‘We inserted insurance between the patient and physician’ — on readiness and reform of health care

Health care access in part depends on location, and physicians located near military bases may be familiar with TRICARE, part of the health care program for uniformed services of the United States.

In some parts of the country, TRICARE may not be as well known as Medicare, Medicaid and the private pay insurers that doctors deal with. But TRICARE is no small program: It has more than 9 million beneficiaries in the United States and around the world.

Like other aspects of health care, it has elements that are helpful to beneficiaries and other parts that could be improved. Government Market Strategies is an analysis and consulting firm that has created Patriot Health, a plan for “bold transformation,” remaking TRICARE “into a unified, technology-driven, value-based care ecosystem.”

Beneficiary experience is one of four strategic impacts that would benefit from change, and TRICARE is not the only aspect of the U.S. health care system that could improve from more direct relationships between physicians and patients. A “cash only” approach to health care may sound like an unexpected solution, but could result in less insurance involvement when patients go to see their doctors.

Government Market Strategies President and Co-founder Joanne Frederick spoke with Medical Economics to discuss TRICARE reforms and a cash-based health care system. This transcript has been edited for length and clarity.

Medical Economics: Your company has worked with TRICARE, the health insurance program that covers active-duty members of the military. For physicians who are not familiar with that program, can you explain what it is?

Joanne Frederick: The TRICARE program covers not only active-duty military, but also their dependents, and retirees. Those who have served in the armed forces for 20 years or more are eligible for the TRICARE retiree program around the world. It covers about 9.4 million people. About 400,000 of those are overseas, and about 9 million are here in the continental United States.

The TRICARE program is really the health plan “wraparound” that covers beneficiaries, as they are called in this system, when they cannot get the care they need in military treatment facilities (MTFs). Those facilities are run by the Department of Defense and are staffed with military physicians, nurses, PAs, etc. That is considered the direct care system. When beneficiaries can’t get the care they need in the direct care system due to capacity or capability, they are sent into the community to receive care from community providers. This has been happening since the late ’80s, when I first got into this system.

Medical Economics: I didn’t realize there were quite that many beneficiaries involved.

Joanne Frederick: It’s a very large population, and they are dispersed throughout the United States and overseas. You can think about the population in “buckets” — there’s definitely density in places with large military facilities, like San Diego; Pensacola, Florida; and Norfolk, Virginia. There are, of course, installations all across the nation and the world.

It’s an interesting program in that, as the TRICARE program, as wraparound or purchased care, as it’s called, you really need a broad network of providers to ensure capacity and capability. This is made more difficult by what they call the readiness mission. In the military, that means a ready medical force and a medically ready force. The military provider community must be ready to deploy, with the training, knowledge, skills, and abilities needed, and service members must be medically fit to deploy. It’s a fascinating system. It is reasonably complex, and it takes care of people who deserve the very best the health care system can deliver.

Medical Economics: There are lots of areas of debate within the health care system, but I would hope that one is not open to debate: for servicemen and women to have access to the care they need.

Joanne Frederick: It is a no-brainer. That said, I would contend that the way the program is administered has significant opportunities for improvement. One concern is that the provider community is paid at a discount, sometimes a significant discount, off Medicare rates. Many in your audience know that even Medicare rates are often not adequate to cover costs. Yet if you see a TRICARE beneficiary, you’re getting paid less than that, sometimes significantly less. There are opportunities to improve how the program is administered to better incentivize providers to treat these beneficiaries as part of their ongoing practice.

Medical Economics: Are there any benefits or lessons that might be worth expanding across other elements of U.S. health care?

Joanne Frederick: I do believe the TRICARE program offers a significant benefit — and rightfully so. These are men and women who have agreed to serve the nation in times of need, and their families serve as well.

If I were to take one lesson from TRICARE, it’s the readiness mission. One could argue that it is the job of the health care system at large to ensure each of us is ready for whatever our individual missions may be, that we are as healthy as possible and able to achieve our goals, whether that’s work, family, or otherwise. Readiness is core to everything TRICARE does. We could benefit from applying that mindset more broadly — through better structured programs, better reimbursement, and recognizing the provider as the most valuable player on the field of our lives to help us get and stay healthy into our old age.

Medical Economics: TRICARE is not the only system you’ve worked with. What might it mean for the U.S. health care system if there were conversion to a cash-only system? When policymakers and physicians talk about that, they don’t always mean the same thing. How would you define it?

Joanne Frederick: In a system as complex as U.S. health care, we need a common definition and a common awareness. I would go back to the original idea of insurance, and think about your car insurance or your homeowner's insurance. Insurance was never intended to be a first-dollar payer. Insurance is intended to take care of something when something goes wrong. Your insurance doesn't pay your fuel, it doesn't pay your for your oil changes on your car, et cetera. Somewhere along the way, we inserted insurance between the patient and the physician. That may have been well-intentioned, but it has become a behemoth, sort of a monster that is difficult to control. U.S. health outcomes lag behind other developed nations, yet we spend more per capita than anyone. Something’s not right, something’s missing there.

Administrative costs alone account for an estimated 15% to 30% of health care spending. What if we reduced that? That’s the premise or hypothesis of a cash-based system: Let’s take insurance back to its intended purpose, which is catastrophic coverage, emergencies, accidents, significant diagnoses, cancer, and restore the direct relationship between patient and provider. The cash basis system does not mean that patients are running around with a pocket full of cash to hand dollar bills to their health care professionals, but more that we remove insurance, we remove the administrative burden of insurance, and we remove the complexity, quite frankly, that insurance really introduces in between that patient and provider relationship.

Medical Economics: Insurers argue that their infrastructure, such as prior authorization, adds value by ensuring appropriate care. How do you respond?

Joanne Frederick: That may have been true initially, particularly with the rise of managed care in the 1990s. I was there, I remember managed care, frankly, through the TRICARE program. The TRICARE program was really the first introduction of managed care concepts in much of the country. Does the value make sense? If ultimately prior authorizations run through two or three times between the insurance company and the provider and the patient and ultimately get approved, then all we're doing is paying for someone to do that work. With the technology that we have today, there is certainly the ability to streamline those types of transactions and decide that some of them don't need prior authorization. Should we really stand in between, or should we put a system in between, a physician saying, “I think you should have a test”? Should we put an administrative system in between that ultimately collects dollars every time a prior authorization transaction goes back and forth, and then ultimately again to perhaps approve that care? The idea of a prior authorization is, is this care medically necessary and medically appropriate? That's the concept, and we have allowed insurance companies to have an opinion in that. In the beginning, it really was for cost control on the idea that fee-for-service health care costs were out of control and physicians were just referring care willy nilly. I don't really think that evidence has proven true across the entire system. Are there pockets of folks that experience that? Absolutely. But we've created this behemoth, very expensive and, frankly, very profitable health care system around fixing a problem. Maybe the fix is way worse than the symptom was to begin with.

Medical Economics: Clinicians hope AI will improve both patient care and administrative efficiency. How do you see technology shaping health care over the next one, five, or 10 years?

Joanne Frederick: AI holds a lot of promise. In 2023, I attended a program at MIT (Massachusetts Institute of Technology) on AI and strategy to better understand what’s coming. There are two schools of thought. One school is, we're going to help patients get information that they didn't have access to. And that's, one could argue, good or bad. And then the other school of thought is, we're going to make the delivery of health care more efficient and potentially more effective. And I have had the honor and privilege of seeing several AI applications that I think hold real promise to help the health care system at large, to help patient care at large. A lot of the adoption right now is sentient listening and taking patient notes into medical records. And I think that's great, but that's just the tip of the iceberg of what is really possible. I've been in the health care industry for 35 years, and even I, at times, have difficulty navigating the health care system, and I understand it. So when I think about the promise of AI from a person-care, patient-care perspective, I really see a lot of promise in navigation. It can't replace that provider-patient relationship.

Back to our concept of readiness: We all want to feel better, that's the goal, right? We all want to feel better and have enough energy to play with our children or go on our marathon run, whatever those things are. That's the goal of feeling healthy. And if you have difficulty navigating through a system that helps you get to that readiness or that healthful feeling state, can we use AI to help that navigation? What is the best next thing I should do for my health to feel better tomorrow, et cetera? And there are some applications out there that are trying those things and there will be some that are used for not good outcomes. We really need to be willing, as a nation and potentially the world, to have really thoughtful conversations about how we can deploy this technology. And it's probably not what's being deployed today, though, again, we're at the tip of the iceberg. We should think about the point of the health care system, the players on the field. Do we need all of those players? Do we need insurance in between primary care relationships? Maybe not. And once we have the structure, then, how do we deploy these tools in service of what ultimately our goals and outcomes are? That's the conversation I would love to have.

Medical Economics: In direct primary care (DPC), patients pay a flat monthly fee to subscribe to medical care. How does that model fit into your vision of a cash-based system?

Joanne Frederick: I actually have been participating in a direct primary care system for quite some number of years, and I've had a great experience with it. But there's a missing piece, and that is, do we rely, and should we rely on our primary care physician to be our “health coach?” And do they have the time? Do they have the patient panel to spend the amount of time that really someone needs to get to what I call your annual health improvement plan. Wouldn't it be great if we lived in a system where every year you met with your physician or a physician assistant, or even a well-qualified, well-trained health coach to say, OK, my goal for this year for my personal health is to run a marathon, or sleep better, or, feel less stress, or, lose five or 10 pounds — whatever that is — to have someone at your support and at your side to help you craft a personal plan to get there. Now, primary care physicians could certainly help with that. But the question is, are we better off creating an additional wraparound system or service that's an adjunct to direct primary care that really works on those annual health improvement plans? Of course, your physician would review and approve to make sure there isn't anything counter-indicated. But I think there's an opportunity to really shift the system from, quote, a “disease care” system, which we've heard for a long time, into really a health- and wellness-based system. The combination of direct primary care and something akin to an annual health improvement program at the individual person level shows great promise. Now let's loop back to the AI conversation and some of the technology that's available, I think that's a great new promise on the horizon here. We just need the courage to sit down and have those conversations and really work together to figure out what the right solution is. But I think that's very encouraging for the future of health care in the country.

Medical Economics: Our main audience is primary care physicians. What would you like to say to them, or what would you like them to know?

Joanne Frederick: I would like to say thank you. The amount of administrative burden that the health care system places on primary care physicians is extraordinary. The number of staff that it takes to navigate through the myriad of potentially hundreds of different insurance plans and provider contracts and what's allowed and what's not allowed, and doing all of that while really providing the care that brought your audience into the business in the first place, is extraordinary. It's a shame that we've created this huge industrial base just to help a person sit down with their provider or their doctor. And I, for one, am absolutely willing to work to change that. So, I would say thank you, and what I would welcome are ideas on how to do that. It's the folks that deliver care every day that have the best ideas.