Health and Science

Health care is broken, but some think the time is right to finally fix it

Key Points
  • Change is coming to the American health-care system, Health and Human Services Secretary Alex Azar said in a keynote address at the World Health Care Congress.
  • Centers for Medicare and Medicaid Services Administrator Seema Verma said unlike other parts of the economy, knowing how much things will cost in health care is a "a big mystery."
  • Health-care spending accounts for 18 percent of the U.S.' gross domestic product.
CMS's Seema Verma: It's time health care caught up to other industries

Health care is broken.

It's a common theme at conversations and presentations at conferences. That was no different this week at the World Health Care Congress in Washington, D.C. Yet another idea was also present: Change is coming.

Spending on health care in the U.S. ballooned to $3.3 trillion in 2016, representing 18 percent of gross domestic product. And it's expected to only keep increasing — unless we fix it.

Government officials and industry leaders alike seemed hopeful that innovation in technology and how we pay for drugs could help finally control costs and improve patient outcomes. Any improvements could take a while, but they're optimistic they're coming.

"We all know change represents opportunity," Health and Human Services Secretary Alex Azar said in his keynote address Wednesday. "So I exhort all of you to engage with us on the efforts I've discussed today and take advantage of the opportunities they represent. Because I assure you, in American healthcare, change is possible, change is necessary, and change is coming."

President Donald Trump has instructed his administration to tackle rising drug prices. Azar said Trump wants to go "much further." Trump's expected to address the issue in a speech next week.

Azar, formerly an executive at Eli Lilly, advocated for moving the system toward one that pays for health outcomes rather than simply treatments or procedures. Known as value-based care, some companies have welcomed the concept.

Two pharmaceutical company executives on a panel said within five years, 100 percent of drugmakers will use value-based contracts. One of them, Enrique Conterno, head of diabetes at Azar's former employer, said these type of agreements make sense.

Lilly has made 12 value-based agreements, five of which have been completed and seven that are ongoing. Conterno said lack of regulatory clarity has stalled the number of these contracts the company has been able to execute.

Value-based contracts put patients at the center because they connect reimbursement to actual outcomes, Conterno said. These systems can save payers money, while pharmaceutical companies get paid for the value they provide, he said in an interview with CNBC.

"I like that it basically rewards performance, and I think it's also a great system for innovation," Conterno said. "Then we'll be looking in a system like this to bring innovation and to bring value. Value-based arrangements in a way create an environment where I think everybody can win. We can get great clinical outcomes and great economic outcomes."

Change could also come from Silicon Valley, where companies are trying to use technology to simplify and improve old ways of doing things. However, they could face obstacles unique to the complex health-care system.

"There's a huge capability for change, but other parts are slow to change," Alan Warren, formerly an executive at Google and now chief technology officer and senior vice president of engineering at insurance start-up Oscar Health, said in an interview with CNBC. "The insurer is at the heart of it and can force change to all the other parts, which is why I'm here."

Most agree that in order to truly change things, the system needs transparency, especially when it comes to prices.

In an interview with CNBC's Bertha Coombs, Centers for Medicare and Medicaid Services Administrator Seema Verma said unlike other parts of the economy, knowing how much things will cost in health care is a "a big mystery." Her administration wants to require hospitals to post prices for procedures online.

"We have a long way to go," she said.

People know things need to change. The question now is whether they can do it.