haven, the adventure to disrupt the usa. uu. health care formed by amazon, berkshire hathaway and jpmorgan chase, is dissolving less than three years after its launch. When it was formed, the three companies had a lofty goal: “to provide us workers and their families with simplified, high-quality, transparent and affordable health care.” Atul Gawande, the famed author and surgeon, was hired as CEO, and Jack Stoddard, who served as General Manager of Digital Health at Comcast, took over as COO. what happened next was a slow drain of talent. Stoddard left just nine months after being hired, and Gawande left a year later.
despite the companies’ combined $1.2 million. employees and incredible market power, it just didn’t happen. why? there are three factors:
insufficient market power. Despite their 1.2 million employees, Haven’s three constituent companies still did not have enough market power to obtain lower prices from suppliers. The main reason is the consolidation of health systems that has occurred in the United States in the last 10 to 15 years. Unless an employer group has a large share of the local market (more than 50% of eligible employees), providers do not change their prices. Since the employees of Haven’s three companies were scattered throughout the country, they couldn’t dominate a single market.
Perverse incentives. We still live in a world where the higher the proportion of hospital beds that are used, the more they are paid. consequently, the us health system focuses on treating disease rather than preventing disease in the first place. Unless we replace volume-based fee-for-service reimbursement with a capitation model that pays providers a fixed amount per member per month and is linked to health outcomes, hospital leaders will still have no incentive to maintain to people outside of hospitals unless their health system is also a health insurer, a path that a handful of organizations, including Kaiser Permanente and Intermountain, have taken.
Since insurers and providers make huge profits in the existing dominant system, they have little reason to change and accept the risks of a fixed-price capitation system. Despite the efforts of the Centers for Medicare & medicaid services (cms) to encourage health systems through accountable care organizations (acos) to take such risks for medicare enrollees, not many have been willing, and most have retained their fee-for-care arrangements. relatively secure service with the government.
bad timing. the covid-19 pandemic has changed everyone’s approach. providers have had to devote all their energies to managing the crisis and have suffered a severe economic blow due to the postponement or cancellation of elective and non-urgent procedures. consequently, they are not considering new ideas until the crisis subsides, and even then, they are unlikely to consider taking on new risks. In fact, the CEO of a large academic medical center told me, “We plan to scrap as many venture contracts as we can over the next two years.”
what can be done? as discussed in a previous article, i think the incoming biden administration should focus on expanding the affordable care act (aca), specifically medicare advantage plans, to make affordable insurance coverage available to people under 65 years. With the creation of the so-called “public option”, people under the age of 65 could obtain insurance on their own and employers could offer Medicare advantage plans at rates established by the government. Thirty-five percent of Medicare enrollees choose these plans today and are very satisfied with them.
Employers may offer competitive Medicare Advantage plans to their employees through a public option or customized private exchange. they would pay 20% of employee wages into a pool to participate, a cost that would be less than the 25% to 35% of employee wages now paying for commercial insurance. This coverage could also be offered as an auto-enrollment plan for the poor, and Medicaid enrollees would be offered the same competitive options. if large corporations want to self-insure, they could still do so, but at a substantially higher cost.
In this scenario, there is no mandate, only choice. it’s the only way to bring employers, insurers, providers and government to the table in a bipartisan way. might work, nothing else has.