Peter Attia MD327 - Choices, costs, and challenges in US healthcare: insurance, drug pricing, & potential reforms
EVERY SPOKEN WORD
150 min read · 29,731 words- 0:00 – 7:08
0:01:38-US healthcare system: financial scale & unique challenges
- SSDr. Saum Sutaria
I think that, you know, if you look at the concept of insurance, I mean, insurance is for random, infrequent, and unpredictable events, okay? And when the primary role of insurance was to prevent catastrophic loss if you had a heart attack or you had an accident-
- PAPeter Attia
Or you got cancer
- SSDr. Saum Sutaria
... or you had an appendicitis, or yes, or you had a cancer, which back in those days was less of a chronic disease, the concept of insurance made some sense, right? Now, if you look at what drives expenditures from a health status standpoint, it's a lot of chronic illness, and in many cases it's multiple chronic illness. You know, we'll get into obesity, diabetes, heart disease, lung disease. E- even, you know, uh, the innovation in HIV care in this country, AIDS has become a chronic disease. Cancer is becoming more of a chronic disease. We try to insure somewhat uninsurable events, right? You don't wake up every morning and think, "Oh, I've got car insurance. Let me go figure out how to use my car insurance to get an oil change." But when we think about we're gonna go to the doctor to get a preventative checkup or refill my regular diabetes medicine, which I'm gonna be on for the rest of my life, we think insurance. But it's not really an insurable event. Insurance today is a discount card. It's not insurance in healthcare like insurance traditionally would be in other parts of your life where you procure insurance for random, infrequent, and unpredictable events. [upbeat music]
- PAPeter Attia
Hey, everyone. Welcome to "The Drive" podcast. I'm your host, Peter Attia. Saum, thank you so much for coming down to Austin to have this discussion.
- SSDr. Saum Sutaria
I appreciate the opportunity.
- PAPeter Attia
Yeah, this is, this is a conversation I've wanted to have for a long time, both for my edification, but also because I think it's such an important topic. And, um, y- you know, interestingly, for, for whatever reason, it, it waxes and wanes in public consciousness over time. There are periods of time when, uh, when healthcare is on the forefront of everybody's mind in, in some aspect, right? It can either be cost or quality or access. Um, for what it's worth at this moment, it seems to be dwarfed by other affairs, uh, but that doesn't mean that it's not going to be front and center in six months or a year or whatever. And therefore, I think in many ways this discussion today, um, my hope is serves as the master class on the United States healthcare system. Um, one other point I think I would make just for the listeners to understand is I fashion myself as a person who tends to get deep into things and then quickly come to an understanding of them. Um, I have been rather unsuccessful in understanding healthcare. Uh, I, I'm, I'm sure my understanding is, is greater than the average person, but, uh, it still feels woefully, uh, inept relative to the effort I put into understanding it. Uh, so I'm personally just looking forward to how much more I'm gonna understand this in a few hours than I do today.
- SSDr. Saum Sutaria
Well, I'm sure with good questions, I'm gonna learn a lot too, so I'm looking forward to it as well.
- PAPeter Attia
Saum, we're gonna talk about the things that people care about, right? Which is why is it so expensive? Why isn't everybody covered? Why do we not have the best life expectancy? In fact, on average, why do we have horrible life expectancy despite spending twice as much as anybody else? But we can't have that discussion if people don't understand the system, and that gets to kind of what I just said a minute ago. It's a really complicated system. Uh, you're one of the most structured thinkers I know of, so I'm gonna actually just defer to you as to what framework do you want to put to this for people to understand how so many trillions of dollars flow in, how many so many trillions of dollars flow out, who's paying, who's receiving, what, how does, how is this thing organized-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... and why are we different than every other country on the planet?
- SSDr. Saum Sutaria
Yeah, let's, so let's start with [clears throat] how the system works from a financing perspective, and then I think we can talk about how that's different than other countries. We can talk about the impact on outcomes, and, and we can probably even start to set up the framework on, as you say, the things people are interested in and why and what can we do about it. Um, but it's, but it's hard to start anywhere other than, you know, this is now close to twenty percent of the U.S. economy, healthcare. Seventeen, eighteen percent currently. And-
- PAPeter Attia
But let's give a number to that 'cause that is such a... People don't understand how big the U.S. economy is.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
So how many dollars are we talking about?
- SSDr. Saum Sutaria
Yeah, we're talking about a U.S., you know, U.S. economy gross domestic product that's probably twenty-eight trillion dollars, okay?
- PAPeter Attia
That's twenty percent of the world, twenty to twenty-five percent of the world's economy.
- SSDr. Saum Sutaria
With about seven percent, right, or less of the... Yeah. And another way to think about it, that's almost ninety thousand dollars per person in the U.S., okay? We spend eleven to twelve thousand dollars per person in the U.S. on total healthcare expenditure, just to put that in context. Four trillion dollars of expenditure in the healthcare sector. If you added up all of the exports that the United States sends out across all industries, you're talking about three trillion. We import more than we export. We're a consumer culture. That's close to four trillion, but not quite at four trillion today. I mean, you just put that in context in terms of how much, how much we spend in, in healthcare in the U.S. It's a huge number. And I appreciate the comments about, you know, how healthcare as a topic waxes and wanes with respect to being top of mind, but any discussion about the economy, about inflation, about jobs, you're really talking about healthcare in many ways. It may not be as direct as talking about healthcare policy, but you're really talking about healthcare given that it's almost twenty percent of the economy, and there's no escaping that.
- PAPeter Attia
Do we know that it represents roughly twenty percent of the workforce as well?
- SSDr. Saum Sutaria
Well, it probably represents in terms of wages a little bit more than that, um, because the average wage in healthcare is higher than in other areas.
- PAPeter Attia
Mm-hmm.
- SSDr. Saum Sutaria
And this is something, this is something that as we get into how you think about the future, we should talk about. Because as healthcare as a percentage of the US economy grows, you can't have that happen without considering what it does to the rest of the economy, and that's gonna be an important discussion around US competitiveness, US affordability, US coverage, et cetera, given the nature of healthcare and healthcare issues today. So-
- PAPeter Attia
So do you think it makes sense, Saum, and feel free to shoot this idea down, does it make sense to go back to the 1950s to start with Hill-Burton to start with-
- SSDr. Saum Sutaria
[laughs] Yeah
- PAPeter Attia
... and then progress into Medicare and Medicaid? Like, does-
- SSDr. Saum Sutaria
Yeah, let's do that
- PAPeter Attia
... historical context m- give people a sense of like what happened after World War II?
- SSDr. Saum Sutaria
Yeah, let's, let's do that.
- PAPeter Attia
What did the United States look like?
- SSDr. Saum Sutaria
Because I think, I think, and we can do it quickly and give people a sense of what happened, but let's, let's just start with painting the picture of where we are today, and then let's back up and say, how
- 7:08 – 16:39
How the US healthcare system works
- SSDr. Saum Sutaria
did we get here, okay? So $4 trillion, and again, I, just to keep this simple, about a trillion of that, okay, one-fourth, comes from consumers. Now, some of that is spent in, you know, you and I both would contribute to the insurance we procure, and some of that we're directly consuming healthcare by spending money on healthcare services out of our pockets. But think about it as one-fourth or one trillion. Employers put another trillion into the system. So how do they do that? Largely through employer-sponsored insurance. So that's the second trillion. So now you've accounted only for half of it, so where's the other half coming from? The other half is coming from government, federal government and state government. These days, a lot of it is federal government, and the federal government contributes in two different ways, direct expenditures, and as we'll get into when we start talking about history, employer-sponsored coverage being the dominant source of coverage is unique to the United States, right? Which is that your employer procures health insurance for employees, which then provides a form of coverage. That's relatively unique as a mechanism of coverage.
- PAPeter Attia
And, and let's make sure that people appreciate that because someone listening to this might say, "But I have a health insurance card, and it says Blue Shield on it, so doesn't Blue Shield provide my insurance?"
- SSDr. Saum Sutaria
That's correct, but it's coming through your employer, and most people would recognize that because of their annual enrollment, right? So they're picking Blue Shield or Aetna or Cigna or United, or, you know, if they're in a Medicare plan, they may be looking at Humana or other Blues plans from that standpoint.
- PAPeter Attia
But, but the point is that the Blue, that the Humana, the Aetna, the whoever is on the card is usually providing an administrative service only if the employer is large enough that the employer is bearing the risk, which-
- SSDr. Saum Sutaria
That is correct
- PAPeter Attia
... may- we'll get into that.
- SSDr. Saum Sutaria
Yeah, and we'll get into that.
- PAPeter Attia
Maybe you should explain that a little more completely.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Okay.
- SSDr. Saum Sutaria
So you've got a fourth that people are spending out of pocket in one form or another, some of it, of course, to subsidize their ability to buy insurance, a fourth that's coming from employers directly, right, out of their profits. Now, think about that trillion dollars for one second. Total US corporate profits are about in- interestingly, coincidentally, just south of $4 trillion.
- PAPeter Attia
Really?
- SSDr. Saum Sutaria
So corporate profits-
- PAPeter Attia
Huh
- SSDr. Saum Sutaria
... okay, post-tax. So the expenditure in healthcare is pretty significant, right, when you think about it that way. Now, off of total revenues, of course, it's a lot lower as a percentage.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
But if you think about it from the perspective of total corporate profits, that's a big, big, big number. The US consumer spends... You, you should think of it this way. For that $1 trillion, it's about, if you have a $20 bill, $1 of that is going into direct healthcare expenditure, like 5% of, of someone's expenditure in an annual average basis, okay? And then you've got the government. The government's spending about 2 trillion. Again, it's direct spend, plus there's tax subsidy for employer-sponsored insurance. We'll get into that because that's a unique feature. When you talk about 1950s, 1954, the tax benefits for providing employer-sponsored insurance were codified into law.
- PAPeter Attia
By the way, going back to that $1 trillion that employers are spending, that is a pre-tax benefit basically to employees.
- SSDr. Saum Sutaria
And that's the incentive, and that's the incentive that started back in 1954, which is that giving people healthcare coverage through group purchased insurance by your employer is a pre-tax benefit rather than a post-tax benefit. So it created an incentive-
- PAPeter Attia
Yep
- SSDr. Saum Sutaria
... for employer-sponsored insurance to grow, and now, of course, ultimately become the dominant form of which people procure insurance today outside of government.
- PAPeter Attia
What's the approximate cutoff in, um, in, um, company size at which point it makes sense to self-insure, which is what you're describing?
- SSDr. Saum Sutaria
Oh, I think it's... I mean, to your point, it's mostly larger companies that do that, but, you know, the definition of large isn't that large. I mean, there are entities-
- PAPeter Attia
500 people?
- SSDr. Saum Sutaria
Yeah, there are entities with less than 500 employees that self-insure at times. Not that common.
- PAPeter Attia
Okay.
- SSDr. Saum Sutaria
But certainly as you get above that level, it makes sense.
- PAPeter Attia
Okay.
- SSDr. Saum Sutaria
Now, you put the, put, let's for a second put the federal spending in context, right? I mean, close to, with the direct and the tax in-kind contribution to healthcare that the federal government is making, you're getting close to 2 trillion, $1.8, $2 trillion. Defense spending, just, let's just put that in context. That's about a trillion. Social Security, 1.2 trillion.
- PAPeter Attia
And to be clear, Social Security doesn't come out of tax revenue directly. That's a-
- 16:39 – 20:31
Huge growth & price impact after transition from out-of-pocket payments to the modern 3rd party payer model
- PAPeter Attia
Okay. So with the that's where we are today, let's go back. It's 1950. What i- what is, w- someone comes home, you know, it's late '40s, early '50s.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
The, the US is on top of the world. We're, we're the greatest country in the world. Our GDP as a percentage of global GDP has never been higher and may never be higher again. In fact, even today, by the way, I just looked this up 'cause I was so interested.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
If you look at the percentage of global GDP that is the US is today, it's, quote, "only 20 to 25%," which is still staggering.
- SSDr. Saum Sutaria
Staggering, yeah.
- PAPeter Attia
It was close to 40% post-World War II, right? So what's happened over the last 20 years is China's GDP has expanded so much that as much as we continue to grow, our relative share has gone down. So we are economically the, the, we've never been more dominant than we were post-World War II. What is true of healthcare? How does a person take care of themselves?
- SSDr. Saum Sutaria
Yeah, and the one, the one piece of context I would add to that introduction is that at the same time, the US economy has grown robustly since then.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
So proportionally-
- PAPeter Attia
It's amazing.
- SSDr. Saum Sutaria
Exactly, and I think that's an important factor in affordability, which is had the US economy stagnated and others grown, this affordability question would be a very different question than what we've seen happen, which is the US economy has grown incredibly robustly. But if you go back to the 1950s, and, and by the way, this is a global phenomenon. In and around the late '40s and let's say into the late 1950s, in many places, significant investments in social welfare programs in healthcare were made. So we'll talk about the US, but just as context, the NHS in the UK was created in 1948, okay? So the systems that were designed to increase coverage originated in that timeframe, roughly. Now, for us, it was 1965 when Medicare and Medicaid, you know, came into being, but it was somewhere in that range. So you go back to the 1950s I mean, first of all, we were spending less than 5% of GDP on healthcare, okay? I mean, as again, put that in context versus 17 and a half.
- PAPeter Attia
Again, just remind everybody, we're close to, yeah, we're, we're almost 20 at this point.
- SSDr. Saum Sutaria
Almost 20-
- PAPeter Attia
Yep
- SSDr. Saum Sutaria
... from that perspective. More than half of those dollars were spent out of pocket, meaning you went to the doctor and you paid your bill.
- PAPeter Attia
Which is today 25%.
- SSDr. Saum Sutaria
Which is today 25%, and actually, if you look at direct expenditures where the dollars, some of the dollars that you're putting in-
- PAPeter Attia
Are going to the premium
- SSDr. Saum Sutaria
... are going to cover your insurance premium-
- PAPeter Attia
Yep
- SSDr. Saum Sutaria
... it's really 15%. So your direct exposure, what you see and feel in terms of what you're spending on healthcare, is down to 15%. That's important because the socialization of coverage of costs has made the American consumer less sensitive to the price points that they're seeing for everything.
- PAPeter Attia
Mm-hmm.
- SSDr. Saum Sutaria
For drugs, for doctor's offices, for hospitalizations, et cetera. The other thing that's interesting is today, that means 85% of healthcare expenditures are covered by a third party, right? Whereas it used to be about 50%. So again, that sensitization phenomenon is real. The federal government contributed about, say, 12 and a half percent, uh, to expenditures back then. Today, it's north of 35%, right? I mean, we've already been through that. When you add up direct spend plus tax benefits and other things that, you know, lost taxes for the federal government, et cetera, when you look at that, you're about a third of the expenditure being the federal government. So the rise of the federal government's role in healthcare has been material and almost as rapid as the rise in healthcare costs from that perspective. So it's a very different system of consumption. Now, you could ask why.
- 20:31 – 26:48
US healthcare system vs other developed nations
- PAPeter Attia
Yeah, I was just about to say, do we have a sense historically why, as the NHS is coming, uh, into its existence in the UK, and as most developed nations are developing systems that look far more like the NHS than what we've done, was there something about our geography being much more vast than, say, you know, England was in the 1940s that, that, that led itself to this? Was it the s- nature of states' rights versus, uh, federal power? Like, what, what was the difference?
- SSDr. Saum Sutaria
Yeah, I think there are all kinds of things in the ecosystem, including geographic diversity, state versus federal rights, and even fundamentally the drive that the American consumer has in determining their own outcome. And if you look at our system today, much of its construct is based on a desire for consumer choice.
- PAPeter Attia
Mm-hmm.
- SSDr. Saum Sutaria
Okay? Many of these, these programs, these coverage programs, or some would say welfare programs that evolved, like Medicare and Medicaid, were designed to solve some substantial problems. So if you go back, what, what happened at that time? Two things happened in the 1950s. One was there was a significant commitment to investment in hospital capacity at the time. I mean, there were people in America, not just rural, but suburban, that did not have easy access to acute hospitalization, and the technology and ability to intervene and save lives in that setting was improving significantly, and I think at the time, there was a belief that it wasn't fair or equitable that that access wouldn't exist. That's called the Hill-Burton Act. You referred to it earlier, which, you know, if I think about it in simple terms, it guaranteed a hospital within every, for, for-
- PAPeter Attia
10 miles or something
- SSDr. Saum Sutaria
... 10 or 15 miles of every American in concept, right? And that's what happened, and that, that legislation drove our thinking in terms of access, you know, all the way until it expired in, in, you know, close to 2000, 1997, if I recall, from that perspective. So we made a massive investment in infrastructure from that perspective to provide people access, okay? And that, that's important. The second thing that happened, of course, is that by the time you were in the 1960s, there really wasn't a coverage mechanism for seniors. I mean, there was patchwork stuff, and there wasn't really a coverage mechanism for those with less means, you know, what we today call Medicaid. And it got to the point, especially with the importance of the seniors' power, not only of the purse, but from a political standpoint, where on average, seniors were spending a quarter of their retirement income from Social Security on healthcare. That wasn't sustainable. So they neither had consistent coverage, it was inequitable, and on average, a quarter of the Social Security check was being spent on healthcare. And so why Medicare and, and ultimately Medicaid associated with it was you had a country whose economy was growing rapidly. We could afford to take care of our seniors, and that was the decision at the time, and it was met with great support, right, obviously at the time. And so you created a system in which that coverage existed, and therefore the federal government's expenditure jumped up significantly.
- PAPeter Attia
Now, why did we not do with Medicare what was done with Social Security? In other words, uh, my understanding, which again, I'm embarrassed to say how little I understand this, but my understanding is Social Security is funded directly. It is not a budget line item. So the, when I pay my Social Security on my paycheck, it's directly going to pay somebody, correct? It's not like building up a war chest that the government has to use to be paying down in the future. But s- Medicare works not the way Social Security does. Why was... But I still make a Medicare payment every month. So in other words, why haven't we at least been able to eliminate the challenge of Medicare and make it more like Social Security?
- SSDr. Saum Sutaria
Yeah. Well, we do pay Medicare taxes today, right?
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
I mean, now there are special taxes to help fund Medicare, but it's really, it's really a sol- it's a solvency issue.
- PAPeter Attia
But the problem is then it's a, then, but then it, well, then it's a fungibility issue as well.
- SSDr. Saum Sutaria
Yeah, but, but hindsight's-
- PAPeter Attia
You can use a Medicare tax to do something else.
- SSDr. Saum Sutaria
Absolutely. In hindsight's a hu- you know, 100% clear. If you think about when the legislation was put in, I'd say 1950, we were like four and a half ... percent of GDP in healthcare. At the time Medicare came about in 1965, that number was in the mid-sixes, mid to upper sixes, okay, at best. So who would've guessed that it would've risen to 17, 18, you know, potentially in the future, 20%? I, I think well-intended ... I mean, the US healthcare system in many ways is a story, an optimistic story of well-intended policies that now are questioned based upon the way the expenditures have increased.
- PAPeter Attia
Hmm.
- SSDr. Saum Sutaria
There's another thing that's important to understand, which is as the US healthcare expenditures increase as a percent of GDP, so did the rest of the developed world, right? So every developed nation that put in place programs, their version of Medicare or Medicaid, I understand more state-run than privately run, their expenditures increased, right? They started like us in the fours, and they've landed in the 11 to 12% range. We've just accelerated-
- PAPeter Attia
Yep
- SSDr. Saum Sutaria
... up to 17, 18%. Think about it this way. From that time forward, the US economy relative to the healthcare economy, the healthcare economy has grown roughly 2% per year faster than-
- PAPeter Attia
Than the US economy, yep
- SSDr. Saum Sutaria
... the US economy, and the US economy has grown robustly, better than the rest of the world. And so that's why the expenditures have gotten so high, and there have been periods where that's been slower, and there have been periods where that's been faster. Every time there's a new coverage event, Medicare or Medicaid, you know, some of what happened with the Medicare Modernization Act in, in 2000, we'll get into that when we talk about drug costs, and then obviously the Affordable Care Act, which created significantly more coverage, that rate of increase for healthcare expenditures relative to GDP growth has widened.
- 26:48 – 31:11
Medicare & Medicaid overview
- PAPeter Attia
Let's, um, maybe we, we're taking some things for granted here. Uh, just define, tell people what CMS is, what Medicare and Medicaid actually do. Who do they cover? How do they work?
- SSDr. Saum Sutaria
Ah, sure.
- PAPeter Attia
Yep.
- SSDr. Saum Sutaria
Yeah, yeah. Well, CMS, Center for Medicare and Medicaid Services as it's called, um, Medicare covers people over the age of 65 and a bunch of special categories of people with severe chronic illness, take dialysis as an example, uh, that it might be hard to find coverage on the private market over a long period of time given their needs. Okay, so it is a, it is more than what I would describe as a safety net program. It's, it's a coverage program for people over the age of 65.
- PAPeter Attia
And how, how long does one have to have paid into it to qualify for it?
- SSDr. Saum Sutaria
Everybody qualifies for Medicare at the age of 65.
- PAPeter Attia
It's not like Social Security where you have to-
- SSDr. Saum Sutaria
It's not like Social Security.
- PAPeter Attia
Got it.
- SSDr. Saum Sutaria
The benefit doesn't vary based upon-
- PAPeter Attia
Anyone who is a US citizen will qualify-
- SSDr. Saum Sutaria
That's right
- PAPeter Attia
... regardless.
- SSDr. Saum Sutaria
And so Medicare, a- another interesting piece of context, you know, think about life expectancy, right? I mean, we're gonna get into life-
- PAPeter Attia
Yes. [laughs]
- SSDr. Saum Sutaria
... expectancy differences in the US. I mean, the fact is-
- PAPeter Attia
What was life expectancy in 1965?
- SSDr. Saum Sutaria
Yeah, and I don't know what the exact number was-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... in 1950 or '65. It wasn't what it is today.
- PAPeter Attia
Right.
- SSDr. Saum Sutaria
Right? And, and the other thing you would say is that, look, I think you would agree, over the last hundred years in the broad context and scheme of things, life expectancy in the developed world has improved remarkably.
- PAPeter Attia
It's about a 2X.
- SSDr. Saum Sutaria
Remarkably. 2X. And yes, there are now differences at the top of the spectrum between the US and others, which we'll get into, but this is in the context of a very, very rapid improvement in overall life expectancy. Health status may be a different thing-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... and I think that's also something, you know, to talk about. What really drove-
- PAPeter Attia
And Medicaid, just to round that out.
- SSDr. Saum Sutaria
Yeah. Okay, so Medicaid, let's, let's ... Medicaid is a safety net program, right? It is a program designed for individuals below different definitions state by state of certain measures of federal poverty level, and the idea behind the coverage is that for those people, not only are their needs unique, but their ability to access healthcare services can be challenged. And the benefit of having programs like Medicaid is it increases, I won't say it makes it entirely equitable, it increases their ability to access the healthcare system in a reasonable manner with a coverage system that avoids taking those least fortunate down a path of severe medical debt that would be overwhelming to their personal financial situation. That's how I think of Medicaid.
- PAPeter Attia
Can you, do you have a ballpark sense of where those cutoffs are in v- like in California, for example, what-
- SSDr. Saum Sutaria
Yeah, I mean, the cutoffs range, you know, somewhere between 100 and 200% plus of federal poverty level, and we'll, we'll get into maybe with-
- 31:11 – 36:00
Why the US kept a employer-sponsored insurance system rather than pursue universal healthcare
- SSDr. Saum Sutaria
be offset. So, okay, that, that's helpful bringing back to Medicare and Medicaid. So if you really look at, you have these programs that came into play, so what, what drove the rapid expansion? 'Cause, like, another view of the world would've been that you had this coverage, the healthcare system stood still, and maybe the costs increased, but they didn't increase beyond 6, 7, 8% of, of GDP.
- PAPeter Attia
Now let me ask you a question. I'm sorry-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... to interrupt you, and, and you can tell me to just punt this and come back to it. I wanna go back to the 1960s.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
We go to the great lengths to create Medicare and Medicaid.
- SSDr. Saum Sutaria
Mm-hmm.
- PAPeter Attia
Why did we not at that moment say, "Hey, why don't we just roll this out for everybody, just as the NHS has done?" Why did we instead continue to keep two completely different worlds, which is we have a government-funded system for people, uh, of low socioeconomic status, we have a government-funded system for people over 65-
- SSDr. Saum Sutaria
Right
- PAPeter Attia
... or with very chronic conditions, but for everybody else, we're gonna do this crazy thing where your employer takes care of you?
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
What, what was that decision-making?
- SSDr. Saum Sutaria
Well, I think the, the, the employer-sponsored insurance system was already entrenched, right?
- PAPeter Attia
I see.
- SSDr. Saum Sutaria
Because of the tax benefits that existed-
- PAPeter Attia
I see. So that was a decade earlier.
- SSDr. Saum Sutaria
That is right.
- PAPeter Attia
I see.
- SSDr. Saum Sutaria
Yes. And so that was entrenched. And, and why does that matter, right? I think this is an important point about our belief in consumerism and choice. The marketplace provides choice in a way that many of the nationalized healthcare systems that exist in other countries don't, okay? And if you really look at many of those other countries, while they have a nationalized healthcare system that purportedly has universal coverage, they also have a private system, no differently than ours, where people with more means can procure better insurance and better access and a private healthcare system, et cetera. It's just not as widespread-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... as it is here. In this country, there was a belief that was institutionalized by incentives that employer-sponsored insurance was working. And remember, at that time, it wasn't that expensive, okay? Meaning employers often covered 100% of the premium, so the employee did not end up having to contribute like they do today to the cost of their insurance as an employee that they're receiving for their, from their employer.
- PAPeter Attia
Mm.
- SSDr. Saum Sutaria
And that's, that, you know, again, it, it was a comfortable system, if you imagine, at the time. And based upon the system, you got choice, right? Which product do I want? What kind of network do I want? Et cetera. What happened as a result of that expanding, especially employer-sponsored insurance expanding, is that insurance moved from being an individual product based upon your or my individual risk to group insurance, right? What are you doing with employer-sponsored insurance? You're aggregating all the employees and all their risk, and you're socializing that risk among the whole group and saying, "Look, in order to protect each of you individually, we're gonna share the risk as a group. We're gonna buy the insurance collectively, and it'll spread the risk among us to avoid individual catastrophic loss from a healthcare perspective, expenditure perspective," right? That's what we did. We socialized in group insurance. That was a big move in the insurance industry as employer-sponsored insurance took off. Of course, Medicare, the concept of Medicare itself, by bringing all seniors together, was also socialization of healthcare cost across all seniors. Not all seniors spend equivalently, as you can imagine. So that was one. What happened on the other side is absolutely a story of incredible innovation over the last 50 to 75 years in healthcare, okay? And, and we can all debate what's resulted from that, but development and maturity of the pharmaceutical industry, development and maturity of the medical device industry, innovation in procedures and services that have allowed people to have invasive procedures in manners that used to hospitalize people for three weeks and now it could be three days, and in some cases, if you're having a knee or hip replaced, it's at best three hours in and out the door, is amazing, right? And yet the impact of that, along with the socialization of healthcare costs, and therefore removing the individual from understanding or feeling that cost directly because they're insured, together was a virtuous cycle that just drove up consumption,
- 36:00 – 45:00
Evolution of insurance: from catastrophic coverage to chronic disease management
- SSDr. Saum Sutaria
right? I'm not an economist, but, you know, people would look at this and say, "Okay, there's moral hazard," and concepts like that that exist with an insurance system like that. And we should spend a minute on, you know, what was insurance designed for back then and what is it now, right? And-
- PAPeter Attia
Yeah, I, I, I loved your analogy there. I've told this story before on the podcast, but assuming someone's listening who hasn't heard it, it's, it's a great example. So I had a friend who, um, [lip smack] uh, he's an American, but he lived and worked most of the year in, uh, Riyadh-
- SSDr. Saum Sutaria
Okay
- PAPeter Attia
... in Saudi Arabia. And I was out visiting him in Saudi Arabia, this is 15 years ago. And [clear throat] [lip smack] um, we're at his flat, and he was... It was in the spring, and he was just kinda getting ready to head back to DC, where he lived. Um, and so I said to him, I said, "God, you know, I can only imagine how hot it gets in Riyadh in the summer. So if you leave here in May, you come back in September, how hot is your apartment when you get back?"
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Just out of curiosity.
- SSDr. Saum Sutaria
Right.
- PAPeter Attia
Like, we're talking, I was like, "Is it, you know, a sauna?" And he goes, "No, 70 degrees." I'm like, "What do you mean?" He goes, "I leave the air conditioning on the whole summer." I'm like, "You leave your house and leave the air conditioning on for four months?" He goes, "Yeah." I go, "That's crazy." He goes, "I'm not paying for it."
- SSDr. Saum Sutaria
Right.
- PAPeter Attia
Like, the government subsidizes all of our energy costs here. I pay the equivalent of a few cents per, you know, whatever it is. Like, it was-
- SSDr. Saum Sutaria
Right
- PAPeter Attia
... he pays a few dollars over the summer to air condition his place. This is the exact point. When you don't have skin in the game, you can't make rational economic decisions.
- SSDr. Saum Sutaria
Yeah, and I think, you know, if you look-
- PAPeter Attia
Or, I mean, I shouldn't say that. It's a rational economic decision for him, but you can't make decisions that are, that are wise in the context-
- SSDr. Saum Sutaria
At the system level
- PAPeter Attia
... of, of, of resources. Yeah.
- SSDr. Saum Sutaria
Yeah. And I think, I think that, you know, if you look at the concept of insurance, I mean, insurance is for random, infrequent, and unpredictable events, okay? And when the primary role of insurance was to prevent catastrophic loss if you had a heart attack or you had an accident or you had-
- PAPeter Attia
Or you got cancer
- SSDr. Saum Sutaria
... an appendicitis or, yes, or you had a cancer, which back in those days was less of a chronic disease, the concept of insurance made some sense, right? Now, if you look at what drives expenditures from a health status standpoint, it's a lot of chronic illness, and in many cases it's multiple chronic illness. You know, we'll get into obesity, diabetes, heart disease, lung disease. E- even, you know, uh, the innovation in HIV care in this country, AIDS has become a chronic disease. Cancer is becoming more of a chronic disease. We try to insure somewhat uninsurable events, right? You don't wake up every morning and think, "Oh, I've got car insurance. Let me go figure out how to use my car insurance to get an oil change." But when we think about we're gonna go to the doctor to get a preventative checkup or refill my regular diabetes medicine, which I'm gonna be on for the rest of my life, we think insurance. But it's not really an insurable event. Insurance today is a discount card. It's not insurance in healthcare, like insurance traditionally would be in other parts of your life where you procure insurance for random, infrequent, and unpredictable events.
- PAPeter Attia
Is this manifested in the financials? So if you, if you look at the insurance companies and you strip out their ASO business, the, that's the reference, the part I referenced earlier about the administrative part-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... where they administer insurance to the, uh, employers, but if you look at the part of their book of business where they bear the risk-
- SSDr. Saum Sutaria
Yes
- PAPeter Attia
... do they look like Travelers? Do they look like Geico? Do they look like the types of companies that Warren Buffett is obs- is obsessed with-
- SSDr. Saum Sutaria
Right
- PAPeter Attia
... because of float and, or do they just totally function different from a-
- SSDr. Saum Sutaria
No, no, they function differently from that perspective. I mean, obviously they have a tremendous amount of expertise in managing risk, but the nature of that risk they understand isn't random, infrequent, and unpredictable events. So-
- PAPeter Attia
It's not car insurance.
- SSDr. Saum Sutaria
Absolutely.
- PAPeter Attia
It's not life ac- it's not life, it's not death, it's not disability.
- 45:00 – 50:07
Challenge of managing healthcare costs while expanding access & demand for chronic illness care
- SSDr. Saum Sutaria
significantly. One of the things that comes up is, well, what, what have the industry participants done to actually help with this problem? And, and so, and the argument will always get made, well, it's grown so quickly they've done nothing, and I don't think that's even remotely true. Sadly, I think you could be in a situation where, where expenditures would've grown even faster. So think about this. It, from a hospitalization perspective, the number of bed days per thousand, so how many hospital days does a popu- per thousand population, have fallen by a half since 1980, okay? The number of physicians per thousand people has more than doubled. The industry has added significant physician capacity in order to help with access. Do we have shortages still in certain areas and cer-
- PAPeter Attia
Hmm
- SSDr. Saum Sutaria
Of course we do, but the number of physicians has doubled from about one and a half per thousand to 2.8 per thousand. So the industry has expanded its capacity. The insurance companies, through their managed care programs, have demonstrated the ability to manage cost if the consumer were accepting of some of that management. That, that's, that's a different issue to get into, which is how to do managed care in a way where it doesn't reduce and frustrate consumers or physicians with respect to choice and professional freedom. But make no mistake about it, tight managed care has controlled costs for a short period of time until there's been a bit of a revolt in terms of that. And product choice within insurance companies has created choice. So if you go back, you know, you had Medicare for a very long time. Sometime around the late '90s, 2000, Medicare Advantage really took off. Why, why did Medicare Advantage get created? Medicare Advantage was a way to, was a way to create product and benefit choice for seniors that wasn't just traditional Medicare, right? They'd have a choice.
- PAPeter Attia
It's sort of the equivalent of the private insurance in the NHS system, where you're, you get the state-sponsored thing, but you want more choice.
- SSDr. Saum Sutaria
Right, and the government gave an incentive. I mean, I think that payments to private insurers as an incentive to get into the Medicare space were almost 115% of regular Medicare expenditures 'cause they were trying to incentivize bringing people into the system, privatizing part of the system, providing better benefits, giving them choice, and ultimately have that managed care hopefully reduce cost. And the jury's out on that, right, in terms of whether it's really reduced cost or shifted cost or whatever. But it is a highly functional private system built on government dollars called Medicare Advantage, and increasingly managed Medicaid is doing the same thing. So the industry participants have done a lot in many ways over the last, in particular, 30 years in this space to try to curb costs without necessarily reducing this fundamental driver that defines our healthcare system, which is the desire for immediate access and choice. And, and that defines our system is that desire for immediate access and choice.
- PAPeter Attia
I would ad- I would even add another point to that, um, 'cause we're gonna go deeper on those two. But, you know, you even mentioned that the number of physicians has, has doubled basically over the last 40 years while the number of hospital bed days has fallen in half.
- SSDr. Saum Sutaria
Yeah, and the number of hospitals has declined.
- PAPeter Attia
The other thing to keep in mind is we, physicians in this country spend infinitely more than in any other country to become educated, and therefore the debt that they assume upon completion is also a big part of what drives presumably we must have the highest physician salaries in this country.
- SSDr. Saum Sutaria
Yeah, the US has the highest physician salaries relative to other countries, but I would tell you that physician compensation on a real basis since the 1990s has been flat or declining. I mean, that is a-
- PAPeter Attia
Yep
- SSDr. Saum Sutaria
... that is a stunning fact. It grew rapidly from the 1950s roughly until the early '90s. But since then, physician compensation has been flat or in, in many cases declining. And You know, that has a lot of implications given the medical, uh, training debt that you're describing about our ability to continue to grow the pool of physicians to meet the growing demand of healthcare services as the population is still aging, but also aging with chronic illness so that their needs are more intensive rather than not. And I'm not even yet getting into mental health, which has been an area that's been under-invested in for the better part of three or four generations, which, you know, as we now realize, actually costs a lot, not just for mental health, but the impact on physical health, which drives our healthcare costs, especially in the, in the context of chronic illness.
- PAPeter Attia
We've been talking a lot about choice, but is it, is it worth maybe spending a minute to explain to
- 50:07 – 58:26
Balancing cost, choice, & access: US healthcare system vs Canada
- PAPeter Attia
people some of the terms that I'm sure they've heard-
- SSDr. Saum Sutaria
Sure
- PAPeter Attia
... but might not fully understand? Like, what's a PPO? What's an HMO? What's value-based care? How does Kaiser work? Like, can you explain-
- SSDr. Saum Sutaria
Sure
- PAPeter Attia
... what those things are so that people understand when they're making their, uh, selection at, uh-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... open enrollment, they, they get a sense of what those things mean.
- SSDr. Saum Sutaria
The way I would think about a PPO plan is it's one in which you're procuring insurance where you have relatively open network choice, okay? So there may be a preferred network where you get somewhat of a discount, but you have the choice to go wherever you want, however you want, et cetera. HMO, or Health Management Organization, is one in which that choice is narrowed. You're making a choice upfront to come into a program with less options such that the penalty for going out of that set of options is high and theoretically comes at a lower cost, okay? And then you have systems within those that kind of operate in the frame of one of those two models, if you will. In the US, the PPO business has been growing significantly faster than the HMO business back to the point-
- PAPeter Attia
Choice
- SSDr. Saum Sutaria
... around choice, right? It's tr- it's, uh, let's use the right word. It's more important than cost right now and has been more important than cost to consumers. That's not to say that people aren't feeling the costs of healthcare increasing and the burden of healthcare costs increasing in the way that they're getting their healthcare, but they're choosing PPO more than not. The marketplace is speaking. Uh, you know, the simple, the simple answer on an example like Kaiser, Kaiser is largely a closed network health management organization where what you're doing is you're buying an insurance product through Kaiser. It's a not-for-profit that you're buying an insurance product through Kaiser, and you're agreeing to stay within their network of hospitals, doctors, et cetera. They have a physician group that is largely bilaterally aligned to them on an exclusive basis that's a for-profit entity, the physician group. And the two of them together produce a product that ought to cover the vast majority of your healthcare needs. And in theory, based upon that integration of care, you either get lower cost or better outcomes or both. And again, I think the jury, from a long-term perspective relative to other models, is out. But it's innovative, and it's worked in some places really, really well.
- PAPeter Attia
And they don't try to cover everything, right? So if you have a child that's born with the most obscure congenital cardiovascular, uh, malformation, they might just say, "You know what? That's something we will just send up to UCSF because they've got the right person there."
- SSDr. Saum Sutaria
I mean, my personal example, my mother had a rare form of brain cancer. We had terrific oncologists at Kaiser who were incredibly dedicated and knowledgeable about oncologic care, who, without hesitation, sought expertise from UCSF when they needed it for the more sophisticated parts of her care, including letting her go there. So I, my personal belief from personal experience is that clinicians do make a lot of the choices at Kaiser. They get knocked sometimes, uh, that somehow there's a corporation sitting there telling them what to do. And yes, it is managed care, and yes, there are restrictions on, in some ways, how they construct their system. But when you have an esoteric problem, no one stops a physician from sending you to the right place there, in my experience. So, and, and all systems that are in managed care have out-of-network expenditure for rare, rare things. But it's, I think that's a really important point and worth bringing up, um, from that perspective. But you have these systems then that work in certain places and don't work in other places that effectively. Look, the vast majority of the country today, from an employer-sponsored standpoint, is working in some form or another of a PPO system where people have choice 'cause that's what they want. And again, that choice comes with a cost as, as we've talked about, right? And that, that maybe explains some of the differences, um, between us and other countries.
- PAPeter Attia
I was just gonna sort of say, you know, I grew up in Canada, and I still have experience with the Canadian healthcare system because my entire family is there. And I don't, I don't know if you have experience there y- you know, previously, 'cause I know at McKinsey you did a lot of work for different provinces and stuff like that and, and obviously through the NHS and here, here's my take and, and again, it's so anecdotal that I'm curious if it's reflective. Um, my take is that if, if, if you needed heart surgery, you know, if you need a, you know, a aortic valve replacement and, uh, you know, a root repair and a CABG, the, there is a surgeon in Canada that's just as good as the surgeon in the US, meaning the top 10% of the surgeons in Canada and the top 10% of the surgeons in the US are gonna be indistinguishable in that regard. You, you're really going to get great care in that regard. The difference is you're gonna wait a heck of a lot longer. The hospital experience could be entirely different. Um Obviously you're, you know, you're not paying for it
- SSDr. Saum Sutaria
Well, I think you have to be careful about that. You're paying more through tax.
- PAPeter Attia
You're paying for it, of course, through your taxes.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Yes. Yeah, yeah, yeah. You're not paying through it. You're not... It's not coming out of your wages directly.
- SSDr. Saum Sutaria
Right.
- PAPeter Attia
Um, the, the, and you're not paying out of pocket-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... to your point. Again, you're shielded, you're more shielded from the cost. Um, but boy, if you're dealing with something like you've injured your knee and you need an MRI, like the difference in how long you will wait to get that is, it's, it's, it's, it's immense, right?
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
The, the, the, the access, the, the speed, the choice, the access is really what goes down. The quality is not really the thing that has, at least in my experience, been degraded in a, in a system like Canada.
- SSDr. Saum Sutaria
I think there are excellent physicians around the world in developed countries all over the place. There's no question about that, and, and I would, I would tend to agree with your description of the top physicians in both places. I would, I would draw one distinction, which is I think emergency care is accessible on an emergent, immediate basis in most developed countries. Now, the interventions that they may take, how interventional it may be, how aggressive they may be using the modern, most modern technologies or modern devices or whatever, you know, may be different, but emergency care is available, right? If you had a heart attack immediately in Canada, went to the emergency room-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... you're gonna get treated very well. I think where things change is the elective care.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
Right? And by the way, heart surgery can be an elective procedure.
- PAPeter Attia
That's right.
- SSDr. Saum Sutaria
You might think of elective as, you know, cosmetic surgery. No. I mean, a hip replacement, a knee replacement when you can't walk, a cataract replacement when you're half blind, or heart surgery can be elective.
- 58:26 – 1:08:36
US role in pharmaceutical innovation, impact on drug pricing, & the potential effects of price controls on innovation & healthcare costs
- SSDr. Saum Sutaria
The thing that's different in the United States at scale that I think is interesting is not just the focus on consumer choice, but the United States has become comfortable in healthcare being the driver and leader of innovation. So in healthcare services, that is the proliferation of academic health science centers that conduct research, much of which used to be supported exclusively by the NIH, which is a brilliant construct over the history of the United States, to really fund basic research and innovation, now clinical research and innovation, and increasingly funded through private industry. And that has driven a large proportion of the innovation in the world, like the science that supports pharmaceutical development, for example, comes out of US academic health science centers, right? Largely speaking. And then you have US-based pharmaceutical companies that develop 75, 80% of the world's pharmaceuticals and, you know, you can keep going, and we can get into drug costs. But it is a unique feature of this country that we have chosen to make that investment for the rest of the world. Um, you know, as I said the other day, it's no differently than we've seems to have made that choice in defense, right? And then there are differences between the two.
- PAPeter Attia
But this i- and this is what I wanna come back to.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Right? So we're gonna go into PBMs 'cause I'm amazed we are as far into this podcast as we are, and we haven't discussed PBMs, so we're gonna get right to it for the people who are listening to us going, "How have you not talked about drugs yet?"
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
But here's the fundamental difference. You made a great point, right? So post-World War II, Bretton Woods Accord, the US makes a deal with the rest of the world effectively, which says, "There's a cold war coming, and if you choose to be our ally, we will provide you security. Specifically through our Navy, we will ensure that your ships can pass freely throughout this entire world. We will not plant a flag on your soil. Um, we might use military base, right? We're not, we're not g- we're not here to be conquerors."
- SSDr. Saum Sutaria
Yes.
- PAPeter Attia
"We're not here to be emperors. Um, but if you pick our side, we will assure your security." And, um, and so that's an example of how we greatly subsidized defense for the world. Um, but we got something out of it. Now, when we are subsidizing drug costs for the rest of the world, because as you point out, we develop all the drugs, it's not like we get different drugs than everybody else. Everybody else in the world gets the same drugs we developed. Everywhere else in the world has price controls that lower the cost of that, and in true economic fashion, it's sorta like somebody is squeezing down on the tube of toothpaste. All that toothpaste is exploding in the United States with drug costs.
- SSDr. Saum Sutaria
Right.
- PAPeter Attia
So the question becomes, what are we getting for subsidizing the rest of the world's drug price?
- SSDr. Saum Sutaria
Yeah. Well, first, I think you gotta look at this in the context of when it developed, right? You're back to the question of could anybody have predicted That we were gonna go from 4%, 5% of GDP to 17? Could anybody have predicted that the drugs that were gonna be developed and the advances in science would result in multiple therapies for common diseases and orphan diseases, which are rare diseases, that might cost over a million dollars a year?
- PAPeter Attia
Right. Right.
- SSDr. Saum Sutaria
Could anybody have predicted that? I think the system as it was set up, especially because drug development at that time was new, in particular small molecule development, and then somewhere in the late '70s, early '80s, you had the advent of biologics, which then grew into commercial products, especially in the late... in the mid '90s, you know, raised the bar on innovation pretty significantly. And also, everything that happened with respect to genetics opened up a whole broad range of therapeutics that didn't really exist before when you were just taking small molecules and at scale testing them against targets.
- PAPeter Attia
Right.
- SSDr. Saum Sutaria
Now, the cost of drug development went way up. Therefore, the price of drugs went way up, at least in the United States where you have a market. Now, you end up in a situation, if you just fast-forward to what people are thinking about today, especially 'cause it's all over the news, you got GLP drugs that may have broad benefit, okay, for the population in one form or another. Why? Fundamentally, the drugs may be effective, but, but it's because our health status is poor. In a country where the health status wasn't so poor as it is in the United States, which chronic illness, the cost of those GLP drugs might not be projected to be so high 'cause less people would need them, right? And we can get into that a little bit around healthcare policy and what the national objectives for health would be. But you have common drugs now for common conditions that are extraordinarily expensive, right? I mean, there are alternatives that are much cheaper that might do a significant fraction, if not for many people, all of the job. Metformin would be a simple generic example that might take care of many of those things for people at a price point that's a thousandth of what... But nevertheless, you have this innovation, and you have also a culture that's obsessed with things like medical approaches to weight loss that, you know, has proven to be difficult to achieve through other, other means.
- PAPeter Attia
Was there ever a place when the U.S., um... Like, what, what's the closest the U.S. has come to trying to enforce some measure of price control in pharma in the U.S.?
- SSDr. Saum Sutaria
Well, remember, there's, there's one thing [chuckles] that's important to understand is that the Medicare Modernization Act that was passed in circa 2000, okay, which we've talked about some of the other aspects of it, forbade HHS from negotiating for drug, for drugs as an entity as CMS. I mean, we legislated that.
- PAPeter Attia
Right. We gave away negotiating power.
- SSDr. Saum Sutaria
Yes. The Inflation Reduction Act, which was passed in the Biden administration, has cracked that door open a bit for negotiation because the dynamics of drug pricing, the nature of the drugs, the widespread app- applicability of the drugs-
- PAPeter Attia
Sorry, what-- Just go back to 2000.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Is it... Did, did, did the U.S. government, at least for Medicare, say, "We will resign the right to ever negotiate"? Was that a concession to phar-
- SSDr. Saum Sutaria
Explicitly.
- PAPeter Attia
Was that a concession to pharma to get something else?
- SSDr. Saum Sutaria
Well, how it came about in the lobby, I don't know the details, right? I mean, I'm sure there was... But, but it was an absolute direct concession that forbade HHS from negotiating this.
- PAPeter Attia
Yes, but what did they get in return for that concession?
- SSDr. Saum Sutaria
Well, there were a whole set of other things that were part of the Medicare Modernization Act that we talked about, like Medicare Advantage was created and scaled up, which created a way to potentially have managed care maybe manage the utilization of drugs and therefore maybe curb the expenditures, create formularies that might encourage people to use generics rather than branded drugs-
- PAPeter Attia
[laughs]
- SSDr. Saum Sutaria
... if they were equivalent. There were other mechanisms-
- PAPeter Attia
Mm-hmm
- 1:08:36 – 1:15:26
How misaligned incentives have driven up drug prices in the US
- PAPeter Attia
That's something that exists virtually nowhere else. Of the 85% that, uh, of that $4 trillion that's not administration, roughly a third of that is drugs and devices, and more of that is drugs than devices.
- SSDr. Saum Sutaria
Sure.
- PAPeter Attia
So drugs are a really, really, really expensive part of the US healthcare system. It also should be patently clear to anybody listening to us right now that we, in this country, are singularly paying infinitely more for every given drug than our peers are elsewhere for the exact same drug. Let us now talk about the elephant in the room, the blessed PBM.
- SSDr. Saum Sutaria
Oh, PBMs. Okay. So let's talk about what a PBM is, 'cause there's two issues with, uh, the PBMs that we should talk about. One is what do they do and how-
- PAPeter Attia
Yeah, what are they? Let's just explain what they are
- SSDr. Saum Sutaria
... fact about it. I'll start there.
- PAPeter Attia
Yeah, yeah.
- SSDr. Saum Sutaria
Then there's the question of who owns them and how do they work, and is that vertical integration helpful or not helpful to the system, which we can get into. But the PBMs, in essence, are organizations that formed as intermediaries between pharma companies, insurers, and pharmacies, where you get much of your medication, in order to help manage an increasingly large complexity of drugs. I mean, today there are probably 15,000 pharmaceuticals available. The PBMs were designed to do a few things: understand the market for those drugs, make formularies that were either broad or restrictive, manage benefit plans for employers who were looking to have preferred pricing on certain drugs versus other drugs, right? So they were created to try to say, "Okay, we've got a lot of expenditure here in the drug arena. The choices are complex. The number of drugs has gone up 15,000 or 16,000, whatever that number may be, and we need entities that help people make more informed decisions, in some ways at scale through employers or insurers, and in some ways at the retail pharmacy level when individuals are going to fill prescriptions." By the way, which includes things like generic substitution and things of that nature when that's appropriate and is allowed. That's what they were created to do. Okay? What did that create? It created a complex payment system, 'cause it used to be you buy a drug, the money goes to the pharma company from the pharmacy. The pharmacy buys a drug, they pay the pharma company. You know, you have a direct interaction, or you're in a hospital, you get a payment. You know, the hospital buys the drug from the pharma company, you pay them something for that drug. You administer the drug, and you get paid as part of your global fee for taking care of that patient, whatever the case may be. The PBMs came in the middle.
- PAPeter Attia
When did they show up?
- SSDr. Saum Sutaria
Well, I think the, the growth of PBMs, PBMs showed up, forms of them showed up in the '80s, but the growth of PBMs has been in the last 20, 25 years, and really has taken off recently for reasons that we'll get into about their ownership structure, if you think about it that way, um, which has brought more scrutiny to them than used to be-
- PAPeter Attia
Yep
- SSDr. Saum Sutaria
... there. You've created a system in which now money is flowing less directly, in many cases, through the PBMs. So the pharma companies may sell product, but depending on what the PBM is doing in terms of committing market share to the pharma company, the PBM may earn a rebate.
- PAPeter Attia
Hmm.
- SSDr. Saum Sutaria
Okay? So you have a rebate that the PBM can earn. Now, that rebate, the PBM may share with the insurance company or the employer who's signing up for that PBM service, because they're saving them money through that rebate. So you have this new flow of dollars. Again, the, the idea behind this was to have better formularies, better understanding, allow people to have choice. Do you want a broad formulary? Do you want a narrow formulary? Of course, incentives are incentives, and, and part of what's happened is that with a rebate structure, you can imagine incentives can exist for higher priced product to move through a PBM and pass through, and some of that being offset with rebates on both ends.
- PAPeter Attia
Yeah. So this is, this is the classic example of, and I'm sure, I don't know who said it first, but it's been said a million times: "Show me how a man gets paid, and I'll tell you exactly how he's gonna act." And, and this is, this is straight from the horse's mouth. I will not identify this individual other than to say it is the CEO of a major pharma company who shared with me that he wanted to price one of his drugs at a low level, right? He wanted to undercut similar products on the market and come in at a lower price. The PBMs flatly told him, "We will not put your drug on the formulary until you triple the price."
- SSDr. Saum Sutaria
Interesting.
- PAPeter Attia
"Don't worry, we will make it up to you with a rebate." I mean, I mean, this is, I don't even know how this is legal.
- SSDr. Saum Sutaria
[laughs]
- PAPeter Attia
Right?
- SSDr. Saum Sutaria
Wow.
- PAPeter Attia
I mean, y- you know, y- y- He, it, it just doesn't, it, it, you understand why that is happening from the incentive system. How is this legal?
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
How do these things exist?
- SSDr. Saum Sutaria
Yeah, well, I mean, I, [clears throat] I think in some ways, um, you know, it's, it's, it's what we've said about most of the US healthcare system, right? Which is well-intended, reasonably constructed structures that might have been effective in one setting, as things have changed, become less in set- less successful in this, in this setting, and economic incentives can sometimes change to drive behaviors like you're describing, which I hope is not the norm, right? Which I hope is not the norm.
- PAPeter Attia
But even if it's not as overt as a situation like that, subconsciously, what we've done is removed any incentive for a drug company to be concerned with the sticker value of the price of their drug, right? It's a meaningless entity because of these machinations and payments that you've outlined, where rebates and kickbacks completely change the economics. Again, the system was so opaque to begin with.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
You know, you've already outlined this idea where we're so uncoupled from our decisions. I don't just mean as patients, I mean as doctors. We have no earthly clue what a drug costs when we prescribe it. If I'm trying to decide to write somebody for rosuvastatin versus atorvastatin, I couldn't, it couldn't possibly enter my stream of consciousness why one of those might be 10 times more than the other.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
And yet we continue to just add unnecessary cost to a system.
- 1:15:26 – 1:23:16
Cost of innovation & choice, & sustainability of the current healthcare expenditures in the face of a shrinking workforce & aging population
- SSDr. Saum Sutaria
Well, I think you're getting at some of the more fundamental questions around what is innovation, right? So do we reward the innovation of a statin itself as the innovation, or do we reward the me-tos that come after it-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... which sometimes grow to be larger than the original statin itself?
- PAPeter Attia
Yeah, and sometimes they're better, right?
- SSDr. Saum Sutaria
And that could be a different manufacturer.
- PAPeter Attia
Tirzepatide is better than semaglutide.
- SSDr. Saum Sutaria
A- absolutely. They, they could be better.
- PAPeter Attia
Yep.
- SSDr. Saum Sutaria
But how do we reward that innovation, right? What happens oftentimes is a floor is set in terms of the reward for the initial innovation. As things get better, rather than competition with more molecules driving price down, it often drives price up because the market moves to the better and better product. I mean, this gets back to supply-side intervention in other countries, right?
- PAPeter Attia
Yeah. Which is a very interesting point. I never thought of it that way, which is how much they throttle supply in a system where demand could be unlimited and they have no control over demand.
- SSDr. Saum Sutaria
Well, I mean, some of those countries, they will just say, "Look, 90% of the benefit is accrued with simvastatin," which was one of the original drugs. You're not going to prescribe atorvastatin or rosuvastatin, right? Uh, that's just not going to happen. And so there's a limit, and you have to qualify with certain criteria that are stringent to get to that more expensive for the incremental 10% benefit. W- we don't work that way in this country, right? Physician choice around physician decision-making around those choices, and we've made the decision that we want to be able to afford that type of choice for the incrementally better drugs, sometimes better, uh, from a side effect profile standpoint, right?
- PAPeter Attia
Yeah, for sure.
- SSDr. Saum Sutaria
That, that can drive, can drive some of these decisions. We've made that decision on an individual basis rather than a population basis, and I think the point that we're talking about today is it's getting expensive, right? [chuckles] And it's getting expensive to the point where 17, 18, approaching 20% of the GDP may be okay, but the next 50 to 75 years, if that grows to 35% of the US economy, I think then you have some very, very serious arguments about how sustainable is that if the US economy doesn't grow as rapidly as it has been growing.
- PAPeter Attia
Well, now I'll bring up my, my favorite thing I've heard recently when Paul Tudor Jones was speaking with-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... with Andrew Ross Sorkin, and he, and he, he wanted to put it into just the simplest terms for why there was no rational argument why anybody should buy a US Treasury, right? Which was imagine I have $700,000 of debt. You've, you've lent me $700,000. Um, my income is $100,000 a year. So what does that mean? That means I have, he's taking that from $35 trillion of debt currently and 5 trillion of tax revenue. So my income is one-seventh my debt. [clears throat] And as you pointed out, I'm going to continue to assume 2 trillion of debt a year in perpetuity.
- SSDr. Saum Sutaria
Yep.
- PAPeter Attia
And I'm saying to you, the US bond holder, the person who's going to buy a 30-year Treasury, "I have $700,000 of debt. I make 100 grand a year. I want you to lend me 40 grand a year for the next 30 years, and I promise you at the end of 30 years, I'm gonna pay it all back." I mean, what do you have to believe for that to be true? You, you really have to believe, "I'm gonna have a remarkable growth of income or a remarkable reduction of cost somewhere along the lines."
- SSDr. Saum Sutaria
Yeah, or a devaluation of the currency. [chuckles]
- PAPeter Attia
Yeah. I'm gonna have to inflate my way out of this thing.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
And again, none of these things are desirable, but when you say healthcare costs over the next two decades could potentially go from 20% to a third, um, is it, how in the world could we imagine that the other costs contract to accommodate that?
- SSDr. Saum Sutaria
That's right, and that's, that's the issue, right? Which is that ultimately, that's a very difficult proposition to actually get your head around and believe. And in particular, I, I think we should get into the outcomes in the US to explain what we're getting for all those dollars.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
But it, you're right, it's very difficult to fathom expenditures getting to that level. Now, one optimistic point of view on healthcare expenditure growth out there is that if you just look at the aging curve of the population, in particular the, the boomers and how they're growing and even with increasing lifespan, the aging of the population in the US peaks at about 2032-ish timeframe. You know, you can look at different projections and it's... So in the next eight years, we're gonna kinda reach the peak of aging. In other words, when I say aging, the number of people will grow every year that enter the above 65 Medicare world. And that number will peak, and then will start to come down.
- PAPeter Attia
So you and I will be right there.
- SSDr. Saum Sutaria
We will be right there.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
That's right. And, and then that number will start to come down. It's not just the boomers, obviously.
- PAPeter Attia
Yeah.
- 1:23:16 – 1:31:52
Why life expectancy is lower in the US despite excelling at extending lifespan beyond 70
- PAPeter Attia
One of the things you pointed out that I was unaware of, although it totally makes sense, and we could argue it's another sort of potentially shining spot, is most people are very familiar with the fact that relative to our peers, uh, as developed nations, the US has a pretty paltry life expectancy-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... in aggregate. Um, most people can point to two things that tend to be the biggest drag on this. Uh, so the first has to do with, uh, fetal and maternal health. The second has to do with overdoses in sort of middle-aged men. And w- you know, we spent time on both of these. These are, you know, related to both access to health and deaths of despair respectively. But the point you made was, once you reach about the age of 70, your life expectancy in the US exceeds that of any other nation. [laughs]
- SSDr. Saum Sutaria
Yeah. Right.
- PAPeter Attia
Like, this is, to your point, that's when the system actually kicks in, in terms of dragging out life pretty well.
- SSDr. Saum Sutaria
So let's, let's talk about life expectancy, and I, again, I, I think the most important context to consider here is that whether you look over the last 50 to 75 years, we've used 1950 as a marker, or 100 years, life expectancy has improved remarkably. A lot of that has to do with infectious disease and other things, so that's fine. So when we say our life expectancies in the US are palt- I think what we're really asking is why are we three years-
- PAPeter Attia
Behind everybody else
- SSDr. Saum Sutaria
... ish behind everybody else, right?
- PAPeter Attia
Especially when we're spending-
- SSDr. Saum Sutaria
We're spending the most, we're not getting the best outcomes
- PAPeter Attia
... 60 to 100% more. Yeah.
- SSDr. Saum Sutaria
Right. And I think you make a really good point, which, which we've talked about before, which is somewhere between 60 and 75, the equation slip. We go from dead last to first because the medical system we've created that optimizes for access, quality, sophistication, technology, the best drugs, flips.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
And it's actually quite effective at creating long, longevity from that standpoint. We can all discuss whether or not, you know, to use your language, the lifespan is improving with or without the healthspan. But nevertheless, the lifespan, you know, is, is the best in the developed world. So what's going on, you know, in the younger population? I think you hit on some of it. Look, infant mortality [clears throat] is two to three times the rate that we see in the rest of the world. Why? We have a higher rate of teen pregnancies. There's a higher rate of sexually transmitted diseases. You've got drug and substance abuse issues that play into that, and some of it is just, again, going back to this notion of access for care, uh, in the prenatal window, and that's really important. Two, which, which you didn't really touch on, I would describe as broadly speaking Injuries and homicides.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
I mean, the rate of those in the US is significantly higher. I mean, homicides seven times the rest of the developed world. I mean, some of that goes back to gun violence, of course, that's unique in the United States versus others. If you look at this over a long period of time, by the way, uh, you know, some of the, the mortality in the younger, younger generations had to do with wars. Um, but, but put that aside as not something as relevant today. Drug and substance abuse issues and just the flow of things like fentanyl and others that are creating a different generational impact of mortality is, is quite significant. Obviously, the penetration of things like HIV and AIDS and, and even though that's become a chronic disease over the last 25 years, it's been a significant driver of mortality. So you have these features that create excess mortality in the US, especially under the age of 65. Now, when you combine that with the fact that our rates of obesity leading to things like diabetes and heart disease when you're older are higher than the rest of the developed world, you have these unique issues, plus you have a fundamental health status issue that we're now recognizing costs the healthcare system money. Obesity and its consequences don't just emerge when you have out of control diabetes 15, 20 years later. The expenditures, the lost productivity in the workplace, all of those things happen earlier. So when you put those two together, you have a health status problem. And, and by the way, they overcome and overwhelm the things we're better at. I mean, oddly enough, you know, we're, we're better at getting our vaccinations. We're better at cancer screening. We're better at treating blood pressure and cholesterol in this country, back to the pharmaceutical, you know, culture. We smoke less significantly-
- PAPeter Attia
Yep
- SSDr. Saum Sutaria
... than other parts of the developed world. But guess what? That's being overwhelmed by these other factors, in particular under the age of 65 or 70, whatever that range may be. And if you look at those conditions, unlike how effective the public health model was in infectious disease in reducing mortality over the last 100 years, it's kind of been ineffective, right? I mean, the combination of public health and nutritional science together in the way that they've evolved in the last 25, 30 years have been ineffective in managing or, you know, dealing with these issues. Now, you can get into debates about were they adequately funded or not funded and the quality of the science and all that, but the fact is they haven't been that effective relative to other interventions, and we've got to deal with that, right? Th- this isn't, you know, this isn't an insurance coverage problem. I mean, we pretty much cover everybody other than undocumented today in the US or people that choose not to get covered because there are options now for everybody, right? And in some states, we're even covering undocumented. It's not a coverage problem, okay? This isn't a system problem in many ways. The healthcare system can accommodate the illness, right? It's the question of what led up to the illness that we haven't really fully dealt with in the country. And, and there's two forms, again, societal issues, you know, whether that be gun violence or poverty leading to bad access to prenatal care, injuries, et cetera, or the chronic diseases that seem to be more prevalent here. And I, you know, how you fix that, you and I have talked about this for years. I mean, it's hard to change behavior. If you really wanna change trajectory, you really want to improve health span, it's hard to change behavior. And the more of that that can get built into the background that just changes the way y- people eat or changes the way people engage in physical activity, which could mean, you know, designing cities where you have to walk to work the vast majority of time rather than drive, like many European nations have done, those interventions themselves must have some benefit, right? Because you're seeing different outcomes between the countries, and it overwhelms all these other, other factors. I don't know that the healthcare system as it stands today is going to solve our cost problem that's driven by the factors I just described. It's certainly not gonna dis- it's certainly not gonna change materially our outcome problem. Tinkering with the different parts of the system, we might be able to affect cost. The outcome problem is a more fundamental problem.
- PAPeter Attia
Yeah. There's so much you've said there-
- SSDr. Saum Sutaria
Yeah, fair enough
- PAPeter Attia
... Saum, which is pretty, is, is pretty typical of your brilliance, which is, uh, you'll, you'll, you'll, you'll say something for 10 straight minutes, and at the end I'll be like, "That's, that's like a, a thesis that, that might have taken me a, a year to come up with." But w- what I took away from that that's just in, you know, again, very insightful is, um, prior to the age of 65, you know, the reason that we're in last place is a few of these things that are unfortunately more American than they should be, right? So we, we talked about, um, access to guns, a kilen- a s- a, a culture of violence, uh, things you haven't even alluded to, but greater mental health crises that, you know, just go hand in hand with all these things, uh, poor access to prenatal care, um, relative to other developed nations that's leading to a far higher, uh, degree of, of infant mortality. And these things just add up. We talked about the drugs. I mean, for heaven's sakes, right? Like it's, we have a fentanyl pipeline coming into this country-
- SSDr. Saum Sutaria
Right
- PAPeter Attia
... that's an embarrassment, and as a result, 100,000 people a year, more than that now, are overdosing.
- SSDr. Saum Sutaria
By the way, it gets back to this issue. The border is a healthcare issue.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
It just is. You can't escape it. Everything ties back in one form or another to healthcare.
- 1:31:52 – 1:47:12
Potential solutions/challenges of controlling drugs costs
- PAPeter Attia
What I really thought was interesting is, you know, I talk about it in terms of Medicine 2.0 and Medicine 3.0, and I've talked about how our system is really good Medicine 2.0, right? And it's really good-
- SSDr. Saum Sutaria
Best there is
- PAPeter Attia
... at treating chronic problems and grinding out incremental years of life when you're chronically ill. Um, and that shines so much when you become a senior citizen, and that's how we leapfrog every other country between, you know, ages 60 to 75. We go from last place in life expectancy to first because our machine shines. It really kicks in. And of course, it begs the question, you know, why can't we have the best of both worlds? Like, these don't have to be mutually exclusive. You, you can, you can preserve the latter, which is, you know, we have all of these remarkable pieces of technology and innovation and access and infrastructure and quality that give us that boost of life expectancy at the end. Why don't we increase the number of people that enter that f- that sixth, that seventh decade of life? Let's increase that by 10% by applying better Medicine 3.0 and access early in life, and by the way, I think you would increase it by more than 10%. Um, the, the other thing that I think just I keep playing back in my head is I've always talked about these as three variables.
- SSDr. Saum Sutaria
Okay.
- PAPeter Attia
So when I've talked about this, I've always talked about three variables. I've always talked about quality, cost, and access, but you, you've made me realize that choice is a part of that as well, and that's the part that I think is also very American. Um, and I don't think we should be apologetic for it. It is just our culture. It is who we are. We want the best, and we wanna be able to pick what we want, right? And you j- y- you know, um, that fourth variable puts even more pressure on the one that is unconstrained. So we've-
- SSDr. Saum Sutaria
Which is cost.
- PAPeter Attia
That's right.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
So cost is unconstrained. We have said we want maximum quality, we want access, and meaning when I want it, I want it now, and I wanna choose where I go. If I control those and I leave one to balloon and that one is cost, away it goes. The other systems, as we've discussed, have said, "No, cost is constraint."
- SSDr. Saum Sutaria
Absolutely.
- PAPeter Attia
Cost is a, cost is a capped resource. Y- y- now you see what's going to happen to the others, and that's where we get into the supply side throttle to lower access. Let's eliminate choice, and you'll still get decent quality, and that's, that's the, that seems to be the choice that the rest of the world has made.
- SSDr. Saum Sutaria
That is, that is right, and I think, you know, the, you can't underestimate the power of... And I, I think, by the way, choice sort of fits in a broad framework of access, right? If you have enough access points and they're differentiated, that allows choice. Uh, if you look at many of these other systems-
- PAPeter Attia
But I, I, I actually like to keep them separate, and I, even-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... though in my former model they were the same-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... I think the way you've described it is better because choice also means you have more drugs than you know what to do with. You have a formulary with how many thousands of drugs?
- SSDr. Saum Sutaria
I mean, there are probably 15,000 pharmaceuticals available today-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... you know, in one form or another. Some of them are re- repeats, but-
- PAPeter Attia
Yeah, yeah
- SSDr. Saum Sutaria
... you know, my point is there's a lot of choice.
- PAPeter Attia
Right, and we'll do meniscectomies. We'll do meniscus repair surgeries. We'll do hip resurfacing. We'll do hip replacements. I mean, we'll do PRP. We'll do anything and everything. You have more choice here. This is the biggest buffet on the planet when it comes to healthcare.
- SSDr. Saum Sutaria
So, so why, why is that, you know, is, is one of the questions that I think comes up. So I think, first of all, I agree with you. We cannot underestimate the power of choice. I mean, we learned that in the '90s with managed care, right, when it was quite constraining. And by the way, as I said before, that system lowered healthcare inflation. It only proved it for a short time-
- PAPeter Attia
Mm-hmm
- SSDr. Saum Sutaria
... 'cause the backlash was so vicious-
- PAPeter Attia
Mm-hmm
- SSDr. Saum Sutaria
... against it, and I don't think we can go back there. Like, politically, e- even from the standpoint of not politically, but just the way the system has evolved to create more options and more choice, it will be difficult to go back there. Limited supply side constraints, I think, at this stage have and are becoming a part of the dialogue. As I said, Medicare sets prices for doctors and hospitals. They probably will start doing so for certain drugs, okay? It's purchasing power, and, and one could argue that in some ways that's a form of supply side constraint.
- PAPeter Attia
Well, let's even start with the choice before that 'cause I always think we should start with the null choice-
- SSDr. Saum Sutaria
Yeah
- 1:47:12 – 1:54:48
Balancing GLP-1 drug innovation with affordability & healthcare spending sustainability
- PAPeter Attia
While the aging pressure m-might be taking a little bit of air out of the balloon, it's hard for me to imagine that it's taking more air out of the balloon than that which is being put in with the rising burden of obesity and type two diabetes. Um, l-let, let's talk about that for a moment. We haven't really-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... explicitly and directly spoken about that.
- SSDr. Saum Sutaria
So you and I used to mark our birth years roughly in the, sometime in the seventies and talk about what the prevalence of diabetes or obesity was then-
- PAPeter Attia
Right
- SSDr. Saum Sutaria
... relative to now. It's, it's what? Three, four-fold up?
- PAPeter Attia
Oh, no, no, much more so.
- SSDr. Saum Sutaria
Much more.
- PAPeter Attia
Uh, uh, obesity maybe, but d- type two diabetes when the year we were born is one percent, and today twelve to-
- SSDr. Saum Sutaria
Yeah, ten to fifteen
- PAPeter Attia
... fifteen percent.
- SSDr. Saum Sutaria
Yeah, I mean, right.
- PAPeter Attia
Right? So-
- SSDr. Saum Sutaria
Much more than.
- PAPeter Attia
Yeah. So, so, so very conservatively, a single log fold, but likely more.
- SSDr. Saum Sutaria
Gen-- We've talked about, I mean, it's a generational failure of nutritional science to really understand what creates obesity and its sequela.
- PAPeter Attia
Yeah. So here's the question, right? We have, we have drugs now that are... They seem pretty remarkable, right? These GLP-1 agonists are doing something we have never seen before, which is simultaneously delivering the best efficacy we've ever seen, coupled with what appears to be remarkable safety, right? So maybe there's some marginal edge cases that are gonna become a-
- SSDr. Saum Sutaria
Sure. Yeah
- PAPeter Attia
... but, but this is not fen-phen.
- SSDr. Saum Sutaria
Right. [laughs]
- PAPeter Attia
This is not stimulants.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Right?
- SSDr. Saum Sutaria
Right.
- PAPeter Attia
We are dealing with truly efficacious-
- SSDr. Saum Sutaria
I forgot about that
- PAPeter Attia
... truly safe drugs. The problem is they cost so much money.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
And so, you know, I, I, I'd love to hear what you're reading about this because what I'm reading is two different types of things, right? I'm reading on the one hand, the bull case that says, "This is gonna change the world. Like, we, we are finally going to address the burden of obesity and type two diabetes and metabolic disease with these drugs 'cause now all we gotta do is give these drugs to everybody." And then the bear case says, "That might be medically true, but economically, if you run the math, we're gonna take a system on the verge of bankruptcy and bankrupt it-
- SSDr. Saum Sutaria
Sure
- 1:54:48 – 2:05:49
Reducing healthcare spending: complexities, trade offs, & implications of cuts to healthcare expenditures
- PAPeter Attia
So I'm making a note here to myself. Government. I'm just listing out the players in the system. The government, the employers and the payers. I'm gonna lump them as one.
- SSDr. Saum Sutaria
Mm-hmm.
- PAPeter Attia
Right? The consumer, the, the medical system that I'm just gonna call hospital p- you know, uh, ambulatory center, physicians, nur- like, the staff, the, the delivery system of healthcare, and then pharma, and I don't really know where to put the PBM. Would you make them their own separate thing as a system, or would you put them in with the payer? Where would you put them in, with pharma?
- SSDr. Saum Sutaria
Well, they're owned by the payers.
- PAPeter Attia
Yeah. Okay, so let's put the-
- SSDr. Saum Sutaria
Mostly.
- PAPeter Attia
Yeah. Okay. So if we were somehow given the ability to do anything we wanted, and we said, "We want to keep quality essentially where it is, maybe restrict choice a tiny bit, kinda leave access where it is, but we wanna shrink cost by 25%," is that metaphysically possible? And if so, how, how does that list of participants play a role in that?
- SSDr. Saum Sutaria
Yeah. Well, 25%'s a big number.
- PAPeter Attia
No, it's a huge contraction.
- SSDr. Saum Sutaria
It's a huge contraction.
- PAPeter Attia
And, and let's just say 25% over the next X years. Like, it's not gonna be an overnight 25% reduction. Which by the way, let's just make sure people understand this. A 25% reduction in our healthcare spend would still have us being the most expensive country of healthcare in the world. We're, we're not even getting to cost parity with other developed nations.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
But I'm just thinking about I'd like to-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... I'd like to get it closer to three trillion than four trillion. That's all I'm saying.
- SSDr. Saum Sutaria
Sure. I think the concept of absolute, absolute cost reduction is very different than bending the trend.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
Okay? And I think And we can get into whether there are absolute cost reductions that we can, we can think about within the current system and what they would mean and what they would, what they would require. Um, but I think the other way to ask the question longer term is can healthcare inflation mimic GDP inflation as opposed to being 2% faster?
- PAPeter Attia
Can it fall below it?
- SSDr. Saum Sutaria
Or could it fall below it, right? But just-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... getting it to that level of being at the same level of GDP inflation, um, would be an enormous, enormous move in curbing of the healthcare expenditures. So look, the first thing is the number one deterrent to absolute, like cut 25% out of the system, is the extraordinarily negative shock on the economy of that type of job loss, right?
- PAPeter Attia
You know, so what you're basically saying is-
- SSDr. Saum Sutaria
It's not healthcare, it's not insurance or-
- PAPeter Attia
You can't do this without cutting jobs.
- SSDr. Saum Sutaria
You cannot do this without cutting jobs. The US actually spends less on infrastructure as a proportion in healthcare services, you know, like buildings and whatnot, than many other countries actually. But the people aspect of this, both the number of jobs and also the fact that our doctors, nurses, et cetera, are on a real wage basis paid higher than in other countries. The two of those together, and other healthcare workers, right, make for a lar-- you know, they, they contribute to the gap, and we, the administrative side is the biggest gap, but-
- PAPeter Attia
I was just about to say, the administrative piece is, how much of that is payroll? That's mostly payroll, isn't it?
- SSDr. Saum Sutaria
No, no. The, the, no, no, the administrative, there's some... Payroll meaning people?
- PAPeter Attia
Yes.
- SSDr. Saum Sutaria
Yeah, but it's the system of having to, you know-
- 2:05:49 – 2:11:30
Government regulation
- SSDr. Saum Sutaria
Yeah. Well, I think, I think that's, that's an important point. Look, the role of government, we haven't talked about, and I, I would argue from my experience, healthcare is over-regulated by a lot, okay? Um, but you have to give the government credit. When, when they were, and I, I would say it in different w- when they worked to create quality standards that people had to meet, you know, things like sepsis and other thi- when they worked to create safety standards around basic problems that you see in healthcare, they have im- that, those regulations have improved the consistency of performance of the US healthcare system.
- PAPeter Attia
Right. If you have a CMS regulated operating room-
- SSDr. Saum Sutaria
Right
- PAPeter Attia
... you have a great operating room.
- SSDr. Saum Sutaria
Right.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
So some fraction of what they've done has really, really helped, and you can't argue with that. And, and similarly, regulations that have been placed in other parts of the industry. So we may be over-regulated, but you can't discount the value of some of that regulation.
- PAPeter Attia
Where, where do you think the government is... Oh, oh, sorry, go ahead.
- SSDr. Saum Sutaria
Well, yeah, no, go ahead. Where, where is it not so good?
- PAPeter Attia
I was gonna say, where do you think the o- the over-regulation is being counterproductively in healthcare?
- SSDr. Saum Sutaria
Yeah. You asked a question earlier about what is value-based care, and I don't think we-
- PAPeter Attia
That's right. Yeah
- SSDr. Saum Sutaria
... we got off on a different... One of the things that I think we get very much caught up in is the concept that our system, which is more of a fee for service system, right? You get paid when you... Versus some kind of value-based population health system would be the change that would be required. And, and the interpretation is always, well, all these other countries who spend less, they're, they must be a population health system or a value-based care system because everybody's in one insurance pool. And, but, but what we've said in our discussion is, no, it's a supply side intervention, right? They just constrain and limit cost and infrastructure and whatever. They just decide what's gonna be accessible. That's what drives the difference in their cost. And by the way, for all those economies, again, remember, their healthcare expenditures went from four to 11 or 12. That's a massive increase for those countries too. It's just not as big as ours. So I think the concept here, you, you have to put this in perspective. The interventions that have fundamentally tried to change the workflow in healthcare, value-based care, mo- most of them haven't succeeded. I mean, look at the companies and other organizations that have been in this space. Despite the best of creative intentions, many of them have not succeeded. I would argue Medicare Advantage is the most important at scale value-based construct that has been somewhat successful. But most of the innovation in and around that has not been very successful. And that doesn't mean it's not gonna get there at some point, right? Part of American ingenuity is trying and failing and trying and failing and trying and failing until you find a model that works, and credit to those that are trying to do that, but it hasn't succeeded. Where I think there are opportunities that are more direct is modernizing where we perform healthcare services into a lower cost setting. That's direct cost savings.
- PAPeter Attia
Mm-hmm.
- SSDr. Saum Sutaria
Right? We built, with the Hill-Burton Act, all this infrastructure that is hospitals, okay? Let's point the finger at the industry that I'm most closely associated with. And it has been happening. Some of that work and is and could come out of hospitals into a lower cost setting, right?
- PAPeter Attia
Why is it... Let, let's just give an example. W- Give an example of a procedure that is done in hospitals and out of hospitals, and give an example of the cost delta.
- SSDr. Saum Sutaria
I would give you the biggest example that has probably had the most impact on, on health status in colorectal cancer is that if you go back 20 years, most colonoscopies were done in a hospital setting, okay? Sometimes people stayed overnight for them, [laughs] right? Just think about that. And, and they moved into an outpatient setting. You're in and out in 45 minutes plus recovery time from whatever anesthesia you have. What did that do to the hospital industry? Yes, it moved business out of one setting into another setting, but that's not what really happened. What happened is when it got into a more convenient, quick, high service, manageable setting, more people in the US started getting colonoscopies 'cause it was easy and it had a screening benefit that's enormous. I credit the ambulatory surgery industry with actually preventing more colon cancers than any innovation in gastroenterology over the last... Because it's now normal to get these.
- PAPeter Attia
So but just to make sure I understand the implication of that, it's twofold. One, we've lowered the cost of each colonoscopy, but we've probably flattened or even raised the total cost 'cause now more people are doing it.
- SSDr. Saum Sutaria
Oh, yeah, the total cost is probably much higher.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
Yeah. But the-
- PAPeter Attia
Per unit cost went way down
- SSDr. Saum Sutaria
... per unit cost went way down and everybody got access, right, so to speak.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
Or more people got access, and it prevented more cancers, which have lots of downstream costs. So the idea of moving things into lower cost setting as appropriate is something we generally have to embrace as a way to manage the total cost, especially if the demand on hospitals is gonna go up with the aging. Okay, so what's the next version of that? The next version of that, that we're in the middle of, is look, a hip and a knee replacement used to be a four-day hospital stay. Now a lot of it is done on a same-day basis in the hospital, but you can also do it in an ambulatory surgery center in an hour, and again, you recover and you walk out the same day, and you go home and you do your PT at home and other things.
- PAPeter Attia
What is the difference there in the payer rate for those two?
- SSDr. Saum Sutaria
It's about half. It costs about half. That's a big difference. You got your 25%, right? It's significantly different. Um,
- 2:11:30 – 2:19:20
Hospital billing: complexity & paths to simplification
- SSDr. Saum Sutaria
[laughs] one of the interesting questions is why does the device not cost less in one setting or another, but the total payment is half, right? So that is a-
- PAPeter Attia
Let, let's spend a minute on this.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
This is another one of those great, great opacities in the healthcare system. [lip smack] So, um, I, I need a heart surgery.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Okay. So I need a, a coronary artery bypass and maybe throw in an aortic valve replacement. I've got aortic stenosis. Um, I go to the hospital that is within my PPO network to get that procedure done. How do, how do the economics of that work? Does the hospital act as the single entity that bills the insurance company for everything, the surgeon's professional fee, the hospital fee, the dev- the device fee for the valve, the drugs, the ICU stay, like all, how does it work?
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Is it bundled?
- SSDr. Saum Sutaria
Yeah. Well, y- you know, sometimes with choice comes complexity, and [laughs] you're getting into medical billing, which has some complexity. At the simplest level, we break things into professional and technical expenses, okay? And I'm gonna define technical. But professional may be easier to understand. The surgeon who operates on you gets paid a fee to operate on, on you for their skill and training and other things, and that is their professional fee. The technical fee-
- PAPeter Attia
D- does the anesthesiologist also have a pro fee in there as well?
- SSDr. Saum Sutaria
Oh, good point, right?
- PAPeter Attia
Yep.
- SSDr. Saum Sutaria
There, there are others involved in the surgery.
- PAPeter Attia
Okay.
- SSDr. Saum Sutaria
The anesthesiologist, who is, again, trained to provide incredibly sophisticated anesthesia to go on heart bypass, et cetera, gets paid a professional fee-
- PAPeter Attia
Got it
- SSDr. Saum Sutaria
... for that service, their personal fee for their time. The technical fee is the fee for having the surgery in the building and setting called a hospital and an operating room, and in that setting, you may use the operating room. You may stay in a hospital bed for three days. You may be in the ICU for a day. You may be given a bunch of drugs and medications that are important for that. All of that cost goes into one bundle called the hospital DRG. In general, the reimbursement system, which used to fragment all that stuff-
- PAPeter Attia
Mm-hmm
- SSDr. Saum Sutaria
... has moved into an element of single reimbursement called a DRG, diagnosis-related group, a, uh, by the way, a government innovation from Medicare that applies in much of the commercial world today, and you get paid a fee for all that stuff. Now, we make our lives a little bit complex because we often send patients confusing bills that lists everything that they had in that DRG and an individual price for each one of those things, even though at the end of the day what's gonna get adjudicated is one payment, very simple, and one copay, if it even exists. But we make it very complicated by sending this entire list of everything you had, which, you know, you can imagine as a patient who's just coming out of and recovering from heart surgery, the last thing you wanna see is a line item of 60 different things that you had done and what the cost of those were, especially when those costs bear no connection to what your insurance company or Medicare may have actually paid, right? It's, it's a complicated system.
- PAPeter Attia
So what's an example? What would be the single reimbursement on the three-vessel cabbage AVR, aortic valve replacement?
- SSDr. Saum Sutaria
Oh, it's highly, highly variable.
- PAPeter Attia
But, but pick an average payer.
- SSDr. Saum Sutaria
Medicare, somebody's gonna reimburse, you know, let's say 20-something thousand, 25 thou-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... some number for that hospitalization.
- PAPeter Attia
And how much of that is pro fee? How much of that is technical fee?
- SSDr. Saum Sutaria
Well, the pro fee is, like I said, that's US the hospital fee. The pro fee may be separate. I mean, what a physician gets paid to do that could be $750 or $1,000, let's say.
- PAPeter Attia
I- isn't that kind of amazing-
- SSDr. Saum Sutaria
Was it
- PAPeter Attia
... when people think about, like, how low that is as a pro fee?
- 2:19:20 – 2:28:07
How prioritizing access & choice increased expenditures: healthcare exchanges & the ACA
- SSDr. Saum Sutaria
bargain made between insurers and providers, that you're going to get a better deal. It's a discount card. So if you come in without insurance, uh-oh, you're gonna be exposed to the $4 Tylenol or the $16 gauze, okay? And the reality is that's what turns into something that we never really talked about, which is bad debt.
- PAPeter Attia
Yes.
- SSDr. Saum Sutaria
There's a lot, you know, there's a lot of healthcare that's provided that has a charge associated with it nobody ever pays, billions and billions of dollars. In fact, I think it's about 40 billion a year or more. And then there's, of course, under-insurance, where people, you know, don't pay their portion of what they owe. And again, with the, those kind of prices, you can understand some of that, right?
- PAPeter Attia
When last I looked at this statistic, medical expenses were the leading cause of personal bankruptcy.
- SSDr. Saum Sutaria
Yes. That may be the case. I don't know that for a fact, but I think-
- PAPeter Attia
It may, might not be true today-
- SSDr. Saum Sutaria
... my concept that medical expenses-
- PAPeter Attia
But it was certainly true, yeah
- SSDr. Saum Sutaria
... lead to medical debt that lead to personal bankruptcy, you know, is another difficult topic within this area. And that's why this-
- PAPeter Attia
And it's difficult based on what you just said, though, Saum.
- SSDr. Saum Sutaria
Well, it's, it's, yeah.
- PAPeter Attia
It's, it's difficult based on the idea-
- SSDr. Saum Sutaria
Exactly
- PAPeter Attia
... that this uninsured individual... Now, I wanna come back to why is anybody uninsured in 2024, 2025.
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
Let's come back to the ACA. But you, you're uninsured, and maybe it's because you made a risk-adjusted calculation, which is, "Hey, insurance is gonna cost me this many thousands of dollars a year. I'm young. I'm healthy. I don't need it. In an ideal world, I wish I had some catastrophic coverage. Now, lo and behold, I'm back in the h- yeah."
- SSDr. Saum Sutaria
Yeah.
- PAPeter Attia
"And guess what? I'm getting charged $4 for Tylenol,"
- SSDr. Saum Sutaria
Right.
- PAPeter Attia
"... $16 for gauze, and all of a sudden, I've got a $250,000 bill-"
- SSDr. Saum Sutaria
Right, right
- PAPeter Attia
... "that if we weren't playing with stupid Monopoly money would be $14,000, and I could manage that."
- SSDr. Saum Sutaria
Right.
- PAPeter Attia
That's the problem, right?
- SSDr. Saum Sutaria
And I think what happens as a result is that it either goes to nothing because people don't pay, or most healthcare, organized healthcare systems have the equivalent of a compact with the uninsured that rapidly discounts that price, often by tenfold-
- PAPeter Attia
Mm
- SSDr. Saum Sutaria
... in order to adjudicate that, and I think that's very appropriate. And yet you still have these unfortunate cases, you know. I mean, the, the, the healthcare system today, the insurance system today, the cost of drugs today, and the structure that's been created works a lot better if you're in the system, not out of the system, right?
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
That's the reality
- PAPeter Attia
And out of the system is uninsured.
- 2:28:07 – 2:36:24
Feasibility of a universal Medicare program
- SSDr. Saum Sutaria
yet.
- PAPeter Attia
Has there been any credible proposal put forth to create a Medicare program that is, uh, that covers everyone?
- SSDr. Saum Sutaria
No.
- PAPeter Attia
What would be required to make that happen?
- SSDr. Saum Sutaria
Well, I think the first question would be, do you want the federal government covering everybody when the whole purpose of the employer-sponsored system is to have choice and to have access to different networks that you can pick from, right? I don't know that a, a one-size-fits-all model would work. I think the second thing, and probably from my perspective the more important thing, is that if what we've talked about here today bears some degree of accuracy around what the drivers of healthcare costs are now and are going to be, it's really about health status, chronic disease, aging, drug costs related to the chronic disease, the demand. Coverage is not what's lacking today. Models of coverage is not what's lacking today. So when you say a Medicare program that covers-
- PAPeter Attia
Yeah, so, so, so Medicare for everybody isn't sol- it's, it's solving the problem we don't have, uh, that, that much anymore.
- SSDr. Saum Sutaria
Well, what you, what you would rather call that would be price controls. If your argument is you wanna put 'em on Medicare because Medicare reimburses less than everybody else, right, commercial insurance or whatever costs, yeah, then you should just call it we're gonna have a price control. But then we're moving to a supply side intervention. That's a supply side intervention, says we're gonna constrain everybody's access and choice. The reimbursement is going to come down, and the infrastructure will survive or not survive, and what's left will be what you can access. That's a different choice because that's what it would do. It'd be a buy-down. Remember one thing, and we haven't really talked about it that much, this system is built on a lot of cross subsidies, right?
- PAPeter Attia
Hmm.
- SSDr. Saum Sutaria
Healthy people in our model of insurance cross subsidize our fellow citizens who happen to be ill in some period of time, okay? In the same way, employer-sponsored insurance, which reimburses healthcare at a higher level than Medicare or Medicaid, overcomes the unit cost under reimbursement of government healthcare. This goes back to the concept, the government already behaves as a monopsony here. They under reimburse. What, what you get paid from Medicaid-
- PAPeter Attia
Yep
- SSDr. Saum Sutaria
... if you're a doctor, or Medicare, may be below your cost relative, and it's cross subsidized-
- PAPeter Attia
So corporate profitability-
- SSDr. Saum Sutaria
... by the insurance
- PAPeter Attia
... is subsidizing the government.
- SSDr. Saum Sutaria
100%.
- PAPeter Attia
Yep.
- SSDr. Saum Sutaria
100%. And that cross subsidy creates this dynamic where you can't have one go away without the other. That's why I'm so concerned about the notion that our number of 40 to, 40 to 65-year-olds relative to the people that are getting the benefit from government that somewhat under reimburses unit care of cost is going down. The people generating the economic rents to cross subsidize the other side is going down, and what does that mean for our economy if healthcare expenditures are growing this quickly? I mean, that's the essence of this discussion. And by the way, I haven't answered your question with any reasonable solution to how to cut 25%, right? I mean, you probably need somebody from totally outside the system to come up with an idea for that kind of cut. I am much more optimistic about the notion that healthcare expenditure inflation could be reduced to a level that is somewhat closer to GDP growth.
- PAPeter Attia
And your argument is, look, we've made it this far where if healthcare is 18% of GDP, as long as we make sure it never exceeds 18% of GDP, even though the absolute dollars will go from four to four and a half to five trillion, we're gonna tolerate that because our economy is gonna grow proportionately, not less, and that's the price that the United States is willing to pay to be first in class for choice, access, and quality. We're willing to pay that price.
- SSDr. Saum Sutaria
Yeah, and I might frame it d- that sounds a little fatalist in terms of where we are. I mean, my framing would be we value quality, access, choice, and innovation, and we're willing to pay for it. It has not deterred the US economy to date in terms of being not only the leading, but the fastest growing economy. And our problem that we need to solve societally is about chronic, in the US, it's about two things as we outlined. It's about chron, the burden of chronic illness and aging and all of these factors that drive worse outcomes that really aren't healthcare factors. Again, we talked about infant mor- the infant mortality issues, the drug and drug access issues, and the mortality associated with that, homicides, violence, injuries, et cetera. Working on those things, plus the chronic illness side from the medical perspective, are not anymore about insurance or coverage or whatever. They're about addressing those issues directly.
- PAPeter Attia
But to your point, public health Has been an abject failure when it comes to dealing with these things
- SSDr. Saum Sutaria
That's right. I don't, I mean, I'm not saying that the solution is public health.
- PAPeter Attia
Yeah.
- SSDr. Saum Sutaria
I mean, I think the success that public health, the current model in public health had in, in infectious disease over the last seventy-five to a hundred years hasn't worked in this setting. I mean, even COVID is a good example of that, right? So much debate exists about what happened there. Why was U.S. mortality higher than most other developed countries in COVID? I mean, the most effective thing that happened during COVID was the development of the vaccines, you know, which was, again, U.S. ingenuity, innovation, and spread around the world, right, in, in many, many ways. And so I, I think we have to rethink these models, and before we give them more funding, we need to make sure that they're doing the right thing for us. But if we can bring those things in line, I think we can make a difference. And I, I come back to, which I learned from you more than anybody else, the background nutritional environment, if it changed, could make a big difference over a ten-year period. And if you add to that incorporating a degree of physical activity, as we all know, this isn't about going from being, you know, sedentary to running marathons. It's about being sedentary to some physical activity, and it has a huge potential benefit on the types of healthcare costs that come from chronic illness. And those two things together, and addressing some of the U.S. unique issues, could bring, could bring healthcare expenditures in line with GDP growth pretty quickly. But you have to have that goal over a ten-year period. If it's a one or two or three-year goal, we will fail and give up before we try. But you can do it over a ten-year period, I think, and that's where my optimism comes from.
- PAPeter Attia
But anything that's gonna be done over a ten-year period has to be government run. There's no employer or individual who can subsidize something for th- where, where the remuneration is that far out, right?
- SSDr. Saum Sutaria
Well, I think you have to start by having a discussion around what's our national health objective, right? I mean, I don't, we don't have a national health objective right now, uh, that seems obvious. And again, unless you just say by default, the national health objective is the ultimate in access and choice. And if that continues to be our objective, the system is designed to produce that. My point is that we can have access and choice and incrementally put dollars into these other things and make a difference to both without radically cutting access and choice, and that's, that's what we have to get our head around from a long-term perspective. You're right, short-term interests from all kinds of industry participants and public participants as well may run counter to that ten-year goal. That's why establishing that goal... The question is, when does that become-- I mean, go back to your point around what we did after World War II. It was a national goal to have an ecosystem of countries that stood for democracy and protected security around the world, and we were willing to invest in it. Now, this may not be an international problem, but it is a national problem, and so we gotta r- we gotta rally around
- 2:36:24 – 2:45:37
Challenge of long-term care & the potential of AI
- SSDr. Saum Sutaria
that.
- PAPeter Attia
So I'm, you know, I've got all my charts here that I've been studying to prep for this, and one of the things that stood out to me is one area where we actually spend less than the other developed nations, 'cause we're spending about two X what they are on everything. We spend less on long-term care.
- SSDr. Saum Sutaria
Yes.
- PAPeter Attia
So I guess my question for you is why? Secondly, we haven't talked about one specific disease that is also increasing in prevalence, which is dementia. Um, so, so those two are pretty linked. What do you have to say about that with respect to future costs?
- SSDr. Saum Sutaria
Well, I, I think our biggest challenge in innovation for the next twenty years is the management and care of neurocognitive decline, whether you formally have dementia or not. One thing is true. When you age, people live longer, they inevitably have neurocognitive decline, and they require more care. Now, I think as a, y- you know, the culture in this country, just to address the long-term care expenditure piece pretty directly, I think there are many positive aspects of the culture of family taking care of generations and, and that being something that's passed from generation to generation. And that, we, we spend less in institutionalized long-term care because a lot of that work is done by families. Now, that's also a burden, right? As people live longer and the cost and complexity of their care as they decline gets higher, the cost of providing that care is not just the direct cost, but it's lost wages and productivity in the economy as people, often women, come out of the workforce to take care of the elderly from that perspective. So this problem is not just a healthcare problem. It could become a macroeconomic problem based upon feeding the workforce and lost productivity. The second reason I think this is a huge problem is just the simp- and I, we won't get too technical, simple issue of blood-brain barrier. The traditional pharmaceutical model to care for these diseases may not work once there's onset of disease because of the blood-brain barrier. And the concept there is that, you know, drugs which go into the body don't get through effectively the barrier between the blood and the brain to be able to treat brain diseases. We need new forms of innovation, and this is where I think you will see the prominence of engineering-based solutions rather than drug discovery-based solutions grow materially to help with these diseases, right? Think about what we do today with stimulation and neurostimulation in Parkinson's. That's a device-based therapy. I think the role of engineers in healthcare has an infinite future and upside for us because of neurological diseases, and we've gotta pivot our model, our research, our funding to deal with this issue because we're gonna go from sixty-five million-ish people in Medicare today to ninety million by the mid twenty-thirties I can again go back to my point before of the number of people pre-Medicare declining that's gonna help finance the care for those people. So we need models for custodial care, meaning where to take care of them and how, that isn't a nursing home, which is, or long-term care, which is too expensive. You gotta make that job easier in the household. And we need innovative engineering-based solutions that help improve their cognitive function to make them more self-sufficient, to deal with their dementia for a longer period of time so that they're more self-sufficient and less dependent. And solving that problem, I think, is one of the grand frontiers in medicine over the next 10 to 20 years, given the aging of the population. 'Cause remember, the, you know, we're, we're gonna age up through 2032, 2033, but those people are then gonna live-
- PAPeter Attia
Yeah
- SSDr. Saum Sutaria
... 10, 15 years. This is a 25-year problem, and, and I don't know that we've found the solution to that.
- PAPeter Attia
So on that, on that thread of technology, we touched on it really briefly-
- SSDr. Saum Sutaria
Yeah
- PAPeter Attia
... in, in terms of how AI can help with the absolute messiness of, um, of reconciliation and adjudication, but we didn't talk about technology in other ways, and we didn't talk about AI in other ways. So what are your sort of broad stroke thoughts on the role of technology in any of the variables we've talked about, but obviously in cost reduction being-
- SSDr. Saum Sutaria
Sure
- PAPeter Attia
... that it's the elephant in the room.
- SSDr. Saum Sutaria
Yeah, I mean, I think today, you know, if we look at the system and what's being developed in AI, administrative cost is the easiest and, and first application, I think, where you can actually see real cost reduction potential. So I think we hit that correctly. I think, I think in the clinical realm, you know, the electronic medical record, which has been a massive industry expense, what it has done is created a much more organized system of record, but it hasn't really fully translated to a system of engagement for all the stakeholders, and I would argue hasn't really been transformative in improving the quality of care relative to other things, and it certainly hasn't really improved access or choice in any way from that perspective. But taking that foundation and building in the potential benefits of AI in better clinical care, better understanding of evidence-based medicine, better-- that has potential from the foundation. So while I'm not a big proponent of the fact that the foundation that's been very expensive has a huge return on investment that the industry has seen, it has had an organizing effect, almost table stakes, that were required to get off paper to enable things like AI to make a difference in the future. And you know what's gonna be interesting is it'll remain to be seen, do the traditional EMR participants or do new entrants really build the AI that does that?
- PAPeter Attia
Mm-hmm.
- SSDr. Saum Sutaria
And I think there's a lot of work going on in that area. I think it's early. I think the hype is seriously overblown in the near term in terms of the value that it will have. But from a long-term perspective, conceptually, the power of the tool to really improve care, not just administrative cost, I'm optimistic about.
- PAPeter Attia
So, Saum, three hours ago, we started talking, and I said I had hoped that by the end I would have, and, and by extension, the listeners would have a better understanding of the US healthcare system. I can't speak for them, but I do speak for myself when I say I honestly think I understand this better than I ever have.
- SSDr. Saum Sutaria
[chuckles] I appreciate that.
- PAPeter Attia
Um, and that's, that's a clear testament to, to you. Um, uh, y- y- you know, maybe just, just to spend one moment on the personal, you know, um, I've talked a lot about my time at McKinsey as a great chapter of my life. When I left medicine, um, you know, didn't know what I wanted to do, but, but knew I didn't want to do clinical medicine at the time. Um, you know, what, what probably many don't know is you were single-handedly the person that, that plucked me out of Johns Hopkins and, and brought me out to San Francisco. Um, and, and you, along with Hamid Samandari, were, you know, the two single most import-- you know, just the most important mentors I had there. Um, I, you know, I owe you such a debt, Saum, and it is, it's such a pleasure to be sitting down with you today. I, I don't-- I wouldn't be where I am today without you. Um, and your, your influence on me is, is, uh, it's, it's hard to overstate.
- SSDr. Saum Sutaria
Yeah, well, I, I appreciate that. It's incredibly kind. But the reality is that you know this and, and, um, the pride that we have in what you've built and I have and my family has is incredible. And the thing about you from my perspective that I can't say about virtually anybody else is that what you have built has been purely based upon your intellectual curiosity, creativity, and drive to know the truth, as opposed to anything to do with your personal gain. And I, I've known you from day one as having worked in that way in the environment that we were in together, and all of the different things that you went to do after that in various-- I mean, I remember Algae and I remember-- [chuckles] But the point is, it was always driven by that intellectual curiosity, and that's something that I wish more people had. And I think if there's any benefit of this conversation of us talking about this, somewhere out there in your audience, there's another person like you who will hopefully solve these problems because they're just as intellectually curious as you. It's a gift that the world will never understand the benefit of from what you're doing.
- PAPeter Attia
Oh, I appreciate that, Saum, and thank you for this incredible, uh, truly master class on a complicated system. I, I, I will say this, the, the single most optimistic thing I take away from this is we might not have to slash the cost by something dramatic like twenty-five percent. If we can enact the right pol-- the right combination of policies, technologies, perturbations in behaviors and incentives that simply bend the cost curve towards GDP growth, we might actually be fine in the long run.
- SSDr. Saum Sutaria
I think that's true. Yeah. Well, thank you for the opportunity.
- PAPeter Attia
Thank you. [upbeat music]
Episode duration: 2:45:37
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