American Consequences - September 2018

A reasonably priced system is one that focuses only on essential care. Europeans are particularly interested in how this new partnership evolves, if only because it represents a bold approach in the struggle to lower health care costs. European health care arlier this year, Amazon, Berkshire Hathaway, and JPMorgan Chase announced plans to create a company that would help their employees in the United States obtain health care “at a reasonable cost.” While details remain sparse, the potential impact is already known: with a combined global workforce of more than 1 million people, the partnership could overhaul how health care is organized and delivered in the U.S. and beyond. By creating a joint venture “free from profit- making incentives and constraints,” the initiative aims to do something remarkable: put patients first. According to Berkshire Hathaway CEO Warren Buffett, the goal is to rein in ballooning health care costs – a “hungry tapeworm on the American economy,” as he put it – while enhancing patient satisfaction and outcomes. Today, most of the U.S. health care industry is profit-driven, and this is reflected in nearly every decision, from which drugs get developed to who gets insured. But in a country that spends roughly 18% of its GDP on health care, yet lags far beyond other rich countries in health outcomes, something is clearly amiss. It is into this dysfunctional environment that the three corporate giants are intervening.

regulators are often hesitant to implement structural reforms. Although authorities in some countries have explored innovative management models, such as patient- centered care and value-based medicine, the basic structures have remained unchanged for decades. Shake-ups like the one being discussed in the U.S. get everyone thinking. Still, despite the proposal’s promise, big questions remain. Most important, what does “reasonable cost” mean, and how might a system be organized to deliver it? In a statement announcing the partnership, Buffett was surprisingly candid in how undeveloped the idea is. “Our group does not come to this problem with answers,” he conceded, only with a shared ambition to find them. Maybe I can help. Based on my research and experience, I would suggest that three key objectives must be assigned top priority if the initiative is to succeed. The first is to hold down administrative costs. In 2015, OECD countries spent an average of 3.2% of their total health care expenditures on administration and bureaucracy; in the U.S., it was a staggering 8.3%. Although health care requires managerial overhead, in many countries, outdated tools hurt efficiency. Any reform that promises better information management – like improved patient records systems – would be worth considering. Moreover, if the new venture brings big-data analysis and artificial intelligence applications to the clerical side of health care, total spending will naturally decline, and lower prices can be passed on to patients and payers.

60 September 2018

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