History repeats itself is an adage so old that you sometimes wonder why new generations fail to see the tide coming. Fair, 100 years have passed since the deadliest epidemic in history. Healthcare observed a paradigm shift immediately after the Spanish flu, with many countries consolidating healthcare systems and expanding access to healthcare services. The 1920s saw the rise of socialized medicine in Russia, Germany, France, and the UK, meanwhile the US adopted an employer-based insurance system. Many countries took matters in their hands in the Spanish flu aftermath and assembled public health ministries as a protective shield against future pandemics. The League of Nations - the precursor to the World Health Organization (WHO) - emerged to spearhead international public health.

Parallels Between the Spanish Flu and COVID-19

Different pathogens, substantial behavioral overlap. Both diseases are caused by viruses that attack the respiratory system. Both viruses took healthcare experts by surprise and epidemiology studies deepened only with the disease dissemination. The funny thing is that science needs large sample sets to make meaningful predictions. Notable differences? There is growing evidence that SARS-CoV-2, the virus behind COVID-19, spreads through small droplets that linger in the air long after the infected person leaves the scene. Problematic discovery as social distancing is not effective against airborne diseases. We should all double down on high-grade protective masks.

Crisis, a Perfect Catalyst for Change

The Spanish flu was the catalyst behind the emergence of centralized and accessible healthcare. If you recall from your high-school chemistry days, catalysts precipitate events that are already in-flight. The ‘20s paradigm shift towards centralized and accessible healthcare occurred thanks to broader social and economic forces. Fast-forward 100 years, the big question is how the COVID-19 pandemic will shake out. We have multiple catalysts in the brew. 2020 is laden with shifting forces amongst which the value shift is the crown jewel. Patient’s out-of-pocket costs have been increasing year over year. And you know what happens when you pay for a service? You mutate from patient to consumer and you suddenly start seeking the best bang for the buck, aka value.

Four Factors Behind the Healthcare Value Shift

• Demographic seismic shifts are prevalent in the US as well as globally. If birth rates were the equivalent of investing in our species’ future, then investors are not looking optimistic. World’s population will nearly stop growing by the end of 2100. 8.5% of the world’s population is over 65 and the number will double to 17% by 2050. An aging population means fewer people are working and paying income taxes. Healthcare costs will rise to accommodate the prevalence of chronic diseases. Rapidly aging countries will go through an economic slowdown and the world will experience a shift in the global distribution of economic power.

• Healthcare inflation is far ahead of consumer inflation. When industries grow up, they seek operational efficiencies in the form of automation. Labor-intensive services such as healthcare and teaching fall into a “stagnation trap.” Labor costs rise faster than productivity, driving inflation higher than the standard rate. Single cure = productivity reform via AI automation.

• Healthcare expectations skyrocketed with the availability of online information and the proliferation of consumer culture. The public started demanding access to better quality healthcare. Policymakers around the world took notice, as seen in the Affordable Care Act in the US, the rise of private health insurance in China, and the world’s largest universal health insurance scheme in Indonesia.

• Disease patterns adapt well to social trends. We transitioned from pre-industrial models of epidemic infectious diseases to modern trends of chronic diseases. 35% of the disease burden in Europe stems from brain disorders. The Milken institute predicts that the most common chronic diseases cost more than $1 trillion annually and that figure can easily reach $6 trillion by the middle of the century

Could Technology Be the Answer

When we think about innovating for a better future, we bet our money on health tech. The VC health tech deal activity was sizzling in 2019.

Health tech makes sense on VC paper. Across non-healthcare verticals, competitive technology leads to better business solutions and improved customer experience. The math is more complicated in the healthcare industry. Someone needs to pay for technology and in the healthcare industry this entity is called “the insurer”. The insurer will keep playing dead until forced to cover new technology or services by the higher Gods. NO, not the customer. The Government or the Center for Medicare and Medicaid Services (CMS). Case in point: telemedicine technology went commercial in 2002 and barely went mainstream during the COVID-19 pandemic when CMS temporarily expanded the benefit to Medicare members. Notice two caveats here: Medicare and temporary. First, CMS can only regulate Medicare and Medicaid. Since ~40% of the insured population in the US is under Medicare or Medicaid, any proposal from CMS is strong enough of a tide to lead to change. Secondly, CMS expanded coverage for telemedicine benefits on a “temporary and emergency” basis. Assuming CMS removes this waiver, we will go back to in-person visits or out-of-pocket payments for telemedicine.

Standalone technology is not the answer. Adoption of health tech requires the regulatory Gods to play along. Or some other semi-gods that decide what is worth paying for and what value looks like in the healthcare industry.

Why Will This Time Be Different?

In the US, we love paying for services if that means we get away from doing any work ourselves. It’s an excellent strategy for cleaning your home or filing your taxes, but healthcare is a daily personal practice. The monthly health insurance premium does not ship with a monthly health boost. If it did, then the US should have won the longevity lottery based on how much it spends on healthcare. We spend twice as much as the average OECD country on healthcare, yet we perform worse in essential areas like life expectancy and infant mortality. Let that sink for a moment.

Advances in technology, along with social shifts caused by COVID-19, might allow us to practice what we preach: predictive, preventive, personalized, and participatory medicine. Like everything healthcare, 4P Medicine started as a theoretical concept. The likes of Walgreens and CVS decided to make it practical with their on-site healthcare clinics. These micro experiments are showing that consumers make educated decisions for their healthcare when directly engaged in a transparent healthcare ecosystem. What these experiments are not able to explain is how we will tackle chronic diseases, the bane of the US healthcare system.

In the US, hospital visits are next door to Chapter 11. Chronic diseases commonly require hospital visits. The more advanced the medical condition, the longer the hospital visit. Hospitals keep charging astronomical prices because patients have no alternative other than medical tourism. With COVID-19, patients suddenly have a forced choice: they choose not to go to the hospital for fear of catching COVID-19. This choice impacts hospitals severely since they no longer have the projected revenues to keep the lights on. Bankruptcy is not the word of choice in healthcare, but many hospitals might just get there. When they apply for bankruptcy protection, the government will likely bail them out. Strings attached, of course. Those strings could be the strings changing the US healthcare system towards the better.