Holistic Solutions for Healthcare Reform: Conversation with Mark Litow, CAUS Chairman

Introduction

Mark Litow is the chairman of the Concerned Actuaries of the United States (CAUS), an organization he helped establish to address critical issues in healthcare and social insurance. His extensive experience as a partner at Milliman fostered his passion for health care reform. In this recent conversation with Jim Wood, strategic counsel to CAUS, Litow shares the origin story of the Concerned Actuaries, delving into the challenges facing the nation today. He emphasizes the necessity of interdisciplinary thinking and holistic solutions to tackle these complex problems, underscoring the importance of integrating principles from economics, medicine, and accounting to create sustainable and effective policies.

Interview Transcript

Jim Wood

Good morning, everybody. This is Jim Wood. I serve as strategic counsel to the Concerned Actuaries of the United States. It has been my pleasure to work for many years now with my friend, Mark Litow, who is the chairman of the Concerned Actuaries of the United States. Want to welcome you Mark, and we're gonna get right to it. Where I'd like to start is kind of where you started. I'd be interested if you could talk to us a little bit about how you decided that you were going to be an actuary? Where did you get that done? And what did your first couple of jobs look like?

Mark Litow

I was a student at University of Wisconsin Oshkosh with a math major and an English minor. I don't think my advisor had ever heard of an actuary I certainly hadn't. And I really didn't like the theoretical parts. I loved the practical parts. I always loved working on models and trying to figure out macro types of problems. And right near the end of my senior year. I was looking around and I got an interview with Northwestern Mutual since I grew up in Milwaukee, and they explained to me what an actuary was. And the exams didn't scare me off because, you know, at that time, there were 10 exams which took 10 to 12 years to pass. But as soon as I heard it, I knew that's what I wanted to do. I started studying for the exams and went back to Ball State where I got a teaching assistantship and got my master's in Actuarial Science and that's what led to where I am now.

Jim Wood

So when did you start with Milliman? What happened between Ball State and Milliman?

Mark Litow

I was at Ball State for two years and graduated in May of 1975. And I received offers from I believe, five different places, insurance companies, consulting, healthcare, pensions, life insurance and casualty. But I was from Milwaukee and Milliman offered me a job in Milwaukee. So I decided to stay in Milwaukee and work for Milliman.

Jim Wood

Did you meet Bob Shapiro? Was Bob at Milliman at that point in time? 

Mark Litow

Yeah, that's where I met Bob. Bob was at Milliman at that time, he was a life actuary, I was hired by Bill Halverson to work in health. But Bob did a lot of what are called merger and acquisition type of valuations where we valued entire insurance companies, which could include various types of business, including health. And so that's how I started working with Bob.

Jim Wood

And then when did you become Director of Health at a time that the company was expanding internationally? Can you take us to that moment in time and talk a little bit about what happened in that period?

Mark Litow

Milliman decided to expand internationally. We already had a couple of practices overseas, one in Japan, through Allen Aflac, who I also knew, and the way Milliman works is they would, for each of the disciplines, which should be casualty, life, health and pension, they would set up directors for each of those areas, and for international, they would have separate ones. So I was made international director, shortly after we really got going starting health practices. So I got very involved in a number of countries where we are starting practices and I invested in those practices.

Jim Wood

What's that timeframe?

Mark Litow

I started Milliman in 1979 And I was working primarily in what was called individual health at that time, which is a very small area, individual health only insured about 5% of the covered population in the private markets. And over time that grew into sort of a health care reform. I became a partner in Milliman in 1991. And I was really the person who was leading the charge on health care reform. I became very involved a few years before that, and it became a passion with me. I became the international director for health for Milliman in I believe about 2000. I really got involved in starting practices, and in a number of places in Hong Kong and South Africa, in England and Netherlands, Australia etc.

Jim Wood

How do those moments in time compare to this moment in time, what's different today?

Mark Litow

Everything. So when I started out, almost all of the work that we were doing would be for insurance companies, sometimes employers, sometimes consortiums, and very occasionally the government. Over time, the government just kept putting more and more rules on health care and getting involved much more heavily in the markets. So the percentage of my work and Milliman's work in general and healthcare, when I started in 1975, was certainly well under 10% of the work we did. By the time I retired from Milliman in 2011, I would say 60% of the work or more was driven by the government. And today that number is even higher. And that's because so many people are in programs such as Medicaid and Medicare, and VA, and others. And even in the private markets, much of the work that you're doing now, as an actuary, is driven by regulations in terms of filings that we never had to do anything like that. For me, it greatly reduced the amount of value that I could add to the clients, including the government, because so much of the work is driven by regulatory requirements.

Jim Wood

So that sort of systemic change, which is a significant one, obviously, what sort of specific challenges do you think it presents to the country, to employers, to actuaries, to citizens?

Mark Litow

Over time and through modeling that I did in in a lot of countries, including the United States, which we did a lot of work for states, we did a lot of work for local governments, as well as private organizations as well, as I worked a lot with two white houses in terms of volunteers, I testified for Congress, and you become aware of the balancing acts that are required with all these regulatory requirements. What I found over time is that the healthcare system was being hamstrung too much by these requirements. And it was really reducing value in the system. And, resulting instead of focusing on creating greater opportunity, and wealth for the country and helping different constituencies, it created a game of trade off where there was a lot of damage done by policies that were creating very substantial, unintended consequences in the early 80s, even even before I became a partner, because I became very involved with the Society of Actuaries, which does education research for this actuarial profession and, and the American Academy of Actuaries, which does public policy, and I was on a number of committees that are already we're asking questions, well, how do we address increasing costs? How do we address problems with different communities getting access to care, etc?

Jim Wood

Let me ask you to put a finer point on some of those things, we've talked about disconnects. And we've talked about misalignments, we've talked about insolvency, what would you say are the three or four biggest challenges? Is it supply demand? Is it access as misallocation of resources? What do you see as the big pieces?

Mark Litow

Well, there's a couple. Governments typically have not figured out how to provide subsidies. Very often they provide subsidies to corporations instead of the people. So the purpose of most subsidies should be to help people learn how to help themselves. So they know either no longer need the subsidy or, at least, are less dependent. And so I worked, for instance, with the World Health Organization a number of times and with their chief economist, Alex Becker. Andthey started to realize that the way they were providing subsidies to populations in numerous countries was not working well, it was creating a lot of dependency on those subsidies, but not encouraging people to learn how to help themselves. So that's one huge disconnect. And that problem has gotten much worse.

There are others. The way insurance is done in much of the world. It's really not based on the purpose of insurance, which is to deal with contingent and catastrophic events. And lots of times insurance ends up providing people with basic needs, and that shouldn't be handled by insurance, which should be handled in healthcare by things such as primary care or other mechanisms. So there's a big disconnect there. Another big disconnect is just the revenue versus expenditure, the whole accounting. Over time as countries’ deficits have gotten worse and worse. We have statutory accounting in the United States, which is totally different than GAAP for generally accepted accounting principles, and they don't follow those basics, which really has created a nightmare scenario. All those disconnects really create big problems in terms of value. Because what you're really trying to do when you put forward legislation is you should not be harming the value of society as a whole. It should be to improve it. But lots of times the unintended consequences turned out to be much worse than the problem that the legislation was intended to solve.

Jim Wood

I guess the logical question now is if those are the problems, what's CAUS doing about the problems you just described?

Mark Litow

There were a couple turning points. Initially, we had created a social insurance public finance section within the actual profession. And then at some point realized that wasn't working, because we became aware that really the fundamental problem was that there were a series of not just actuarial principles, but economic medical principles, accounting principles that weren't being followed. So when they are putting forward these rules and regulations, they are actually encouraging bad behavior by different types of constituencies. And so one turning point was I would go to Washington, and we'd have meetings with the Congressional Budget Office. And we had a meeting in Washington with the Chief Actuary for Medicare, and Social Security, where we laid out some of the problems that we saw, and specifically that these rules and regulations were not following them. They agreed with that, but they really wanted to get Congress to implement a change in social security, which we thought the change was fine, but we said they'll never do that. And at that point, I think we realized we had to take a different approach, and couldn't be affiliated necessarily directly with the actuarial profession through the committee they gave us.

We had to go form our own group called The Concerned Actuaries. And over time, there have been several meetings like that where it became obvious that we had to change the thinking, and the process, whereby these decision makers would act upon problems, they weren't getting the type of information they needed, they were worried about what was going to happen to all these different constituents. So they were doing very narrow thinking, and not holistic thinking, as we call it. And that's what led us really to say we needed to build programs for whatever, whether it be in healthcare or pensions or other areas that could help these decision makers see what was going to happen on a holistic basis.

And I think that was really a turning point for us, we just realized we had to go out and create a basis that decision makers could look at, and start to understand how cost, access, health status, GDP etc, were interacting together. And then we realized, we couldn't just focus on cost and health care, we had to focus on how this affected government expenditures and revenues or the deficit, how it would affect the GDP. And, a lot of other consequences, because the health care system, which by the way, Committee for Responsible Federal Budget, asked us to focus on health care and that's how we got involved there in great detail. We knew we had to address issues of cost, how many people are getting inadequate subsidies, how many people are getting too much subsidy and how many are getting the right level, we had to focus on health status, we had to focus on access to how many providers are there, hospitals, physicians, nurses, etc. The health status of the population which has been deteriorating over time, even after you adjust for age, the impacts on economics, not just GDP, but a whole series of sub factors such as wages and investment, and so forth. And the long term sustainability of these systems because of course, the demographics play an important part. And we know the population is getting older, and more people are retiring, etc. So our system had to take account of all those factors at the same time, across various markets.

And so we built heat maps to say these things are getting better, these things are getting worse. And what are the aggregate implications of all those changes. And as we've built a system out, of course, we recognize there's labor shortage problems, so we have to add in more things on employment and unemployment. Interest rates, of course, are driven by the deficits as is inflation and all these things are interactive. So we are continuing to add those types of factors into the equation. And so ultimately, that will allow the decision makers to make more holistic analyses and recognize that you just can't make changes such as in Medicaid Medicare, what is the government's method of trying to control costs? They keep putting in more price controls, which are basically saying we're going to pay this much for this type of procedure. And they put in all these complex formulas. But as they drive down cost and more people enter these government programs such as Medicaid, Medicare, it forces the providers into very difficult situations where they have to either charge more for other patients, so they can make enough revenue. Or they have to start protecting, which people they can treat. And we've seen this happen over and over again, in the system, and particularly in rural areas, United States, it's getting to be a terrible problem, because there's such a shortage of supply of providers, versus the demands of the population, which tends to be older and sicker.

And so these problems are getting worse. We've run a rural model, now, that's clearly showing there are problems in urban areas galore, but the rural areas are really suffering. And it has dramatic effects across all the signals I just talked about, particularly, you know, economics, if you can't get workers and your people are sicker, how are you going to provide the services you needed for your communities in those places.

Jim Wood

So as I understand it Mark, you wouldn't be he would say to people, look, we started to build his model. And it's become more complex, but also more powerful, because what we're understanding is, we started out with health care, and there's still a lot of work to be done in healthcare. But there's growing interest in understanding how this model might be able to provide other holistic analysis. And my question is, what are you doing with the model now? What have you already done? And where are you now in terms of a potential applications for the model?

Mark Litow

Right now we're, we've put in a proposal for a grant to actually look at all of the major entitlement systems. So that would include things like food, include housing, it would include pensions, social security, all things outside of healthcare, and bringing those all together is a mammoth undertaking. But financing of these programs are very interactive. So if the government is running deficits, and there's a problem that emerges over here in housing, and they put more money, throw more money at that, well, maybe that's good, but maybe that money is coming from other places, and it's causing other problems. So they really need to look at these problems interactively. And when you make a change to one of those programs, or you, you know, expand Social Security benefits in some areas, you expand benefits for disabled, which is another part of the model, what happens to the whole system, whether it's in cost, whether it's in access to care, whether it's an access to services, whether it's because suddenly hospitals are closing are happening all over the country in rural areas, because they can't make it because most of their populations are Medicaid, Medicare. But those are just examples. So we really need to look at all these problems together and see what happens rather than saying, we're going to solve this one thing over here. And that's why our ultimate goal is to create a model that looks at all these areas, and that can help the decision makers translate and understand what might happen if they do this, what might happen if they do that. And how can we create more value in aggregate rather than less value? That's really the driving question. The model is trying to address.

Jim Wood

As you look at the last five years, and what you've been able to do with the model and what you've been able to do with colleagues and your fellow board members and advisors. Where do you find yourself at the moment? Are you optimistic? And where do you see it going?

Mark Litow

Well, I think we are headed in a positive direction. I wish it was much faster because these problems are continuing to grow. The deficits are becoming bigger problems, access to healthcare is becoming bigger problems. If you just watch what's happening in funding for people in areas like Chicago, where the communities are having trouble getting funding for basic needs, the problems are getting worse. The population is getting older, the demographics are creating bigger problems. So I wish we could go faster. But you know, we have to deal with the situation as it is. And we need to bring in, you know, people who can help us with all these disciplines of accounting and medicine and economics, etc. And get some champions for these things and start to face up to the reality because, you know, look, the reports coming from trustees show that social security medicare have serious long term problems. Public pension plans have serious long term problems in many states. And if these things collapse, or benefits are cut, there's going to be a heavy price to pay. And none of us want that. So we really have no choice but to continue forward. But it's a huge mountain to climb.

Jim Wood

Have you had the sense that the last two or three years, say, since the pandemic, as the problems are worse, that local officials that employers are not talking to universally, but do you think there is more recognition of the need for the model, and a more and greater receptivity than you were experiencing say, three, four or five years ago?

Mark Litow

Yeah, I mean, I don't think there's much question many more people recognize the needs for these kinds of tools. Take COVID as a great example. So here we have this pandemic that comes along. And everybody gets obviously very concerned about people potentially dying, or suffering from this virus. But what was the reaction to it? And and can we learn from that? So the next time a crisis comes along, can we have a model in place or some kinds of analytical tools, which will help us pause and think about the ramifications. And that's just one example out of many part of my passion is, I've been worried for decades already about how my kids and my grandkids, etc, were going to handle this. And obviously, those problems and needs are much greater. And like most parents, I want a better future for my kids and grandkids, not a worse one. We're very worried about that. So that's my reason and my passion. And we're going to plug ahead just as fast as we can to help you deal with these problems, and hopefully mitigate them.

Jim Wood

We're down to the last question, what would you tell people that they need to tell their representatives in Congress about this particular situation?

Mark Litow

I would say get your heads out of the sand and let's start dealing with reality. I think the vast majority of politicians know these problems are real, they're smart people, they're not stupid, it's just that politically, it gets very difficult for them, because their constituents are lined up on one side or the other, I think we can still, you know, keep the pain down. Surely there's going to be some pain and not everyone is going to be happy. But it's a lot better than watching situations like Detroit, or Bakersfield, California, or others that have gone through, you know, massive bankruptcies and other things and trying to go back and build from scratch. And I don't think anybody wants that, regardless of what side of the aisle you're on, or your beliefs, but ignoring the problems is not going to make them go away. So that's what the message would be, let's start dealing with them. You're going to have lots of disagreements. But let's start learning from each other and talking rather than shutting down the dialogue.

Jim Wood

And if the county board chair called you up and said, Mark, what are the three most important things I need to know about what you're doing at the moment and what I need to be doing at the moment?

Mark Litow

Well, clearly they need to understand the problem. So in terms, they need to understand what's happening under the programs where they get a lot of their revenues, such as Medicaid and Medicare, what their population mixes, what the labor force looks like, in those areas. And what are the potentials for improvements? So what options could we test, or consider that might start to mitigate some of the problems? So that's where I would start, and if you don't start with the data and understanding what your problem is, it's like having a plumbing leak, right? You don't know where it is? Well, if you just put your finger in one of the leaks, and it may reduce it or push it out somewhere else, you haven't really solved anything. So we need to start looking and understanding what's going on so we can fix the issues that exist.

Jim Wood

Is that the same advice you would give to the head of a rural hospital at this point in time?

Mark Litow

Well, sure. I mean, you know, every different group or situation you have to look at what your circumstances are. What  advantages do you have, what disadvantages and if you have serious problems, whether that be short of revenue, short of providers, whatever you need to address those and understand what the current situation is and then look at your options. But if you don't understand what's going on in terms of supply and demand in your area, in terms of the costs, in terms of labor, in terms of the health status of your population, for you to resolve your problems is not very likely. because you're probably missing an important piece of the equation.

Jim Wood

What advice and counsel would you have if you had the association execs from the accounting firms and the economist firms, etc? What would be your message to those folks?

Mark Litow

Well, I think one of the things we're trying to do is we're trying to, not be just an actuarial organization, we're trying to bring in all these disciplines, need to talk and learn from each other, because we have a series of principles across all these disciplines that we've created. And for our analysis, we believe a lot of the principles within these professions, such as economics, supply and demand, such as within medicine, what we call maleficence, where your idea is to help the patient but you shouldn't be doing something to harm society. And, to me, those are just being violated very seriously. Look, I'm not an economist, I'm not a doctor, although I work a lot with economists and I worked with a lot of doctors and nurses and hospitals, etc. But they know that stuff better than I do. But if we can all talk to each other, learn about actuarial principles and learn about medicine principles, and learn about economics, etc, and accounting. And we can meld those together to try to create a win-win. And that's really critical. And if we're just acting as our own profession, and not worrying about the others, we're going to miss things that are really important. And therefore it's not going to work nearly as well as what is if we put our heads together and figure this out together.

Jim Wood

Is there a question you wanted to answer that I didn't ask?

Mark Litow

I don't think there were probably any, any of those that I didn't hit one way or the other. I just want to see these programs reworked. All these programs make a lot of sense in terms of what they're trying to achieve. And if you want to help the populations that are more vulnerable, it's not about changing those programs or just changing the finance, you have to get the right behavior. And the incentive has to be to help people help themselves to the extent they can, there are going to be people who can't help themselves. And those are different kinds of safety nets. So when people focus on safety nets, they need to think about helping those people, not harming the rest of society. It's not like a zero sum game. So that'd be the one thing I would add. You know, you hear this all the time. Well, if we do this, we have to, we have to make other people less prosperous. But that's not the objective of these programs. It's to increase overall wealth, and help the people who need the help so that their lives are better, and we're not thinking about it that way. So that's what I would stress.