Healthcare transformation is in the news again. Once again the dialogue will focus on the most frustrating constant of providing care: costs always increase. But there is another constant in healthcare that rarely makes the mainstream discussion: over half the costs are due to the lack of engagement of the chronically ill with their therapy. The CDC says that 86 percent of all U.S. healthcare costs are due to chronic disease and over 50 percent of those costs are attributable to patient behavior. Responsibility for the lack of attention usually focuses care givers, i.e. the need for Accountable Care Organizations, and occasionally politicians who believe this is a \u201cthird rail\u201d topic. The reality is a problem of this magnitude is going to take the best efforts of all parties \u2014 payers, provider, politicians and patients. Unfortunately one party, the payers, are not yet engaging on changing the behavior of the chronically ill and, in my experience, in fact have financial policies that push in the opposite direction.\n\n\nI have been a T1D (Type 1 Diabetic) for over 40 years. I have lived through treatment transitions from animal insulins to human insulins, slow-acting to fast-acting to long-acting insulins, urine tests to home blood testing to A1Cs, syringes to pumps, finger pricks to continuous glucose monitoring, and recently closed loop pumps and CGMs to create an artificial pancreas. My ability to treat my diabetes with tighter control has become easier and more effective with every technology advance.\n\n\nBut there has been one constant throughout my 40 years living with this chronic disease \u2014 insurers and employer-payers have not just failed to encourage my self-treatment, they have impeded it. Here are the realities of insurer\/payer treatment of diabetics:\n\n\nPharmacy formularies offer no low-cost generic insulins for patent-expired medications.\nThe more I test myself and the more diligent my insulin regimen, the more I pay. Co-payments increase with frequency of treatment as if testing and injecting insulin are undesired behaviors.\nPharmacy formularies try to tell me how much insulin I need based on some unseen average data. They add friction by controlling access to insulin without recognition of the individualized nature of insulin dosing and how the need for insulin changes as a function of circumstances, e.g. holiday eating and sicknesses that typically raises blood sugars as part of the body\u2019s response.\nRoutine visits to my endocrinologist are not treated as preventative care. Thus I pay to practice preventative medicine for costly complications.\nInsulin costs, and thus my self-treatment costs, have increased 400 percent in the last 10 years even though there have been no improvements in the product.\n\n\nA colleague of mine recently told me a story of a harsh CEO who, when he did not understand a subordinate\u2019s report on the business, pointedly asked, \u201cAre you lying to me or are you incompetent?\u201d I don\u2019t agree with the management style, but the question occurred to me the other day when I went to the pharmacy to get my monthly diabetic care giving supplies.\n\n\nDiabetes tops the \u201ccost-by-disease\u201d list of chronic illnesses in the U.S. Diabetes is the poster child of chronic disease and as such can shed light on broader chronic disease problems. Healthcare in the U.S. is once again in a transformative period focused on costs and how policies and behaviors drive them ever higher. The analysis below will show that there are costs to both treatment and non-treatment of a chronic disease and every diabetic knows that it is \u201cpenny wise, pound foolish\u201d to try to save time or money on treatment \u2014 both personally and economically. The question is, why do insurers not understand this?\n\nThe treatment\n\nDiabetes is a lifestyle disease with lifestyle therapy. It has terrible and extremely expensive long-term consequences if not treated \u2014 blindness, kidney failure, heart disease, neuropathy, etc. Insurers and analysts alike refer to diabetes as an epidemic in the U.S., driven primarily by obesity\u2019s connection to Type 2 diabetes, and it has even been cited as the primary reason life expectancy has recently decreased in the US.\u00a0 The treatment for T1Ds is different and more intense than for Type 2s, but the therapy disciplines are similar. The treatments are even converging somewhat when it comes to insulin use.\n\n\nThe way I care for myself and avoid the costly and lifestyle-eroding side effects of diabetes is to eat properly, exercise regularly, test and give proper doses of insulin 6 to 8 times a day. If I do this I can live a normal life and do pretty much whatever I like, e.g. I am a triathlete and half-marathoner. There are T1D Tour-de-France cyclists, Olympic athletes, and any other profession you care to mention. Modern treatment enables us to live normal lives despite the disease. The same principles apply to Type 2 diabetics, although they generally test less and are not as insulin dependent. The key to managing diabetes, and avoiding its side effects, is a healthy, disciplined life style with routine, self-administered medications. Good patient behavior avoids complications and decreases costs.\n\nThe Promise\n\n\nOur mission is to provide high-quality, affordable health care services and to improve the health of our members and the communities we serve.\n\n\nWe are dedicated to helping people achieve health and financial security by providing easy access to safe, cost-effective, high-quality health care and protecting their finances against health-related risks.\n\n\nWe work with members and providers to make health care accessible, affordable and a means by which our members improve their health.\n\n\n\nThese are the mission statements of three large health insurance providers. Similar statements can be found on any insurer\u2019s home page. Note the unanimous commitment to \u201chelping patients improve their health\u201d and \u201cproviding access to cost-effective\/affordable care.\u201d Indeed, these are the key objectives of any healthcare policy discussion.\n\n\nThe best way to improve or maintain the health of a diabetic and reduce the cost of caring for them is to help them practice diligent self-treatment, i.e. the CDC report. If a diabetic tests regularly, matches their insulin to their food intake, and exercises regularly they can maintain good blood glucose levels that will avoid the many complications. Indeed, a recent study showed that increased testing frequency reduces A1Cs by more than 1 percent which saves almost $1,500 per year.\u00a0When diabetics avoid complications they save themselves, their employers, and\/or insurance providers money. By the way, $1,500 per year on 30 million Type 2s is $4.5 billion per year \u2014 real money. So if payers are going to live to their mission statements and provide access to cost-effective care, it follows that they should make diabetic treatment as easy as possible.\n\nThe Costs\n\nDiabetes is estimated to cost the U.S. economy over $322 billion per year. I once heard a health insurance executive say \u201cdiabetes is too important for us to let anyone else determine the approach to care.\u201d They clearly understand the financial importance of diabetic care and prevention for their business.\n\n\nBut here\u2019s the thing. These costs are not the treatment costs of the disease \u2014 not the insulins, syringes, oral medications and test strips critical to a T1D and Type 2. The majority of the costs are the treatment of the consequences of not treating the diabetes.\n\n\nThe annual cost of treatment for a T1D is reported as $7,900 per year by the American Diabetes Association. By my experience this comes from $500\/mo for insulin, $200\/mo for blood testing (50 cents per test strip), and two to four office visits per year at $175 each. Type 2 oral medication can be as low as $35 per month and with good behavior a Type 2 diabetic could have the same office visits at which their A1C blood tests are done. If one takes these numbers at face value, more below, the annual treatment cost for diabetes in the U.S. would be $7,900 times 3 million T1Ds and $420 per year plus four $175 office visits for the 30 million Type 2 diabetics or about $67 billion \u2014 just 20 percent of the of the annual cost of diabetes.\u00a0\n\n\nIf diabetics in the U.S. were to diligently apply their treatments and practice healthy lifestyle behaviors, the cost of the disease could be reduced by as much as $250 billion per year. Diabetes, like most chronic illness, is a lifestyle disease whose costs are dominated by the consequences of not applying the correct behavioral treatment.\u00a0\n\nPenny wise, pound foolish\n\nInsurers and payers routinely ask patients if they smoke and patients pay more if they do. Clearly insurers believe increasing costs for the patient will deter them from unhealthy behaviors. Apparently the converse is also true because insurers have paid members to attend health clubs for years and recently have been jumping on the \u201cif we give them a Fitbit they will be healthier\u201d bandwagon. So, it seems logical that if insurers wanted diabetics to be healthy and reduce the vast majority of the costs, the complication costs, they would encourage diabetics to diligently treat themselves by lowering their costs.\n\n\nBut the cost of the standard-of-care drug for diabetics, synthetic human insulin, has increased almost 400 percent in the last 10 years. That\u2019s a 400 percent increase for a product that has no production limitations and has had no technical improvements \u2014 not even packaging. If you try to \u201cfollow the money\u201d you see that many intermediary parties are making money off treating T1Ds \u2014 this is not only a manufacturer driven problem.\u00a0 In the age of Amazon, none of the parties between the manufacturer and consumer, the patient, have value. Further, in the technology world, customers would expect the price of this product to be cut in half three to five times over the same 10 year period, i.e. Moore\u2019s Law. In the industrial world, the expectation would be 10 to 15 percent annual reductions in production costs or an 80 percent reduction over a ten-year period. \u00a0\n\n\nClearly if they wanted to encourage treatment insurers and payers could reduce patient expenses dramatically by pressuring manufacturers and eliminating intermediaries.\u00a0 By encouraging self-treatment insurers could benefit from savings on the vast majority of the costs. Yet they continue to treat diabetic therapy as a revenue source and continue to increase diabetics' out of pocket costs.\u00a0As payers try to recover 20 percent of the cost of the disease in treatment, they drive the growth of the other 80 percent.\u00a0\n\n\nThe technology world sees the opportunity and has engaged.\u00a0Omada Health has been leading the pursuit of helping Type 2 and pre-diabetic patients change their behavior so as to improve or even prevent onset of their diabetes. They have demonstrated efficacy in clinical trials. One would think that insurers would be paying their diabetic and pre-diabetic members to use the Omada app to help life healthier lives with fewer complications. Yet Omada is the leader for continuing their pursuit of reimbursement so that they have a way to reduce the cost of their therapy for patients via government policy. \u201cThrifty with small amounts of money but wasteful with large amounts\u201d \u2014 penny wise, pound foolish.\n\n\nChronic illnesses are responsible for the large majority of the healthcare costs in the U.S. If we are going to reduce costs and improve the health of the population, we must take a new approach to chronic care. Diabetics and the chronically ill determine their wellness through their behavior and diligence in their self-care. Proper treatment and healthy behavior by diabetics could cut the cost of the disease by as much as 80 percent. New behavior focused treatments are becoming available while the necessary medications and devices have matured to the point where the manufacturing costs could be inconsequential in the cost of treatment if the insurers so chose.\n\n\n\u201cHelping patients improve their health and providing cost-effective\/affordable care.\u201d\n\n\nWould more diabetics be in better health if treatment costs were reduced? What if insurers paid diabetics to test and inject instead of charging them more and more each year? What if insurers paid for subscriptions to patient behavior apps to help them manage their diseases and avoid complications. Smoking is down over 60 percent in the U.S. in the past 25 years. Could insurers reduce more than $250 billion of diabetic costs by reducing the cost of treatment? What if they attacked all chronic illness with the idea of encouraging self-treatment?\n\n\nSeems like it would be worth a try.