Ken Beckman (who's not into having his photo out on the Internet, so I grabbed a graph instead) is Vice President and Actuary at Central States Indemnity. He's a member of theAmerican Academy of Actuaries, and an Associate of the Society of Actuaries and Casualty Actuarial Society. With 0ver 20 years of actuarial experience, primarily in life and health insurance, he's done a lot of writing and thinking on the best ways to cover individuals efficiently and manage pools of risk.
(Now hang on, you non-math folks – this is going to be a lot more interesting (and accessible) than you might think. Give us a chance here… 🙂
After getting turned on to the health benefits of a plant-based diet, Ken began seeing the health insurance industry in a radically new light. If the best possible outcome is a slow decline mediated by appropriate drugs and timely procedures, then we're probably doing OK.
If, on the other hand, disease prevention and reversal is really possible, then our current system is a paragon of inefficiency.
Ken turned his actuarial mind to the topic and wrote a provocative paper for his fellow actuaries, titled “A Challenge to the Insurance Industry.”
In the paper, he argued that simply by shifting financial incentives for physicians – by paying them to keep patients well rather than for the volume and amount of services provided and products sold – could lower costs and improve public health dramatically.
He also recommended that insurance companies tell their subscriber members about plant-based lifestyles not as a diet, but as a serious healthcare approach for avoiding disease and reducing their dependence on pharmaceuticals.
Turns out, the insurance industry is not particularly innovative or open-minded. It's been business as usual over the past bunch of years, as costs and premiums soar to a point where fewer and fewer people can afford them.
And as the so-called Affordable Care Act appears to be on the chopping block as I write this (January 23, 2017), it doesn't look like relief is in sight.
And as my co-author T. Colin Campbell points out, the question of “Who should pay?” should be subservient to the more fundamental issue of “What are we paying for, and is it worth it?”
Ken's developed a brand new incentive model (at least, brand new for the US health insurance industry) that is going to make someone (and probably a lot of someones) a billionaire. At it takes is one disruptive company (and repeal of a bunch of laws written by Big Pharma lobbyists) to shake things up mightily.
That's what we talked about in this conversion. We covered:
- insurance 101: the basics so even I could understand it
- the role of actuaries in setting premiums and managing risk
- the power of a plant-based diet compared to modern medicine in the treatment of chronic conditions
- the driverless car dilemma – and why insurance companies are worried about fewer accidents
- the paradigm shift: paying for desired outcomes rather than procedures
- how doctors could get filthy rich by keeping their patients alive and well (imagine that!)
- if I bought internet service like I buy health insurance
- “there's no precedent in healthcare for anything getting cheaper or more efficient”
- how healthcare manages to defy the Invisible Hand of Capitalism
- healthcare inflation 3-4 times greater than cost of living
- the compliance myth: why the healthcare industry dismisses lifestyle medicine
- barriers to change: “any company could do this tomorrow”
- medicare – where the big money is
- 18% of GDP spent on healthcare that could be spent somewhere better
- focusing on saving society rather than enriching one segment
- and much more…
Enjoy, add your voice to the conversation via the comment box below, and please share – that's how we spread our message and spread our roots.
Ken's paper, A Challenge to the Insurance Industry
HOWARD: OK, so let's talk about today's show. If you listened to last week's show with Paul Chatlin, you'll recall his epiphany moment was when Blue Cross Blue Shield was willing to pay $120,000 for his bypass surgery, but was not willing to pay $700 for him to learn how to cook healthy meals so he would never need bypass surgery.
Today's guest, Ken Beckman, is a rare bird -- he is an actuary -- he is someone who manages risk in the insurance industry. And he has figured out -- alone pretty much, among anyone in the insurance industry -- how much money could be saved, how many lives could be saved, how much the industry could be improved and rationalized, by paying for those very sorts of things that Paul Chatlin was talking about last week. By having insurance companies incented to keep people well, through prevention and specifically through plant-based nutrition. Rather than waiting for them to get sick and need meds and needs surgeries and all that stuff.
I'm hoping that someone listening to this podcast is going to get the idea to start the world's first really smart health insurance company, based on the numbers that Ken has crunched. And the science, and all the data. Talk about the opportunity to disrupt a sucky and inefficient industry! This is a big one. And of course, all the rest of us are going to benefit from lower premiums, better health care and better health. So without further ado:
HOWARD: Ken Beckman, welcome to the Plant Yourself Podcast!
KEN: Thank you very much, Howard. Good to be here.
HOWARD: Let's start with who you are and what you do, because that'll kind of frame the rest of where we're going in this conversation.
KEN: My profession is an actuary, and actuaries essentially manage risk for companies, primarily insurance companies. So, I've been working in the actuarial field for over twenty years, mostly in the life and health insurance industries. And doing various things, in terms of life and health insurance products, and coming up with the rates that the companies charge for those products and also determining the reserves that they set aside to pay any claims that come about in the future. And so basically, their financial security systems for the public, that they rely on -- we as actuaries try to make them sound, so that the company has enough money to make a profit and pay the benefits that they promised.
HOWARD: Gotcha. So I think in college, I took some probability courses, and some of the examples were from the insurance industry, so I think I may have a basic understanding of how this works. So when you're trying to set an insurance premium for Joe Blow who's 50 years old with a certain set of characteristics and demographics, what goes into that? I kind of want to lay out what actuaries usually do, so that we can segue into why we're having this conversation.
KEN: Sure. Well, at a simple level, let's consider life insurance for a moment. We know that a 50-year-old may have a life expectancy of, say, 25 to 30 more years. So we essentially say, they've got to pay us a certain amount of premiums to cover that next thirty years or so, so that when they die, we'll be able to pay them whatever their chosen benefit was -- a million dollars, let's say. And it's really very similar with health insurance, but there are more variables. Obviously, it's not just life and death, it's how many times does somebody need to go to the Emergency Room, how many times do they see their doctor for routines visits. So you look at data and studies and your own policy holders, and determine that someone who's 50 or 60 years old, are going to incur this many claims per year, and you're going to have some people [within that demographic] that're going to have very large claims, some people who will have no claims, but you basically create this mathematical model to determine what price tag you need to put on those services.
HOWARD: So, help me see if I'm correct here. It's basically pooled risk -- it's a whole bunch of people together that can kind of smooth out -- so if something terrible happens to one of them, then everybody doesn't have to [individually] save for that possibility, but [if] a bunch of people save a little bit, then when it happens to one person -- act of God, roll of the dice -- then it's like the community stepping in to cover what needs to be done for them.
KEN: That's right. As an actuary, we can't really predict for a given person, whether they're going to need a million dollars worth of medical treatment or no medical treatment, but when we take a large group, the community -- like you said -- we can get pretty precise that this is the average cost that somebody is going to use for medical services.
HOWARD: So in my hypothetical model, if you have a whole bunch of people -- let's say one hundred people, for the sake of my little brain -- if you have a hundred people -- we're expecting that a certain number of them will have heart attacks, and a certain number of them will have strokes, or develop diabetes and need to be on medicine, a certain number will fall out of windows and need to go to the Emergency Room. And we take that whole amount of money -- all the care that would be required for that group of one hundred people -- and divide it by a hundred, and everyone pays that amount, plus whatever the insurance company gets for profit.
KEN: That's it. At a high level, that's exactly what happens.
HOWARD: OK, so let's put a pin in that for right now. So -- we're not having this conversation to train a new generation of Plant Yourself Actuaries -- but to go into the intricacies of the insurance system and some of the ways in which it might not be entirely rational. So, when did you begin to see that there might be other ways of setting up insurance and insurance companies, that might be more beneficial for people, and better for companies
KEN: Well, I think it really gets to the plant-based diet, and my experience with that, and seeing how powerful it was in terms of improving people's health, and just knowing that this power is out there. that the insurance framework, as it's set up right now, is not aligned with getting that concept spread to as many people as possible.
HOWARD: So this is where I have trouble. Because I grew up -- if now a huge cheerleader of capitalism, at least respecting its good points. And one of its good points was, the ruthless efficiency of the market, that when something better came along -- like when google came along, everyone started using google and stopped using Alta Vista. Right? And when the internal combustion engine came along, people stopped using horses, and long-term issues aside, for the short-term benefit, if someone came along with something better, cheaper, more efficient, more convenient, worked better, saved money, that people would flock to it. So, how is it that -- for example, I was talking to someone the other day who was trying to get their insurance company to pay them for an $800 course on plant-based diet. And the insurance company wouldn't pay that, but they would the $120 - $135,000 bypass surgery. So explain to me, what are the obstacles to the insurance companies being intelligent about this.
KEN: Well, that's a very good question. A lot of it, I think, is their being unwilling to change, and that's not unique to the insurance industry -- many people are set in their ways and unfortunately not willing to change, so I don't have a perfect answer for you. It kind of boggles my mind, and is something I think about a lot. Why hasn't this been adopted by the insurance industry and other industries who are involved in health care? But I think it really gets down to, if people are exposed to the concept enough, then I think it can change. Right now, I know the momentum and the exposure is growing, but it's still relatively on the margins, it's not a front-page story every day in the newspaper or on the news. So I think that's really the big obstacle, that it's still this marginalized concept that many people view as not mainstream. Even though it's really the most effective thing out there for reducing costs.
HOWARD: Let's dive into that for a second. People can listen to me talk about my own plant-based journey and how I've helped people. And then can read studies, read the China Study, read Dr. McDougall's books and things like that, but you're just a dispassionate numbers guy in your profession -- what do you see -- what did you see when you started looking into a plant-based diet, that made you think that this is something better than drugs and surgeries?
KEN: Well, it's probably not any different from the studies that you've seen. You referenced the China Study and the work that Dr. Ornish and Dr. Esselstyn and others have done, and seen the results that they have had, and I see in my data what a bypass surgery costs, or what it costs to treat diabetes or obesity, and it's just so obvious, it really doesn't take an actuary or a scientist or anything, to figure it out, anybody can see that the plant-based option is a much cheaper, safer and better all-around choice.
HOWARD: But if you're an actuary, and you're discussing things with your fellow actuaries in the insurance industry, that's what I don't get. I mean, you talk about diet, and everyone gets defensive because the want to eat the way their momma cooked for them, or eat the bacon that they love, and so there's all this emotion in it, but I'm just hoping that there's a group of people that just look at the numbers.
KEN: That's what I try to focus on. I try not to lead with it being a diet and view it more as a cost reduction vehicle or a health care improvement vehicle, and I know maybe that's splitting hairs a little with words, but I think it's important when you're in an industry, you don't want to say, "Try this diet and it will help lower our costs" -- you want to say, "Here is an approach that has been proven to reduce health care costs more than any of these pills or procedures that we're currently paying thousands of dollars for. And it has no side effects -- it has positive side effects -- and the results can be seen very quickly. And so that's the approach that I try to use when I'm talking to people. And quite honestly, I haven't made much headway in the industry, but I hope to.
HOWARD: So help me follow the money a little bit. Because obviously there are a lot of players who are making a lot of money off the current system. Can you paint that picture? Because you know, I can rant and rave about insurance companies and drug reps and doctors and hospitals and health clinics, but I don't have the numbers the way you do. Do you have a sense of what are the entrenched interests, what are the parties who have a vested interest in not understanding what you're saying?
KEN: I think there are a lot of vested interests out there, and I don't follow any of the other industries -- the pharmaceutical industry or anything -- I mean, they're trying to make money, and they should try to make money. I view it as my calling, to expose people to the concept, and obviously there are entrenched interests out there, that profit significantly from the current system that reimburses based on either the complexity of the procedure or the number of procedures, or the number of pills that are consumed and so obviously there is that significant financial incentive for things not to change, but I think if we can look at it from a positive perspective and not assign blame to those industries, we can say, "Here's another approach, and look at what this can do for costs" -- that maybe then those interests'll go by the wayside a little bit.
HOWARD: But what about the insurance industry itself -- it's not monolithic -- aren't there some insurers that actually get paid a percentage of the money spent in clinics and hospitals, as opposed to. I mean, are there portions of the insurance industry that don't benefit monetarily from reducing costs?
KEN: Well, I think most insurers are compensated essentially by getting a percentage of the health care costs, because that's what the premium is based on, so if you have health care costs that are, say, a million dollars instead of $500,000, the insurance company's going to get x percent of that million instead of x percent of $500,000. So there is that incentive to keep those costs high, but I think really, we're at the point where the premiums have gotten to such a high level that it becomes unaffordable to the average person. So whereas in the past, maybe the average person could absorb the increased costs from year to year, we're approaching a point where they're not going to be able to afford it anymore. And something's going to have to change.
HOWARD: So in other words, the insurance companies get paid a percentage of what the assumed total costs will be, because the premiums are essentially that cost plus profit.
KEN: Right, right. And if they want to maintain a certain profit margin then, unless they want to take a reduced profit, then they're just going to get that percentage of whatever the premium's going to be.
HOWARD: So in other words, we have our hundred people and all of a sudden someone comes around in a truck installing window guards so that people stop falling out of their second story window. So after a few years, the premiums would go down.
KEN: That's correct. I liken it to the impact of driverless cars. There's a lot of attention in the property-casualty insurance industry about the impact of driverless cars on auto insurance premiums. And there's no doubt that if that comes to be, and is a widespread phenomenon, that invariably the number of incidents should go down and the auto insurance premiums should go down, and so that means less overall money coming in for insurers.
HOWARD: I used to run a marketing agency, and I helped people with their Google advertising, and the standard in the industry -- the standard model for people like me and companies like mine -- was that I would charge a percentage of your spend. So however much you were spending with Google to advertise your business, I would get maybe five percent of that, or 3.5 percent of that. And it quickly became apparent to me that there is a conflict of interest between me and my client, because if I say, "Hey, you're paying too much for this campaign; I can help you lower the cost of the campaign" -- but if I'm charging a percentage of their spend, then I've just given myself a decrease in income. And it seems like there are other ways that you could set up an insurance industry, that makes it more win-win. Am I right? Are there other models?
KEN: Right now, we're paying providers based on the number of procedures and the complexity of those procedures. If we change more to a model where we're paying on actual health outcomes -- take a particular patient, how many times did he see his primary care doctor or how many times did he adhere to his medication -- What did we really do to make him healthier? And if we change our method of compensation based on that, I think that's really the direction we need to go.
HOWARD: I'm just imagining, when I get my healthcare-dot-gov email, which I probably will never get again, and the insurer says, "Pick your plan" -- I mean, right now, my family eats healthy, and avoids most chronic diseases, so I just look at what's the catastrophic [policy], because I really am buying a bunch of if-then procedures. I'm imagining, what if the question was, "Would you like your family to be unhealthy, moderately healthy, pretty healthy, very healthy, or extremely healthy." And for each level of worse health, I would pay more money. Wouldn't that change things?
KEN: It would! That's really what we should be talking about is, "How healthy do you want to be?" Not, "How many procedures do you want next year?"
HOWARD: That just kind of blew my mind a little bit. Because even with all my years of trying to help people be healthy, I've still thought of insurance as providing things like doctors visits, or surgeries or pills, IF they become necessary -- as opposed to what we really, really want -- which is to be healthy. Or am I an outlier? Do most people not really care about being healthy or taking responsibility, but just want the coverage?
KEN: Well, I think people DO want to be healthy. I think there's no doubt about it. And I think right now, they are dissatisfied with the results they get when they go to their physician, because they're not getting results. And yet, they don't know another way other than to try another physician or another health care provider. So I think if we, as an industry, came out and said "Really the goal of you buying this health insurance, is not to pay for all your procedures next year, even though we'll do that, the real go of you purchasing this policy from us, is to make you healthier. And that is our sole focus when you buy this policy, and we'll do everything we can to help you, but you have a role in that as well, to help make you healthier."
HOWARD: Now it's getting complicated in my mind, because I'm thinking, for example, I have U-verse from AT&T, and I pay them a hundred bucks a month for all the services. And the best thing is if I never see them because my service is working fine. I mean, whenever there is a problem, they send someone out. Wouldn't it be insane to imagine, "How many visits do I want them to make this month? Three? Seven? Ten? Or maybe if I really want the premium service, I can pay them to come out every day and fix something that's broken." Isn't that kind of the paradigm shift we are talking about in health insurance?
KEN: It is. That's it.
HOWARD: At the same time, I think of a different kind of insurance like product replacement insurance. Like, when I buy a piece of electronics from BestBuy, they'll sell me the $25 two-year extended warranty. But then if it doesn't break in those two years, I feel ripped off. Do you think that attitude plays out in health insurance also?
KEN: There IS sometimes this idea that people want to use their insurance. Like sometimes in life insurance, people buy a policy and they kind of complain about the premium. But the answer to that is kind of, "Well, you haven't died. So be glad for that." And it's kind of the same thing in the health insurance world -- obviously there needs to be some amount of money paid to cover those unfortunate circumstances, and if you don't have any of those unfortunate circumstances where you have to get some kind of procedure or medication, that's great. That's really the goal. The more we have of that, the lower we can reduce premiums.
HOWARD: It's coming from a win-lose, zero sum game perspective -- if we keep the premiums the same, and we reduce costs -- I mean, if we're actually getting health, if we're getting the productive time at work and time with our families -- getting all the things that we're supposed to get from our health industry. I mean, if we're getting that, then hey, why not give the extra money to the companies in the health industry?
KEN: Exactly, I agree. The public is not really getting value with their health insurance right now. They're getting their procedures done, no question about it -- we're reimbursing hospitals, we're reimbursing physicians, but there's very little value being received for those premium dollars.
HOWARD: So for how long have you been beating the drum of the plant-based approach to health care?
KEN: Really, only since very recently. I myself adopted a plant-based diet three years ago, and had great results with that. And as I got into that, I was looking around to see what can be done with this, because I think it's really such an exciting concept. And being in the health insurance industry, I really didn't see other insurers out there, any actuaries, or anyone else in the industry talking about this topic, so I put together a paper to summarize my thoughts. And then I could send that to others in the industry and get their feedback on this concept because in my case, up until three years ago, I was not even familiar with the research or the ability of a plant-based diet to reduce health care costs. So I really am in the beginning stages of talking to others in my industry?
HOWARD: Is there a precedent in medicine in the last twenty or thirty years or so, of something coming along that is better or cheaper and being embraced?
KEN: Well, I think a lot of new drugs have been embraced very quickly. but I don't know that they're cheaper -- a lot of times, it goes the other way, that there's a new drug that's very expensive and maybe works quite well [that gets embraced as the new standard of care]. But no, I'm not aware of any medication or procedure that reduces costs. And especially, I'm not aware of any that addresses the whole host of chronic conditions the way whole food plant based nutrition does.
HOWARD: I'm just thinking, is there any case of even maybe a new way of delivering insulin, or something that prevents the big machine, or prevents the long hospital stays -- like, something that just reduced costs, and everyone said, "Oh that's a great idea."
KEN: I'm not aware of anything off the top of my head. What we see in medical trends is, even though the last three or four years, the spending has been lower, if you look at the last twenty or so years, the spending has been increasing at a rate much higher than inflation. And that's really where the problem has been. So even if there've been, maybe, some pockets of improvement here and there, overall you have medical inflation maybe at 8%, and normal inflation in the economy overall at maybe 2% to 4%, that's where we find ourselves. That's why we've gotten in trouble.
HOWARD: So this is a very systemic problem, that medicine just keeps getting more complex and more expensive, as opposed to what you might expect from a capitalist system. I mean, look at computers in the last twenty years. Everything you can think of that has a technological component to it has just gotten so much cheaper that the people who sold the first models couldn't have even imagined.
KEN: Right -- they've gotten so much cheaper, and so much better and more effective, in terms of computer technology. But on the medical front, it seems to go the other way. It's not cheaper, it's more expensive, and you could make the argument that it's actually less effective [than treatments many years ago].
HOWARD: So do you think it's because of the insurance component? That if we were buying our computers on an insurance basis and our phones, that somehow the system would malfunction? I mean, what is it about medicine that makes it go against the laws of the Invisible Hand [of the market]?
KEN: Well, I think it's the way we've set up the system, where we're incentivizing these procedures and pills. That's what we're paying for -- we're paying for the pill or the procedure -- we're not paying for the outcome. Whereas with computer technology, people are willing to pay for the next generation of technology because it's so much better. There's nothing like that in insurance -- it keeps getting more expensive and we keep paying for it, even though the quality isn't there. So it's really gotten turned on its head from the way it goes with computer technology.
HOWARD: So when you shared your paper and you talked to people in the industry, what's the kind of push back that you get?
KEN: I think a lot of is that people think that if you present this concept to someone with a chronic condition especially, that they won't adopt it. It's too far out of the mainstream, it's too different from the way people think and people eat, and so they don't even want to bring it up with policy-holders or clients, because it is so different. That's really the biggest pushback that I've had -- it's not that the evidence is made up or faulty -- the research is definitely sound, but it's more that it's [considered] too hard of a thing for people to adopt.
HOWARD: Is there any evidence to support that view?
KEN: I haven't found any, and I've looked. What the studies show is that with people with chronic conditions who are looking for solutions -- if you present it to them, and explain it to them properly, you're going to have eighty, ninety percent adherence rate over the long term. And once people do adopt it, they feel so much better that there's really no going back.
HOWARD: I remember looking at a Kaiser or Humana study that Colin Campbell was showing me -- that people don't adopt better lifestyles, but the lifestyle was "eat more vegetables", or "eat less red meat" -- these really vague principles that are put forward, maybe in good faith, or maybe just throwing out some ideas that they know no one's going to take seriously so that they can say, "Yeah, this lifestyle stuff doesn't work, let's keep pumping 'em with pills and procedures".
KEN: I talk about that in my paper as well. It's really much more than saying, "Eat more vegetables" or "Reduce your level of fat". You really need to be very clear on what this is -- it's a way to improve your health, it's a way to prevent or reverse a chronic disease. And if you present it in that way, there's no evidence that people will not adhere to it. But if you present it, as you said, kind of off-hand, "Eat more fruits and vegetables", then there's not going to be a lot of compliance there. Because "Eat more fruits and vegetables", we've heard that for years, while diseases and costs have continued to mount.
HOWARD: From my perspective, the insurance piece is a huge piece of the puzzle. People like you and me can watch Forks Over Knives and can hang out and go to retreats and things, but the masses -- the idea that doctors aren't going to prescribe something if they can't get paid for it. They're not going to hold classes or give nutritional education if they've got to do it on their own dime. They're not going to hold classes Wednesday night and stay late at work. So if you had a bunch of investors -- I don't know how much money you'd need as a starting point for a health insurance fund -- but if you had that amount, what would you create?
KEN: I'll tell you what I talked about in my paper, which is that actuaries right now have a model based on pills and procedures, as our model for how we compensate physicans. Physicians don't want to take all this on -- the education and the materials themselves -- but if we can make a shift in existing insurance companies, where we can pay the physician their regular fee schedule, but on top of that, we would compensate them for essentially having a brief conversation with their patients -- especially those with chronic conditions. And if they would recommend to their patients that they go to some type of seminar or webinar or webiste or some type of education session, then we would compensate the physician for that. And additionally, if this was someone with say, diabetes, incurring $10,000 worth of claims every year, who by going through this process of getting educated about lifestyle and diet -- if then, the patient would reduce claim costs from, say, $10,000 to $2,000, then a system could be set up where the physician would benefit from that, and potentially share in that savings over the long term. So if you think about it, if someone age 50 has diabetes and has $10,000 worth of claims every year, they're likely to have that same amount or greater, over the next 30 years of their life. And so, if we could hold out to physicians that "If you essentially cure this person, by educating them on proper lifestyle choices, we will compensate you for that over this person's lifetime." And it's a difficult thing, to figure out how all these dollars move around, but I think that's really where we need to be.
HOWARD: It reminds me of a cartoon from the big book of jewish humor, where a baseball stadium has these ads against the fence, like "Hit This Sign and Win a Salad", or "win a steak" or whatever, as an incentive for the batter to get a hit, and the cartoon had this sign that said, "Hit This Sign and Abe Vigold Will Give You A Free Suit", and out behind the outfielder, there's Abe Vigold with a mitt, trying to protect that spot of wall. It's like, if your doctor knew that they were going to get a thousand bucks a year because you're healthy, they'd be following you around and guiding you. It would be their mission to keep you alive and well, and they would make out like bandits. Wouldn't that be amazing!?
KEN: That's what we need to do, is change the incentive system. I don't see any other way to do it, other than that type of a model.
HOWARD: The cascading effect would then hit medical schools, where they realize, "What I've been learning, isn't going to get me paid in this new system."
KEN: So if there were an investor who maybe had a milion dollars to invest, I think they could partner with insurance companies and maybe educate physicians or work on developing these monetary incentives -- putting that money to use to do everything possible to drive people to better health.
HOWARD: Could an existing company do this as a little experiment? Like, they wouldn't have to change the entire model of their business, but maybe take one population in one state -- just 1/50th or 1/100th of their business, and see what happens over five years?
KEN: Any company could do this tomorrow. My paper talks about, 1). The incentives for the physicians, and that's a long-term change that would have to be set up, but also 2). Let their insured members know that this concept exist. It's not that insurance companies have to practice medicine or prescribe a particular course of treatment, but simply let their insured customers know that there is an approach out there that's been medically proven, that if you have heart disease, if you have diabetes, if you are obese -- you can go right down the list -- that you can reverse those conditions, that you can possibly get off your medication, and here are some resources, websites, or materials that you can review for yourself and try it out. And that's really what worked for me -- it wasn't an insurance company giving me the information, but I had just stumbled on the information and evaluated it myself and gave it a try. And I think, if insurance companies would just take that one little step -- they're talking to their policy holders all the time with various communications -- this is something that can be done inexpensively and fairly quickly.
HOWARD: Have you worked out a business case, like you would take to an executive, to say, "Here's how you solve your problem, satisfy your shareholders, mitigate risk and contribute to public health?"
KEN: That's what I was just describing there -- that I would recommend we just send out materials and let people know about it. And then they would have to consult their own physicians themselves. We couldn't get involved in treating them, as an insurance company. That would really be the business case.
HOWARD: Do you have financial projections to say, "You can still make a living doing this, and in fact, it might be a better living."
KEN: Well it's really hard to pin down what impact that kind of thing's going to have. I mean, if you told a million people, we really don't know if 10% or 40% are going to think it's a good idea, and adopt it. That's kind of an unknown. And then what impact would it have on the claims that a company would see? Those are all numbers that are very hard to predict. If we could get some companies that would like to try that, though, we would learn those numbers fairly quickly.
HOWARD: It almost seems like you have an Edison problem -- how are you going to sell lightbulbs if you don't yet have the power grid? You need a lot of infrastructure, both physical and mental. If everyone switched overnight, there would be a lot less risk for insurance companies, than wondering, "Are people actually going to take advantage of this? Are the doctors going to get behind this?", since we're telling them to do something that they haven't been trained for.
KEN: Yeah, it's one of those things -- you don't know exactly where it's going or how it's all going to work out, but for me the bottom line is, I think as actuaries and as insurers, we have a code of conduct that says that our first priority is the public interest. It's really not our employers. It's not our industry. It's really -- we are here to serve the public. And I can't think of anything more important, than to get that message out to the public, that here is an option for you, if you care to look into it more, it could essentially save your life. And it's not so much about living to be a hundred, it's about having that quality of life, of not being in and out of doctors' offices for the rest of your life. And if you would like to look into it more, then please do so.
And I think that's really the first step, and then there is infrastructure and other things that really need to be worked out, but presenting the information about treatment successes with a plant-based diet, is really the first step.
HOWARD: I did not realize there was a code of conduct. So insurers have their own hippocratic oath?
KEN: Yes, and there are disciplinary standards in place -- we're required to follow those, and if we don't, we can be called to task for that.
HOWARD: I had no idea. Now, when I first asked you about pushback -- why people aren't adopting this when it makes so much sense financially -- you said that people aren't willing to change. So I'm thinking about other industries where there has been disruption. Like, Microsoft could've dominated the internet, but they didn't see certain things coming, so Google really stepped in. And Google could've really dominated everyone's data but they didn't see social media coming. And Steve Jobs foresaw the mouse at Palo Alto Research Center. And Kodak was once dominant in photography, but not Kodak isn't relevant anymore. There are all these examples of disruption, how if people are stuck in their ways -- which seems to really be the natural human condition -- is there room then, for some other insurance company, to really blast out of the gate with a totally different approach?
KEN: Someone could lead with this approach, start up a brand new insurance company, and it would attract people who are receptive to this message. And by doing so, they would have very good claims experience, therefore they could change a very low rate of premium. And anytime you have low premiums, that attracts more people to that business. So you would eventually pick up people who are not familiar with this message, and then that gives you a chance to educate them. So it does have potential as a start-up, as a disruptive-type company to really make a go at it.
HOWARD: There's also the danger -- like a charter school coming and poaching away all the highest performing students and the best teachers -- so if an insurance company comes along and takes all the healthiest people, the Whole Foods crowd -- they take those people out of the pool, and then those people [left behind], their insurance skyrockets.
KEN: That is exactly the risk, that's true. And I think, if something like that were to start to happen, then it would at least give additional attention to this approach. And maybe people would start talking about it a little bit more, whereas now, it's really not in the everyday vernacular.
HOWARD: And maybe an enlightened state government or federal government could subsidize people's insurance policies that kept them out of the Emergency Room, or [eliminated] the risk of diabetic coma and heart attacks, and all the things that taxpayers would end up [paying for].
KEN: And we've talked a lot about the private insurance industry, but you really can't talk about health insurance without talking about where the big money is, and that's in the government programs of Medicare and Medicaid. And especially Medicare covering the over 65 population, that's really where you see the impact of all these chronic diseases that've been building up. I mean, probably 99% of the American population has a chronic disease, they just don't know it yet. And it will only surface when they turn 65, 70, 75, and if the Medicare system would just put this out there as an option, then I think it really would get a lot of attention.
HOWARD: In that case, I think you can really clearly see the influence of pharmaceutical money on politics, because they're the ones who stand to lose if people were to switch from Bayetta to broccoli. So it becomes a lot clearer and more transparent, why we have this dysfunctional system.
KEN: And there's always talk about Medicare, and how long that will last, and is the Medicare trust fund going to run out in ten years. If this were to spread in the Medicare population, for one that concern would go away, and two, you're really talking about money that would be freed up to go to much more productive causes. Right now, 18% of the economy is spent on health care, which includes Medicare and other things, but [a portion of that] could instead be spent on roads or on education -- you name it -- but right now we've got 18% of the economy going to health care and it's increasing with no end in sight. That number just keeps going up and up, and if we could even just address Medicare, that would be a significant portion of it right there.
HOWARD: So what are your plans over the next months and years to get this message out and convince people?
KEN: Well, I just keep talking to people in the industry about it, and trying to explain the concept to them and how it could benefit society. It's really a win-win for everyone. And as you mentioned there are certain interests, and even the insurance industry who may, in the short run, worry about bringing in less money, but we really need to focus on what benefits society as a whole because if health care costs consume too much of the economy -- if health insurance premiums become too expensive for the average individual, then we really have more serious problems to address, so we really need to think about how this impacts the economy as a whole.
HOWARD: We're all in the same boat -- someone's making money, [but it's by] drilling holes in it. That's not good for the rest of us. Well, Ken Beckman, thank you so much. This has been illuminating and fascinating. I think I'm much smarter now about what some of the limitations are and what the possibilities are for structural changes and the way we think about health.
KEN: Well, I appreciate you giving me the opportunity, Howard, and I appreciate the work that you do.
HOWARD: Well, take care, and I'll include a link to your paper in the show notes so that people can read it and see for themselves. Let's stay in touch, because I have a feeling someone's going to make a trillion dollars off of this.
KEN: Well, whoever makes it, that's fine with me.
HOWARD: All right, take care, Ken, and thanks again.
Download the PDF Transcript here (courtesy of Traci Scharf)
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