The official motto of the United States of America can be found on our currency and coins: “In God we trust.” Not surprisingly, this phrase can be found in two places in the Quran, and similar verses can be found in both the Old Testament and New Testament. A trust in God naturally spans religions. Cooperation among organizations, however, requires more than trust; it requires that all parties benefit from working together — a belief that cooperation will yield win-win outcomes.
Payers may trust blockchain technology, but this shared trust does not translate into sufficient trust in each other. Despite potentially enabling technology, payers will not cooperate to solve the problem of member churn by sharing investments in care and associated returns.
Anticipation is making me wait
Payers make long-term investments when they are externally required, paid, or encouraged (e.g., via reporting) to do so, or when they are internally motivated do so by philosophy or evidence of a return on investment (ROI). Member churn is one of several reasons why payers may not make long-term investments in care. For example, some preventive services yield benefits many years after their costs are incurred and long after most of those members are enrolled. The ROI on one payer’s investment may be realized by other payers down the road. This problem can lead to an underinvestment in care associated with long-term outcomes.
Increasingly, payers are challenged by the high up-front costs for cell and gene therapies. Partial solutions include financing the cost (e.g., payment plans) and value-based contracts. Yet a payer that is responsible for the entire cost of these therapies may be making payments or be eligible for a rebate after the member switches to another plan! The costs and benefits are not transferred from one payer to another when a member switches plans. As with preventive care, member churn may result in underinvestments in these ultra-expensive, short-duration treatments and cures.
Along came technology
Introduced in 2008, Bitcoin is the most common cryptocurrency. It is based on blockchain technology, which uses cryptography to securely record and execute transactions. A “block” is a transaction entry, and a ledger distributed to all users creates a “chain” that connects these blocks. Trust is baked into the blockchain model because the records cannot be changed and because the ledger is shared by all users of the network. Users trust the technology and the information it supports.
It always makes sense to consider how new technology can be applied to other uses. For example, the list of NASA spinoff technologies is long. Building on the Bitcoin model, thought experiments led some to consider how blockchain technology could, in theory, be applied to help avoid underinvestment in care. HealthCoin, which has been proposed as a tradeable currency, could in theory be used to finance cures in a multipayer environment where one payer’s investment can benefit other payers. Just think, a shiny new disruptive technology solving an important problem. How cool is that? But once we scratch beneath the surface, the promise of HealthCoin begins to lose its luster.
There’s a way but no will
For blockchain to solve payers’ member churn problem, all payers would have to participate. And if all do not participate, then there’s a free-rider problem. Unless required by law, it is unlikely that all private payers would voluntarily trade an issued currency like HealthCoin. And the passage of legislation requiring all payers to trade a blockchain technology currency is also unlikely.
Alternatively, CMS could issue a cryptocurrency, but that’s also not likely. The political challenge is that Congress would have to pass authorizing legislation. And the economic challenge is that the actuarial work needed to monetize health investments would incur administrative costs. Further, Medicare may not realize some returns flowing from earlier investments by payers when patients were younger than 65. Higher administrative costs and a potential for lower-than-expected cost offsets is not a recipe for bipartisan support. Good Lord, we can’t even trust the federal government to pass legislation to eliminate the penny, which costs more to produce than its face value.
Putting in two cents
Blockchain enthusiasts have a lot to be excited about. And there are several exciting ways that payers can leverage this disruptive technology. Payers can use blockchain to securely share patient information with providers and regulators. Payers can use blockchain for financing and contracting with providers and manufacturers. And payers can use blockchain to process prior authorizations and claims. But you can bet your bottom dollar that payers will not use blockchain to solve the inherent problems with member churn.
The promise of blockchain technology solving payers’ member churn problem is not bright, and HealthCoin’s use to finance cell and gene therapies (or prevention services for that matter) will likely remain a theoretic use case. Sadly, the potential for underinvestment in care remains. Thank God investors are still willing to finance the R&D that is bringing new treatments and cures to market. Clearly, they believe there will be a sufficient ROI despite the potential for payers’ underinvestment. In returns they trust.
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