FAIR Health Board Access Interview with Robert Parke

Having recently joined the FAIR Health Board of Directors, Robert Parke, FIA, ASA, MAAA, brings a unique perspective that is founded upon a distinguished, international career. Mr. Parke is a principal and consulting actuary with the New York Office of Milliman, where he provides actuarial and consulting services to health plans, regulators and healthcare providers. Throughout the course of his career, Mr. Parke has led work with insurers, hospitals and physicians in the United States on a number of issues such as emerging alternative payment models (e.g., bundled payments and Accountable Care Organizations). He also has worked extensively on health insurance issues in Western Europe, Canada, the Middle East and Africa. A fellow with the Institute of Actuaries, an associate of the Society of Actuaries and a member of the American Academy of Actuaries, Mr. Parke has served as the Chairman of the American Academy of Actuaries Disease Management work group. FAIR Health Access recently spoke with Mr. Parke about the healthcare landscape and the future of transparency.

FAIR Health: What influenced your decision to pursue a career as an actuary in the healthcare sector?

Robert Parke: Fortuitous events, more than anything else, led me to become involved in healthcare. I completed my actuarial exams in South Africa where, at the time, there was not much actuarial involvement in healthcare. I was working for one of the large South African life insurance companies that also owned what was called a “medical aid society”—essentially a not-for-profit health plan. South Africa is very similar to the United States in terms of having a predominantly private health insurance market. My company and other life insurance companies became more involved in healthcare as a result of changes in regulation. I continued in the healthcare sector because it was, to me, much more dynamic than the more traditional actuarial fields of life insurance or pensions. It seemed to be more directly relevant to individuals; there were multiple stakeholders and numerous issues to address.

A few years later, when I moved to the United Kingdom (UK), some of the actuarial consulting firms were starting private health insurance practices. Given my background, I was hired by Milliman’s affiliate in the UK as it was starting to develop a healthcare actuarial practice. While in the UK, I met my wife, who is American, and we later moved to the United States. Health actuarial work in the United States is incredibly diverse and over the years I have been fortunate to be involved in what has always seemed to be an important national discussion.

FH: Based on your international experience, how do the challenges associated with health coverage and care in the United States compare with those of other countries? What lessons from the international sphere can be applied to the US healthcare system?

RP: While different social values underpin the healthcare objectives in all of the countries where I have worked—South Africa, parts of Western Europe, the Middle East and India—cost and access, and the balance between the two, are a common theme.

It is somewhat of a misnomer to think of the United States as having just one healthcare “system.” Instead, I think of the United States as having lots of healthcare systems, with examples of some of the best and the worst systems in the world. However, a key difference between healthcare in the United States and in other western countries is that it is not clear to me that there is a general consensus in the United States that healthcare is a basic human right. In other western countries, there is no question about that and they are more willing to discuss the fact that resources are limited, and how best to allocate and deploy those resources. In the United States, we still need to have that discussion and ultimately develop a consensus around what we pay for, how much and how we pay, and under which circumstances we pay.

Anecdotally, last year my mother passed away from cancer in the UK and at the same time we had a very close friend who was diagnosed with cancer here in the United States, so we were dealing with two different healthcare systems simultaneously. There were positives and negatives in both cases. In the UK, doctors were much more willing to talk about the efficacy, costs and value of certain treatments. It was quite clear that the National Health Service in the UK had made some rational decisions around whether the treatments provided value. In the United States, there was no similar discussion around treatment and outcomes or much about side effects; however, it seemed that there were more options and, if you were willing to engage, more control. In the UK, a little bit of that control was taken out of your hands through the national decision-making process. Doctors there were also much more willing to have a discussion about the fact that death is part of living. Of course, it is difficult to generalize, but given what I know about our system and the UK’s system, in my mind, these experiences seemed to reflect some of the differences.

FH: Your work has focused on alternative payment models that promote value-based care. What are the characteristics of payment models that successfully promote high-value care?

RP: Value-based initiatives are an attempt to align incentives with evidence-based outcomes as opposed to aligning incentives with activity, which, in my opinion, is the key characteristic of an effective payment model. In many ways, value-based incentives are also an attempt to align multiple physicians, hospitals and other providers in the patient’s treatment by breaking down some of the barriers that exist among these providers. Another important aspect of this involves data. All providers who participate in value-based programs need access to data across the care continuum in a timely fashion to help them manage toward desired outcomes. Most of these characteristics are not present in fee-for-service payment models.

FH: The healthcare sector is experiencing tremendous disruption and transformation, underscored by the increasing emergence of mobile health apps, alternative care settings (e.g., telehealth, urgent care centers) and provider consolidation, among others. Which elements have the greatest potential to transform how we deliver and pay for care? What do you think the healthcare sector will look like in the next few years?

RP: Assuming the goal is to reduce costs and improve quality, my view is that, while all of these innovations are important and may very well benefit an individual patient, none of them are likely to move the needle very much. By some measures, 30 to 40 percent of any care is probably inefficient or unnecessary. Innovations that move the dial by maybe a quarter of a percent become completely overwhelmed by waste in the system. There is a general consensus that waste in the healthcare system is driven by misaligned incentives. Until the incentives are correctly aligned, all of these more limited innovations, while helpful, will not solve the issue.

On some level, provider consolidation potentially is an innovation—if you want to call it that—that could move the needle if it is part of an attempt to align incentives more appropriately. However, in some cases, it appears that provider consolidation has been used to concentrate market power, as opposed to improve efficiency. I believe that will change in time. Certainly when provider consolidation is tied with value-based models, there are more incentives to drive a realistic discussion with providers about what, where and when services are provided.

FH: Certain payors now provide services that address social determinants of health (SDoH), such as food insecurity, in order to advance population health and contain costs. From an actuarial perspective, to what extent might widespread approaches that address SDoH result in changes to plan designs (e.g., lower cost sharing) and lower healthcare spending? How can solutions that address unmet social and environmental needs be made scalable and sustainable?

RP: One of the impediments of the fragmented nature of our healthcare system is that accountability for SDoH is not always aligned with who is paying for medical treatment. One of the challenges is, again, to think about how to align all of those incentives. Certainly in some of the western European countries, it is easier to think about that than in the United States. For example, in the United States, a health plan may have little incentive to address social determinants with a long-term impact if its engagement and financial liability with a member is limited to only a year.

With respect to Medicare and Medicaid, the question becomes: Who is paying for what part of the treatment? Medicare is paid for by the federal government, and Medicaid is paid for by both the federal government and the state, so aligning who pays for the different parts has been a challenge. Clearly there’s a need to address social determinants, and it is even entering the discussion from a policy perspective. For example, the Medicaid program in Massachusetts has introduced SDoH into its risk adjustment methodology, which drives how the state reimburses Medicaid managed care plans.

FH: To what extent has the current healthcare landscape affected the way in which cost transparency is figuring into the national conversation on costs? What is the future of healthcare cost transparency?

RP: While policy makers have discussed the lack of transparency and misaligned incentives for some time, mainstream media have only recently started to discuss these issues. The lack of transparency discourages accountability and drives waste in the healthcare system. In some ways, payors and providers have not had many incentives to be transparent around pricing and treatment options.

I believe transparency is a first step toward identifying the opportunities for improvement in the healthcare system—though I am not Pollyanna about that. One aspect to bear in mind is that one person’s waste or cost is somebody else’s income or job. A significant portion of what we spend on healthcare is what might be considered medically unnecessary or inefficient, but that money is being spent on building hospitals and providing jobs—not only for physicians and nurses, but for cleaners and food service workers in the hospitals. There needs to be a balance, and transparency and good data are the first step in a rational discussion about what is the appropriate balance.

FH: FAIR Health has continued to lead as a source of independent and objective price and utilization information. How are claims data valuable in addressing the system’s current challenges? Looking to the future, how would you predict FAIR Health’s role will evolve, particularly with respect to actuarial practice?

RP: FAIR Health’s data, and similar data, are obviously a starting point for, and an important contributor to, the discussion of the healthcare system. We can begin the discussion in terms of what the data are showing us when there is agreement that the data are credible and reliable and not biased toward a particular vested interest. That said, while healthcare data are important from a policy perspective and a future-of-healthcare perspective, patients and members also need to be comfortable that their privacy and rights are being respected in this discussion.

Reliable data are the foundation for anything an actuary does as actuarial science essentially involves projecting outcomes into the future and making decisions based on the models and projections. Data such as FAIR Health’s are starting to encourage important discussions. With the current push toward transparency, FAIR Health will become only more important because FAIR Health was created almost in foresight of this move toward transparency before it became so mainstream.