Who’s On First? Attempting to Explain the U.S. Health Insurance Market

Few of you are likely old enough to remember “Who’s on First?,” the famous comedy bit from Abbott and Costello, but that’s a shame.  If you haven’t heard it, you really should seek it out (listen here) because it’s one of the funniest comedy skits in history, at least in the view of me and numerous others.  The premise of the skit is that Lou Costello (in the form of a peanut vendor at a baseball stadium) asks the team manager, played by Bud Abbott, to familiarize him with all of the players on the team so he knows how to engage in the, ahem, baseball ecosystem when they get to the game.

This skit came to mind in a rush the other day as I played the role of Abbott trying to explain the U.S health insurance world to a startup CEO from another country as he considers a U.S. market launch.  It became clear to me pretty early in the conversation that the CEO did not really understand how the insurance market works over here, and I made an attempt to explain it, more or less, in outline form.  We only had 60 minutes, so I barely scratched the surface, but I was having an out of body experience during the conversation as I heard myself describing what I knew to be ridiculous, but which sounded so much worse as I tried to simplify it.  All I could think of was “Who’s on First.” (note: you can read the full written transcript of this skit HERE)

For instance, I explained that, like bases in baseball, there are basically three major insurance markets (though of course there are more), which are Commercial, Medicare and Medicaid.    I explained who was covered in each market, what the main source of funding is for each market and how the basic outline of coverage works for each market.  And that’s where it started to go crazy.  I admit to some minor editorial license below, but these are basically accurate excerpts from the conversation:

Him: So Medicare covers all people over 65?
Me: Not exactly; sometimes when they are still working they are covered under Commercial insurance.
Him: And Medicaid covers poorer people?
Me: Yes, except when they are covered by Medicare too because they are dual eligibles.
Him: So who covers what?
Me: It depends – who and what are somewhat fluid.

Him: So, when the federal government decides what to pay under Medicaid, will they cover my product?
Me: Medicaid is administered by the States, not the federal government.  Each state is different in what they cover.
Him: So, each State decides how to manage its own Medicaid program?
Me: Yes, except when it’s the Counties in a State that decide, like in California.
Him: So, who decides for Commercial plans?
Me: Companies decide, except when the federal government mandates certain benefits.
Him: Why does the government get involved in private insurance?
Me: The government is always involved in one form or another.
Him: Which government?
Me: It depends on what program we are talking about.

Him: So, let me get this straight: insurance companies are “payers” and providers are “providers” in this scheme?
Me: Yes, except when payers are also providers or providers are also payers, which is more and more common, like in Accountable Care Organizations. Many payers acquire provider groups and many providers start health insurance plans.
Him: Then is it likely that every payer will also be a provider?
Me: I don’t know.
Him: So, then what is CVS Health? Is it a payer or a provider?
Me: Yes. And, also a pharmacy.
Him: Does every pharmacy have a payer and provider under the same umbrella?
Me: Not yet.
Him: Then who is just a payer at this point?
Me: I don’t know.
Him: So it’s total chaos?
Me: Naturally.

Me: Look, I get it, all you wanna know is when you launch your product, who is going to pay for it.
Him: Yeah, who will pay today and who will pay tomorrow?
Me: It depends on what the financial incentives are and whether it’s a fee-for-service or value-based model.
Him: Forget the U.S. launch – I don’t give a damn.

Ok, so that last part of the conversation didn’t actually happen, but I could hear him thinking it very loudly!  The rest of it is pretty on point.  I could feel the guy’s utter amazement/disgust/confusion oozing through the phone.  I could also relate to it.  How could something be so damn complicated, and nothing be clear at all?  All lines are blurred, all roles in flux, all funding streams filled with treacherous rocks and boiling like a white-water rafting trip.

One of the most absurd parts of it all was that, after 30+ years thinking and talking about all this, not to mention working in it, I also realized I didn’t know some of the answers to the questions about who, what and how some of this health insurance stuff gets done.   Famed third baseman “I don’t know” was mentioned more than once.

Can you imagine what it must be like for regular people in America who don’t have a choice but to live in our system to have to make sense of it when they need to use it?  It’s like handing someone Julia Child’s Mastering the Art of French Cooking and saying, “ok, let’s start with the beef bourguignon.”  Um, could we start with something easy, like how to boil water?  Nope, we are going straight to the thing that takes 6 hours and requires an endless list of ingredients – hunker down now.

I often speak with and advise foreign companies on their U.S. entry strategy, and it is pretty typical for them to have complete misunderstanding of how our healthcare system operates.  They start by assuming it’s somewhat rational.  That’s where they go off the rails.  Many industrialized countries around the world have some form of government-sponsored health system and it is assumed that our government-sponsored plans have some similarities.   Nope.  They assume our system was designed as…a system; nope – it’s entropy in its finest form.

Frankly, if our healthcare system were simple, what would all the consultants do?  Why would we need all these startups seeking to simplify things? Why would we need zillions of dollars in venture capital to disrupt it?  We wouldn’t.  So. I guess, given my profession, I should be grateful that the healthcare system is as goofy as it is or else I might not have a job.

And if you have never seen Abbott and Costello’s Who’s on First?, you really should watch it. It’s comedy genius.