracy around what the drivers of healthcare costs are now and are going to be, it's really about health status, chronic disease, aging, drug costs related to the chronic disease, the demand. Coverage is not what's lacking today.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Models of coverage is not what's lacking today.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
What you would rather call that would be price controls. If your argument is you want to put them on Medicare because Medicare reimburses less than everybody else, commercial insurance or whatever costs, yeah, then you should just call it we're going to have a price control. But then we're moving to a supply-side intervention.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Oh, I think it's, to your point, it's mostly larger companies that do that. But, you know, the definition of large isn't that large. I mean, there are entities- 500 people? Yeah, there are entities with less than 500 employees that self-insure at times. Not that common, but certainly as you get above that level, it makes sense. Let's for a second put the federal spending in context.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's a supply-side intervention that says we're going to constrain everybody's access and choice. The reimbursement is going to come down. and the infrastructure will survive or not survive, and what's left will be what you can access. That's a different choice because that's what it would do. It would be a buy-down. Remember one thing, and we haven't really talked about it that much.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
This system is built on a lot of cross-subsidies. healthy people in our model of insurance cross-subsidize our fellow citizens who happen to be ill in some period of time. In the same way, employer-sponsored insurance, which reimburses healthcare at a higher level than Medicare or Medicaid, overcomes the unit cost under-reimbursement Of government healthcare.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
This goes back to the concept, the government already behaves as a monopsony here. They under-reimbursed. What you get paid from Medicaid, if you're a doctor or Medicare, may be below your cost relative. It's cross-subsidized.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And that cross-subsidy creates this dynamic where you can't have one go away without the other. That's why I'm so concerned about the notion that our number of 40 to 65-year-olds relative to the people that are getting the benefit from government that somewhat under-reimburses unit care of cost is going down. The people generating the economic rents to cross-subsidize the other side is going down.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And what does that mean for our economy if healthcare expenditures are growing this quickly? I mean, that's the essence of this discussion. And by the way, I haven't answered your question with any reasonable solution to how to cut 25%. I mean, you probably need somebody from totally outside the system to come up with an idea for that kind of cut.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I am much more optimistic about the notion that healthcare expenditure inflation could be reduced to a level that is somewhat closer to GDP growth.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That sounds a little fatalist in terms of where we are. I mean, my framing would be we value quality, access, choice, and innovation, and we're willing to pay for it. It has not deterred the US economy to date in terms of being not only the leading but the fastest growing economy. And our problem that we need to solve societally is about, in the U.S., it's about two things, as we outlined.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It's about the burden of chronic illness and aging and all of these factors that drive worse outcomes that really aren't healthcare factors. Again, we talked about the infant mortality issues, the drug and drug access issues, and the mortality associated with that, homicides, violence, injuries, etc.,
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Working on those things, plus the chronic illness side from the medical perspective, are not anymore about insurance or coverage or whatever. They're about addressing those issues directly.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I mean, close to with the direct and the tax in-kind contribution to healthcare the federal government is making, you're getting close to $2 trillion, $1.82 trillion. Defense spending, let's just put that in context. That's about a trillion. Social security, $1.2 trillion today.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's right. I mean, I'm not saying that the solution is public health. I mean, I think the success that public health, the current model in public health had in infectious disease over the last 75 to 100 years hasn't worked in this setting. I mean, even COVID is a good example of that. So much debate exists about what happened there.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Why was US mortality higher than most other developed countries in COVID? I mean, the most effective thing that happened during COVID was the development of the vaccines. which was, again, US ingenuity, innovation, and spread around the world in many, many ways. And so I think we have to rethink these models.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And before we give them more funding, we need to make sure that they're doing the right thing for us. But if we can bring those things in line, I think we can make a difference. I come back to, which I learned from you more than anybody else, The background nutritional environment, if it changed, could make a big difference over a 10-year period.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And if you add to that incorporating a degree of physical activity, as we all know, this isn't about going from being sedentary to running marathons. It's about being sedentary to some physical activity. And it has a huge potential benefit on the types of healthcare costs that come from chronic illness. And those two things together and addressing some of the U.S.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
unique issues could bring healthcare expenditures in line with GDP growth pretty quickly. But you have to have that goal over a 10-year period. If it's a one or two or three-year goal, we will fail and give up before we try. But you can do it over a 10-year period, I think. And that's where my optimism comes from.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, I think you have to start by having a discussion around what's our national health objective. We don't have a national health objective right now that seems obvious. And again, unless you just say by default, the national health objective is the ultimate in access and choice. And if that continues to be our objective, the system is designed to produce that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
My point is that we can have access and choice and incrementally put dollars into these other things and make a difference to both without radically cutting access and choice. That's what we have to get our head around from a long-term perspective. You're right. Short-term interests from all kinds of industry participants and public participants as well may run counter to that 10-year goal.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's why establishing that goal. The question is, go back to your point around what we did after World War II. It was a national goal to have an ecosystem of countries that stood for democracy and protected security around the world, and we were willing to invest in it. This may not be an international problem, but it is a national problem. And so we got to rally around that.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think our biggest challenge in innovation for the next 20 years is the management and care of neurocognitive decline, whether you formally have dementia or not. One thing is true. When you age, people live longer, they inevitably have neurocognitive decline, and they require more care.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
The culture in this country, just to address the long-term care expenditure piece pretty directly, I think there are many positive aspects of the culture of family taking care of generations and that being something that's passed from generation to generation. We spend less in institutionalized long-term care because a lot of that work is done by families. Now, that's also a burden.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
That's correct.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
As people live longer and the cost and complexity of their care as they decline gets higher, the cost of providing that care is not just the direct cost. but it's lost wages and productivity in the economy as people, often women, come out of the workforce to take care of the elderly from that perspective. So this problem is not just a healthcare problem.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
It could become a macroeconomic problem based upon feeding the workforce and lost productivity. The second reason I think this is a huge problem, we won't get too technical, simple issue of blood-brain barrier. The traditional pharmaceutical model to care for these diseases may not work once there's onset of disease because of the blood-brain barrier.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And the concept there is that drugs which go into the body don't get through effectively the barrier between the blood and the brain to be able to treat brain diseases. We need new forms of innovation. And this is where I think you will see the prominence of engineering-based solutions rather than drug discovery-based solutions grow materially to help with these diseases.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Think about what we do today with stimulation and neurostimulation and Parkinson's. That's a device-based therapy. I think the role of engineers in healthcare has an infinite future and upside for us because of neurological diseases.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And we've got to pivot our model, our research, our funding to deal with this issue because we're going to go from 65 million-ish people in Medicare today to 90 million by the mid-2030s. Again, go back to my point before of the number of people pre-Medicare declining that's going to help finance the care for those people.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So we need models for custodial care, meaning where to take care of them and how, that isn't a nursing home or long-term care, which is too expensive. You got to make that job easier in the household.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And we need innovative engineering-based solutions that help improve their cognitive function to make them more self-sufficient, to deal with their dementia for a longer period of time so that they're more self-sufficient and less dependent. And solving that problem, I think, is one of the grand frontiers in medicine over the next 10 to 20 years, given the aging of the population.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Well, yeah. I mean, that may be what we collect, but obviously the government is spending closer to 6.8 trillion or something like that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Because remember, we're going to age up through 2032, 2033, but those people are then going to live 10, 15 years. This is a 25-year problem, and I don't know that we've found the solution to that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah, I mean, I think today, if we look at the system and what's being developed in AI, administrative cost is the easiest and first application, I think, where you can actually see real cost reduction potential. So I think we hit that correctly. I think in the clinical realm, the electronic medical record, which has been a massive industry expense...
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
What it has done is created a much more organized system of record, but it hasn't really fully translated to a system of engagement for all the stakeholders. And I would argue hasn't really been transformative in improving the quality of care relative to other things. And it certainly hasn't really improved access or choice in any way from that perspective.
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#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But taking that foundation and building in the potential benefits of AI in better clinical care, better understanding of evidence-based medicine, that has potential from the foundation.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So while I'm not a big proponent of the fact that the foundation that's been very expensive has a huge return on investment that the industry has seen, it has had an organizing effect, almost table stakes that were required to get off paper to enable things like AI to make a difference in the future. And you know what's gonna be interesting? is it'll remain to be seen.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Do the traditional EMR participants or do new entrants really build the AI that does that? And I think there's a lot of work going on in that area. I think it's early. I think the hype is seriously overblown in the near term in terms of the value that it will have.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
But from a long-term perspective, conceptually, the power of the tool to really improve care, not just administrative cost, I'm optimistic about.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I appreciate that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I appreciate that. It's incredibly kind. But the reality is that you know this, the pride that we have in what you've built and I have and my family has is incredible. And the thing about you from my perspective that I can't say about virtually anybody else is that what you have built has been purely based upon your intellectual curiosity, creativity, and drive to know the truth.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
as opposed to anything to do with your personal gain. I've known you from day one as having worked in that way in the environment that we were in together and all of the different things that you went to do after that in various... I mean, I remember algae, but the point is it was always driven... by that intellectual curiosity. And that's something that I wish more people had.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And I think if there's any benefit of this conversation of us talking about this, somewhere out there in your audience, there's another person like you who will hopefully solve these problems because they're just as intellectually curious as you. It's a gift that the world will never understand the benefit of from what you're doing.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
I think that's true. Thank you for the opportunity.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Yeah. I mean, ultimately, that is, I think, the question when healthcare is such a large part of the economy, how sustainable is it what we're doing in healthcare expenditure? So you take all that money and financing, and then in the US, there's a system that it goes into, right? You got $4 trillion, a quarter, a quarter and half from government, and you're flowing it into a system.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
And in our system, about two and a half trillion of that, plus some from the government, is flowing into private insurance. They're covering what we would traditionally call commercial insurance. But the private insurance community is also covering a bit of Medicare and Medicaid, increasingly large proportions of that.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
Medicare Advantage or Manage Medicaid or other things like that, that allow for theoretically better choice, better benefits and other things, and maybe even cost control. And then there is a retail component. And then obviously the government does pay directly to providers through Medicare and Medicaid some amount of money, and that's about a trillion dollars.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
So the split and flow, you can break it down pretty simply from that perspective. When I look at how the money's spent in a way that people can understand, I think of very simple rules. We'll get into this, which is administrative cost in the US is probably one of the biggest gaps to what we see in the rest of the world. And that can be good or bad.
The Peter Attia Drive
#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.
You have to make a judgment about whether all that administrative spend is creating a better system with more choice and better outcomes. We're not, but we do spend that. And that takes up close to 10 to 15% of the total pool of dollars. When you think about that number on $4 trillion, that's a huge amount of money going into administration. We'll talk about that.