One enduring feature of both investing and health is time arbitrage. This creates a gap where price and value diverge. David Einhorn of Greenlight Capital is one of many hedge fund managers to speak of time arbitrage. “I think one of the inefficiencies in the market is investors are generically too short-term oriented and time arbitrage is one of the best inefficiencies in the market.” Like a molar, long and hidden, a firm’s value is deeply rooted in future profits. Rarely does missing a quarter’s expected numbers by 5% justify a 10% same-day drop in the share price. This is the classic market overreaction to short-term news.
Long-term health purchasing decisions and their compounding effects are huge. This is not the 10,000-steps-a-day or eat-more-organic-kale parts of healthcare–the impact those have are obvious but the decisions are personal and long-term. The decision on how to invest for future healthcare expenses, how to choose plans, where to buy prescriptions, how to argue and what to say when confusing bills come, and how to think about 5-10+ years worth of health expenditures are easy to set thoughtlessly on auto-pilot. Explicitly overpaying is intuitive. But what about the cost of being over-insured? What about what we miss by not using benefits differentials to negotiate higher pay? There are many ways to be a healthcare consumer stuck on a path of inertia. Many don’t engage in the healthcare system often but over time we all do. And what you don’t know can hurt you.
One challenge is what consumers see in healthcare is short-term. Plans reset every 12 months. “It’s December, use your benefits before the year ends.” Enrollment is once a year and most make a decision in a portal or just wish it could be put on auto-pilot. Fridges can be fun to shop for. Health plans not so much. Subtle and not so subtle levels of friction put employers and employees at odds.
While people argue about how things should be, new healthcare models with long-term horizons and better incentives are growing. Direct Primary Care (DPC) is one and now numbers over 1,500 practices. DPC is a Costco-like membership model at odds with an insurance-centric model of 8-minute/$150 visits, where patients, doctors, and screens all awkwardly dance to the glow of a screen meant to capture billable events. With DPC, for $50-80 per month, you get unlimited visits. You can text or email your doctor. Some will even visit your home to stitch up your son’s knee after botching a bike jump landing. Generic drugs are often dispensed at 70-90% off what you’d find at even the cheapest pharmacy near you. Networks don’t change every year and there’s a 5-10+ year relationship with aligned incentives. DPC practices don’t funnel you to their hospital’s expensive downstream care. Their goal isn’t to maximize documentation for CPT billing codes.
We all need advisors and gatekeepers of sorts in some domains of our lives, especially around long-term decisions that compound for or against us. We all will eventually need extensive help with healthcare interventions but now could use a hand on how to make the compounding effects of all the purchasing decisions work in our favor. Even baby Yoda needs a Mandalorian to keep him from messing with the ship’s controls.
Photo by John Paul Summers on Unsplash
