Wednesday, January 31, 2018

Bezos, Buffett, Diamond, the Latest Newbies on the Health Care Block

I found it incredible that health care stocks tanked on Tuesday in response to an announcement from the Amazon, Berkshire Hathaway, and JPMorgan Chase CEOs that they were, as employer payers, going to become game changers in the health care market.

I have seen this movie before. Dozens of times over the last twenty-five years. The first time was when the leading employers in the Minneapolis-St. Paul market began the same effort in the early 1990s. That, and any other such initiative I have seen over the decades, went essentially nowhere.

But, this week, reporters were agog with the notion that these titans of business were going to wade in and change the health care world. After all, together these companies had a combined population of a million-people covered under their health benefit programs.

That is about as many people as Rhode Island and Delaware Blue Cross combined cover. So, I am not quite sure how these CEOs will bring a game changing critical mass to any provider bargaining table.
The CEOs announced to all of us that the place to start is with data.

The health care world figured that out about thirty years ago. Remember the Dartmouth Atlas?

By comparison, UnitedHealth, through its Optum data technology subsidiary, has detailed health care utilization information on over 115 million consumers, four out of five hospitals, 67,000 pharmacies, 100,000 physician practices, 300 health plans, and government agencies in 34 states and D.C.

But on the announcement, UnitedHealth's stock tanked with the other major managed care players, whose capabilities in the arena arguably rival United's.

What's my reaction to all of this?

After a few years of high profile press releases and trade association presentations this one will end up in exactly the same place all of the others have. Nowhere.

Where is the answer?

First, needs to come the realization that long ago we reached the point of diminishing returns attacking utilization. If this were the big answer, we'd have solved all of our health care problems years ago. After thirty years of chasing utilization the meager results we are seeing today from accountable care/value-based purchasing efforts in Medicare should be putting the final nails in that coffin. Expecting providers to cut their income voluntarily by enticing them with little incentive payments is the height of naivete.

If we compare the U.S. systems' costs to the more affordable costs in other industrialized nations, the glaring difference is price not utilization (Uwe was right fifteen years ago, "It's the Prices, Stupid").

Unlike the other industrialized health care systems, the U.S. health care system is the victim of decades of virtually unfettered supply side-economics. The providers had access to unlimited money and kept building it––we all came until we had created a huge self-perpetuating health care industrial complex demanding more and more cash.

By comparison, the other industrialized nations decades ago put and kept their systems on global budgets that have kept their costs affordable.

The market by itself, no single health plan or employer coalition, has proven large enough to put even a dent in the cost march.

What's the solution?

"Global" U.S. budgets that would likely take decades to methodically wean the existing health care industrial complex back down to an affordable and sustainable level.

Does that mean single-payer Canadian-style health insurance is the only answer? That is one way to budget but there are others that could preserve the best of the market with its choices and competition. The amazingly successful Medicare Advantage product is one such example of a private market within a global budget, as is the Medicare Supplement product built on Medicare's utilization and fee schedule chassis. Another is managed Medicaid where most states have turned to health care companies to manage almost 49 million beneficiaries.

On this question of how to implement global budgets is where we should be searching for answers. Clearly our political system is nowhere near the point of being able to have a constructive conversation on this. But it will eventually have to if for no other reason the long walk off a short pier our entitlement costs are currently on.

In the meantime, somebody should tell these newbies their ideas about health care data are already ancient.


Avoid having to check back. Subscribe to Health Care Policy and Marketplace Review and receive an email each time we post.

Blog Archive