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Father Christmas Reminds Us We Can Do Better Than This

By MIKE MAGEE

The Ghost of Christmas Past, in the form of Surgeon General C. Everett Koop, has returned this season to torture one RFK Jr who refuses to fully share life saving vaccines with children. In the encounter, the ghostly Koop reviews a time 37 years ago when citizens came together to celebrate separating scientific fact from fiction with life-saving effects.

Beginning in 1988, the United States, along with the rest of the world, had formally acknowledged and celebrated World AIDS Day on December 1st each year – that is until 2025. At President’s Trump’s direction the State Department, and with HHS support, turned their back on an inconvenient truth – the Republican early record on HIV/AIDS. Let’s channel the truth-telling Surgeon General from Christmas past and remember this telling story.

On June 5, 1981, the CDC reported 6 cases of Pneumocystis carinii associated with a strange immune deficiency disorder in California men. Drs. Michael Gottlieb and Joel Weismann, infectious disease experts who delivered care routinely for members of the gay population in Los Angeles, had alerted the CDC. Inside the organization, there was a debate on how best to report this new illness in gay men.

The vehicle that the CDC chose was a weekly report called the Morbidity and Mortality Weekly Report or MMWR. So as not to offend, the decision was made to post the new finding, not on page 1, but on page 2, with no mention of homosexuality in the title. Almost no one noticed.

On April 13, 1982, nine months after the initial alert, Senator Henry Waxman held the first Congressional hearings on the growing epidemic. The CDC testified that tens of thousands were likely already infected. On September 24, 1982, the condition would for the first time carry the label, AIDS – acquired immune deficiency syndrome.

The new Surgeon General, C. Everett Koop’s focus at the time, along with the vast majority of public health leaders across the nation, was not on a new emerging infectious disease, but rather on the nation’s chronic disease burden, especially cardiovascular disease and cancer being fed by the post-war explosion of tobacco use. He had already surmised that the power of his position lie in communications and advocacy.

One month after his swearing in, he appeared on a panel to release a typically boring Surgeon General update report on tobacco. He was not intended to have a big role. When Koop rose to deliver what all thought would be brief, inconsequential remarks, he wasted no time disintegrating the lobbyist organization, the Tobacco Institute. For print journalists in the audience, he was clear, concise and quotable. For broadcast journalists, he was a dream come true – tall, erect with his Mennonite beard, in a dark suit with bow tie, exuding a combination of extreme confidence and legitimacy mixed with “don’t mess with me” swagger.

As Koop would later say, after that, “I began to be quoted as an authority. And the press from that time on was all on my side… I made snowballs and they threw ‘em.” The other thing that Koop noticed early was that the Reagan Administration didn’t shut him down. That was surprising since Koop’s major supporter in a year long confirmation battle (the AMA opposed his appointment) was NC arch-conservative Senator Jesse Helms.

Add to Jesse’s wrath, R.J. Reynold’s CEO, Edward Horrigan, complained directly to Reagan about Koop’s “increasingly shrill preachments. Cigarette consumption in the US was in free fall. By 1987, 40 states would have laws banning smoking in public places; 33 states had bans in public transportation; and 17 already had eliminated workplace smoking.

Still Reagan didn’t shut him down. Now everyone from public schools to medical groups to women’s associations to civic enterprises wanted him. And beginning in late 1982, he arrived in full regalia, in a magnificent Public Health Service, Vice-Admiral’s uniform with ribbons and epaulettes. And his aide, also in uniform, always carried with him a bag of buttons for distribution which read, “The Surgeon General personally asked me to quit smoking.”

But in the most pressing public health challenge of the day, HIV/AIDS, the department was AWOL. Koop was actively sidelined by top Administration officials. Not surprisingly, the situation deteriorated rapidly. Everyone was feeling the heat, including the CDC, who removed funding for AIDS education after being accused of promoting sodomy by conservatives.

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Why AI Still Isn’t Fixing Patient Referrals—And How It Could

By NAHEEM NOAH

A Call from the Black Hole

Three months into building Carenector’s facility-to-facility platform, I got a call that crystallized everything wrong with healthcare referrals. A hospital social worker, who was already using our individual patient platform to help families find care, had been trying to coordinate an institutional placement for an 82-year-old stroke patient for six days. She’d made 23 phone calls. Sent 14 faxes. The patient was medically cleared but stuck in an acute bed costing $2,000 per day because no one could confirm which skilled nursing facilities had open beds, accepted her Medicaid plan, and had stroke rehabilitation capacity.

“I love what you built for patients,” she told me, “but when I need to do a facility-to-facility transfer, I’m back to faxing. Can’t you fix this workflow, too?”

She wasn’t wrong. We’re in 2025, and despite billions poured into health IT and breathless AI promises, referring a patient often feels like stepping back into 1995. Earlier this year, THCB’s own editor Matthew Holt documented his attempt to navigate specialist referrals through Blue Shield of California. The echocardiogram referral his doctor sent never arrived at the imaging center. When he needed a dermatologist, his medical group referred him to a provider who turned out not to be covered by his HMO plan at all. “There is a huge opportunity here,” Holt concluded after his odyssey through disconnected systems, “even though we’ve got now a lot of the data…to integrate it and make it useful for patients.”

Clinicians make over 100 million specialty referrals annually in the U.S., yet research shows that as many as half are never completed.

Here’s what we’ve learned after a year of operation: we built a consumer-facing platform that helps individuals and families find care providers matching their needs, insurance, and location—it now serves over 100 daily users, including patients, social workers, and discharge planners. But solving individual care searches is only half the battle. The institutional referral workflow—hospital to skilled nursing facility, SNF to rehab center, clinic to specialist—remains trapped in fax machines and phone tag because no one redesigned the actual coordination process.

That’s what we’re building now. And the question haunting us isn’t why we don’t have better tools? It’s why billions in AI investment left the institutional referral workflow virtually unchanged?

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To Improve Health, Design for Agency

By DAVID SHAYWITZ

Agency — the conviction I can shape my future — is a vital driver of human health and human potential.

It is also the factor overlooked by most digital health platforms.

University of Pennsylvania psychologist Martin Seligman, who has spent decades studying this, says agency boils down to the belief “I can make a positive difference in the world.” People with high agency believe there is something they can do next that might help – and then they actually try.

As Seligman emphasizes, the moments when we “try hard…persist against the odds…[and] make new, creative departures” are precisely when agency is at work. That extra effort and sustained determination — not just the mindset — shows up as improved performance, greater achievement, and enhanced health.  It also manifests as resilience, enabling us not only to recover from adversity but (ideally) to bounce back as an even better version of ourselves.

GLP-1s highlight the power and promise of newfound agency.  For many living with obesity, past attempts at weight loss reinforced a “cycle of despair” – trying harder mostly meant failing again. With the advent of GLP-1 medicines, many found that their weight would come down — and stay down.  Oprah Winfrey called the feeling “a relief, like redemption, like a gift.”

The deeper change is psychological: for the first time in years, effort feels rewarded. GLP-1s unlock an agentic dividend: the motivational boost that comes from finally being able to take control of your health. That surplus sense of possibility can be channeled into the familiar health basics — moving more and sleeping better — but also, often more importantly, into how we show up in our relationships and communities, in the enthusiasm we bring to our hobbies and pursuits, into the totality of experiences that make life so meaningful.

Agency is the motivational currency of health, the ATP of behavior change – it lets success in one domain drive progress in others.

Connected fitness platforms have a similar opportunity. Each discrete achievement — finishing a class, riding three times in a week, noticing that the stairs feel easier or the back hurts less — is a small proof of “I can do this.”  

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Brown and Toland weighs in on the $34.94 Labcorp test. (Part 6)

By MATTHEW HOLT

I know you all care, so I am giving a 6th update on the telenovela about my Labcorp bill for $34.95.

The very TL:DR summary of where we are so far is that in May 2025 I had a lab test to go with the free preventative visit that the ACA guarantees, but I was charged for the lab tests and I was trying to find out why, because according to CMS I should not have been.

For those of you who have missed it so far the entire 5 part series is on The Health Care Blog (1, 2, 3, 4 & 5). Feel free to back and read up.

When we left the scene on Sept 9, Blue Shield of California had finished their 30 day investigation and their rep read me the letter they sent me (that I couldn’t open due to their secure email not working). The letter told me that Brown & Toland Physicians, the IPA that manages my HMO, was going to investigate. Today I got a text from Blue Shield alerting me to a secure email and I got all excited, but it was nothing to do with this. And of course I should have heard from Brown and Toland in October or November.

So I decide to pick it all up again, and I called Brown & Toland Physicians or actually Altais which is the holding company that owns them and Blue Shield. I got through the phone tree and eventually got, “leave your number and get a call back” which actually happened not too long later.

The very nice rep tried to figure out my case and told me this:

On 8/14/2025 Mike at Blue Shield called Brown and Toland and asked for the original claim to be review (1430201). I am pretty sure Mike is the nice man from the Executive Admin office at Blue Shield we met in part 2 (or was it part 3?).

On 8/29/2025 the benefits department at Brown and Toland finished their review and reported that the original lab test wasn’t coded as preventative lab services by One Medical, so that the co-pay of $34.95 was correct. ($34.95 was the total agreed payment for all the tests, charged at a total of $322.28. And as it was less than my $50 copay, LabCorp only charges the patient for the total, not the $50!)

Meanwhile, that 30 day Blue Shield investigation was still going on. It ended up with them asking Brown and Toland to investigate. Presumably as a direct result of that, on 9/9/2025 Kelly from Blue Shield called Brown and Toland and sent them the $34.94 claim asking them to review it. (Again, as it turns out, as they just had reviewed it on 8/29/2025).

“So what happened?” I asked today.

My rep told me that whomever at Brown and Toland spoke to Kelly on 9/9/2025 didn’t get or didn’t put in correctly the claim reference number, and so when they passed it on to the adjuster in the benefits department it couldn’t be worked on, and so nothing happened since then. So much for their 30 day investigation!

However my nice rep today told me the results of the 8/29/2025 benefits analysis which as previously mentioned was that when Labcorp got this claim submitted it was NOT coded as preventative. So the solution is that One Medical needs to change the diagnosis or CPT codes and resubmit the corrected order at Labcorp so that Labcorp can bill Brown and Toland for these as preventative services, and presumably get its $34.95 directly from them. As of now, that’s it.

I am of course girding my loins and preparing to ask One Medical to re-submit that lab claim with the preventative codes.

Meanwhile, I mentioned to my nice rep that I had two subsequent tests that I was not billed for. One was a Fit test in which One Medical sent me home with a kit to scoop my poop. That seems definitely to be preventative as it was to test for colon cancer. The other was a set of tests for low iron ordered during my preventative care visit because my iron levels looked a little low. My guess is that doesn’t fit the preventative category and I should have paid for that.

You may recall that iron test was billed at $0 and neither me nor the Labcorp rep who was working the case with me quite understood why.

Turns out Brown and Toland think that I should have paid a co-pay for both of those tests. The Fit test billed on 5/18/25 was $15.60 (1537124). By the way, Brown and Toland is getting a good deal as the cash price Labcorp charges consumers for that is about $90! The iron test was billed at $60.79.

You’ll recall my lab copay is $50, so Labcorp should have been charged me the lower of the copay or the actual total. Which is $15.60 for the Fit test and $50 for the iron test.

I got no charge for either.

By the way, I would like to show you the EOB from Blue Shield, but as they cancelled and reinstated my insurance last month, their online site has wiped all my EOBs!

So I agreed with the Brown and Toland rep when she suggested that they investigate the $15.60 bill for the Fit test to see if there should be a co pay, and I may hear from them in 30-45 business days.

And just to square the circle I will (probably) ask One Medical to resubmit the claim!

And yes this is all totally ridiculous and it all indicates why health care is so overly complex and why no consumer can figure out what is going on.

CODA: Meanwhile I was contacted by a journalist asking about ChatGPT being used to to sort out and protest medical bills. So I went down that rabbit hole a little too.

Matthew Holt is the founder and publisher of THCB

The Dartboard Toss and the Algorithm

By GEORGE BEAUREGARD

How A.I. could have personalized my 2005 cancer journey

I don’t think I’m in the minority of Baby Boomer physicians when it comes to my curiosity and ambivalence about the progressing application of A.I. in medicine. But that curiosity isn’t just prospective, it’s retrospective too. In 2005, I became an outlier who perhaps needed something other than the standard of care for a disease.

During the fall of 2005, I first saw a single drop of blood hit the toilet water while I was urinating in my bathroom. After hitting the water, the rose-colored bead slowly sank, twisting and contorting, dissipating like a puff of smoke. The evidence was fleeting—gone in seconds. If I were a spectator rather than the source, I might have admired its visual artistry. There was no associated pain.

A single thought ran through my mind: Did I just pee blood? I thought I had perhaps imagined it.

I was 49 years old and didn’t have what were considered risk factors for kidney or bladder cancer: smoking, obesity, advanced age, high blood pressure, or exposures to cadmium, trichloroethylene, or herbicides. But I was adopted and lacked any knowledge whatsoever about my family history. Did I have a grim genealogy? What was perhaps significant, however, was that both of my adoptive parents had developed different types of urogenital cancer. That led me to speculate that environmental factors related to materials in our house and/or the land it sat on or around it had perhaps played a role.

I tried to dismiss any concerns, but the adage “painless hematuria is cancer until proven otherwise” ran through my mind in chyron-like fashion.

The episodes continued and worsened, prompting an ultrasound, the report of which read: “…a soft tissue density is seen in the base of the bladder toward the right. While this could represent thrombus, I cannot rule out a primary mucosal lesion. The lesion measures approximately 4 X 5 cm in diameter.”

I consulted a urologist colleague, who performed a cystoscopy. His comment about what he saw: “As you know, you have a mass in your bladder. I got a very good view of it. It’s pretty angry-looking, so I suspect it’s not benign. I tried to remove as much as I could. It would’ve been pretty risky to scrape deeper and risk puncturing your bladder. I know I didn’t get all of it.” A TURBT soon followed. The pathology showed a high-grade urothelial carcinoma extensively invading the lamina propria and muscularis propria. There was multifocal lymphovascular invasion, so I probably had a more advanced subgroup than the localized SEER stage.

At that time, the relative five-year survival rate for stage II muscle-invasive bladder cancer was about 45 percent.

Overwhelmingly, bladder cancer is an age-related malignancy. So, there I was, 49 years old, with a cancer whose median age of incidence—septuagenarians— was much older than mine. A WTF moment.

One that started me thinking about how much time I had left.

So, I had cancer, but in some ways felt cautiously optimistic. I had access to Boston-based academic centers and specialist colleagues who were willing to see me quickly, and good insurance.

But getting the diagnosis was only the beginning. I saw three expert urologists, each of whom recommended a radical cystectomy, small bowel resection, and construction of an orthotopic ileal neobladder. Convergence. Certainty for me.

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Travis Rush & Kala Weeks, Reperio

Reperio Health is trying to really boost the delivery of at home health testing, including not only weight and blood pressure but also cholesterol, obesity and blood sugar. Having use the kit and done an at home demo, I’m pretty interested to see if this can be a front-end telehealth service to get the average middle aged adult into a preventative health checkup. (Here was my experience)

I spent some time at the HLTH conference back in October talking with Travis Rush, CEO and Kala Weeks, VP Marketing to discuss how it works, who they are targeting and what their metrics are. And how they think this will roll out — Matthew Holt

Let’s get moving on AI-discovered treatments

By STEVEN ZECOLA

Recursion Pharmaceuticals announced results today for one its AI-discovered treatments. I was pleased to see the large, sustained reduction in polyps attributable to its treatment for Familial Adenomatous Polyposis.  Recursions’ oral medication will be viewed by the traditional scientific and regulatory community as “promising”.

On the other hand, I was disappointed not to see/hear any reference to the savings of the cost to society from this treatment and a vague reference to working with the FDA in 1H2026.  Quite frankly, the urgency seemed to be lacking.

Currently, treating FAP is an expensive, lifelong endeavor for the 50,000+ survivors. Early detection strategies cost $10k+ and late detection $37k+. The cost to treating metastatic colorectal cancer (for which FAP predisposes) can be extremely high, up to $300,000.  Overall, the cost to society from FAP easily exceeds $1 billion per year, or more than $15 billion on a present value basis.

This medication should not be subject to any further regulatory delay.  There is enough information now on efficacy and safety to have Recursion more forward with a broad application of this treatment, while continuing test dosage levels and stratifying the patient population.  The alternative is more needless cost and suffering.

Steve Zecola sold his web application and hosting business when he was diagnosed with Parkinson’s disease twenty three years ago.  Since then, he has run a consulting practice, taught in graduate business school, and exercised extensively

Health Insurance Cancel Culture

By MATTHEW HOLT

Strap in for a dramatic tale in which our hero battles bureaucracy and logic to try to get his health insurance back.

About 20 years ago lots of Americans, especially Californians who bought health insurance from Blue Shield of California, found that their coverage was cancelled without them knowing about it. That practice called “recission” got lots of attention during the run up to the ACA, and was banned by it. Now if you want to buy insurance and you pay for it, the insurance company has to sell it to you and can’t cancel it after the fact.

Or so I thought.

Post ACA most people who don’t get their insurance through an employer, or Medicare or Medicaid, now buy it via a very regulated “individual market” on a state-based or Federal exchange. Generally, the insurance they buy is heavily standardized (with bronze, silver or gold levels) and what they pay for insurance is heavily subsidized based on income. It’s those subsidies that were increased in the pandemic and extended in the Inflation Reduction Act (IRA) during the Biden administration. The subsidies were the topic–still unresolved–of the latest government shutdown. (Yes, yes, I know the shutdown is over—for now).

It’s pretty much impossible to buy individual insurance outside the exchange, although if you have Scott Galloway levels of wealth you can avoid buying insurance altogether and pay cash and you might be better off, or you can join some quasi-religious health share organization and take your chance. But for most people you are way better off buying on the exchange because that’s the only way you can get those subsidies.

I live in California and remain an under-employed blogger, and a few times in my recent life I have not been married to someone with health insurance provided by their employer. It happened in 2016-17 and again two years ago. No, not what you’re thinking. I didn’t get kicked to the curb by my wife, but in 2022 she got laid off by her employer and decided not to get another job. For the first year of that period (2023) we did not buy via the exchange, but used COBRA. That means we bought into her previous company’s insurance using our own money because it was cheaper than buying on the exchange. Two reasons for this. First, she got a severance package that made our combined incomes too high to get a subsidy and secondly, the ACA plans charge by age, whereas employers pay a flat fee for all employees. That made the exchange plan more expensive than the employer plan. (No prizes for guessing who in our family is old and expensive!)

But COBRA only lasts a year, and then it was time to head back to Covered California.

This starts a process where you try to figure out which plan offered is the cheapest, yet includes your and your family’s doctors, and which one has the lowest associated fees for the stuff you use the most (usually pediatric visits in our case). Turns out that in our case is the Blue Shield Trio 73 HMO. My inability to understand why it’s called Trio 73 reveals why no one calls me a marketing genius.

The other thing you have to figure out is what level of subsidy you get. As mentioned, the IRA passed in 2022 extended the pandemic emergency increase in subsidies for people with higher incomes. But then again, you have to figure out what your income will be when you sign up. Like the audience laughing at an obvious punch line a comedian hasn’t gotten to yet, those of you running ahead of me will have worked out a slight problem here.

I was signing up for a 2024 health plan in 2023. But I had to guess what my 2024 taxable income would be. Like many self-employed people with extremely variable income I had no idea what that final income would be until I filed my 2024 taxes in October 2025 (given I take the IRS extension). In other words, almost two years after I chose the plan. It turns out that in California, the people who track your income are not your health plan, nor the exchange but instead your local county health department. So in November 2023 I guessed my 2024 income and had to tell the local county what that guess is via some affidavit. The county health department actually called me to check that my estimate was correct. Or at least was what I told them it was.  Remember this for later.

Meanwhile I sign up on what I regard to be a very complex web site run by Covered California, and select the aforementioned Blue Shield HMO. It covers One Medical and UCSF theoretically via the Brown & Toland IPA, and leads to lots of fun and games in terms generating much content for me on this blog and Linkedin.

As it turns out, I was sent for an echocardiogram by my primary care doctor this past summer to check if I had a heart. While many of you were surprised at the answer (yes, I do), apparently it’s got a congenital disorder that needs a little help.

This gets us to November 2025 (last month!) with your brave hero going back onto the Covered California exchange trying to figure out whether the cardiologist recommended by my primary care doc is covered by the 2026 version of the Blue Shield plan I am on, or whether I need to switch. I could now digress and tell you the late Ian Morrison’s formula for choosing a health plan but I will hold that for the next telenovela article as of course that process is a fricking mess too!

In order to try to do that I login to the Covered California site and see I have a notice that I am not eligible for health insurance. I am confused.

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Slaying The Dragon

By MIKE MAGEE

The date was June 9, 1954. This was over a year after Wisconsin Republican Senator Joseph R. McCarthy had assumed the chairmanship of the Senate Permanent Subcommittee on Investigations. The history shows that he had  “rocketed to public attention in 1950 with his allegations that hundreds of Communists had infiltrated the State Department and other federal agencies.” Clearly a psychopath, he escaped control of moderating voices, biting off ever larger targets, including now the U.S. Army.

“Judge, jury, prosecutor, castigator, and press agent, all in one”, was how Harvard law dean Ervin Griswold described him. In 1954, McCarthy accused the army of “lax security at its top-secret army facilities” which he claimed were infiltrated by communists. The army responded by hiring veteran Boston lawyer Joseph Welch to defend itself.

As documentarians reported, “Mothers who never watched TV during the day were glued to watching the Army-McCarthy hearings.” McCarthy’s right-hand chief council that day was lawyer Roy Marcus Cohn. Pragmatic, ruthless, and evil to the core, Cohn’s career was launched by McCarthy, and his tainted touch destroyed lives and weakened the U.S. government for three more decades, straight up to the moment of his death from HIV/AIDS in 1986.

His style and tactics are widely felt today to be the strategic scaffolding of our Executive Branch’s attempted takeover of the US government. Not surprisingly, a direct assault on the control functions, values, and traditions of the US Military are a leading wedge in these attacks.  They have literally exploded in the past week with revelations that Defense Secretary Pete Hegseth himself gave the go-ahead on a “kill them all” order that ultimately engulfed two survivors of a rocket attack on an alleged drug-transporting speed boat.

In a 5-minute summation of the televised events of June 9, 1954, you (along with our leaders) are able to witness the historic takedown of McCarthy by Welch (with Cohn as witness) – the “slaying of the dragon” that finally destroyed McCarthy once and for all.

Cohn had reached an agreement with Welch that McCarthy would avoid attacking one particular Army service man as a communist if Welch remained civil. But Welch had laid a trap, and purposefully needled McCarthy into loosing his temper, and on camera, violating the agreement and “attacking the good lad,”  who an outraged Welch tearfully defended in his historic and well-prepared retort.

As historian Thomas Doherty recalls, “It was as if the entire country had been waiting for somebody to finally say this line, ‘Have you no sense of decency.’” As Welch pounced on his victim, Cohn winces as his dragon is slain. To which Jelani Cobb adds, “At the end of it, all the illusions, the comfortable illusions that McCarthy had cultivated about himself, had effectively been dispelled.”

As Congress grapples with a situation that has veered dangerously out of control, we can only hope that this time “history will repeat.” Courage must be resourced from within. As Martin Luther King famously reminded: “In the end, we will remember not the words of our enemies, but the silence of our friends.”

Mike Magee MD is a Medical Historian and regular contributor to THCB. He is the author of CODE BLUE: Inside America’s Medical Industrial Complex. (Grove/2020)

Let’s Check the Math on Health Subsidies

By KIM BELLARD

It’s December 3, and, to no one’s surprise, Congress still has not acted on extending the expanded health care premium tax credits for ACA. To Congress, the subsidies don’t expire until the end of the year, so they figure they have until at least then to act, or maybe sometime after that, given the way they handled the recent government shutdown.

On the other hand, consumers who are renewing or shopping for ACA plans face a more immediate deadline; they have until December 15 to enroll for January 1st. They’re already seeing huge increases that result from a normal renewal increase plus the loss of the generous subsidies; Kaiser Family Foundation estimates that their premiums will more than double without them. They can’t wait while Congress plays politics.

There seems to be agreement that something will be done about the subsidies, but less clarity about what that something is. Some centrists argue to extend the enhanced subsidies but with some tweaks, such as lowering the upper income levels and/or requiring everyone to pay at least some minimum premium. To me, that’d be a reasonable compromise. But some Republicans, including President Trump, are calling for a more radical change: instead of giving the expanded premium tax subsidies to those “fat cat” insurers, give them directly to consumers through health savings accounts (HSAs). Put individuals over insurers, they argue. 

I’m here to tell you: the math does not work.

I am not an actuary, but long ago I was a group underwriter, setting rates for employer groups’ health insurance, and, also long ago, I was involved in the early days of so-called consumer directed health plans (CDHPs), including HSAs and high-deductible health plans. I don’t disagree that HSAs and high-deductible plans can play a role, but one has to understand the math that drives health care spending.

The central fact of health care spending is that it isn’t evenly distributed. It is a perfect example of the Pareto principle: 80% of spending comes from 20% of people. The flip of that is that about 15% of people have no healthcare spending in any given year. What insurance does is take money from everyone and use it to fund the spending of the high cost people. That’s what all insurance does.

OK, I’ve avoided doing the math as long as I could, but here goes. One proposal has called for $2,000 to be deposited in each enrollee’s new HSA. Let’s keep it simple and say there are 1,000 such people, and that their average annual health care spending is $2,000 (which, of course, is way low). So we have 1,000 x $2,000 = $2 million in both subsidies and spending. It works out perfectly, right?

Not so fast.

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