Anyone not blinded by the billionaire star power of Warren Buffett, Jeff Bezos and Jamie Dimon could have known that their project to solve America’s healthcare woes was a dead duck from the start.
The venture, ultimately christened Haven, was announced in January 2018 to a blast of fanfare.
Their plan, the trio explained in a joint statement at the time, was for their firms to create “an independent company that is free from profit-making incentives and constraints” and to focus on “technology solutions” to the healthcare cost mystery.
We have good ideas on how to reduce costs. They mainly involve a variety of ways of saying ‘No.’
David Anderson, Duke University
Since their firms were Berkshire Hathaway, Amazon and JPMorgan Chase, frissons of excitement permeated the public sphere, while disquiet ran through the healthcare sector. Stocks in drug companies, hospital networks and health insurers plunged. For a moment.
The moment has passed. Haven announced Monday that it will be shutting down at the end of February. Despite the excited expectations that accompanied the original announcement, the venture will leave barely a footprint on the American healthcare landscape.
The tone of the shutdown announcement is almost one of mortification. The venture claims to have “piloted new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable.”
Possibly the organizers hope no one will notice that three years later, primary care is not easier to access, insurance benefits are as opaque and arcane as ever, and prescription drug pricing is as much a public scandal as it was back then. Whatever gains in any of those categories have been achieved have been due to the Affordable Care Act, which was passed in 2010.
Haven says bravely that “it will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of their own employee populations.” Cleverly, the announcement doesn’t actually share with the rest of us what “insights” it gained.
It’s easy to say in retrospect that this venture was doomed, but doomed it was. Not to brag, but we said it at time of the announcement. (OK, to brag.)
The flaw in the billionaires’ reasoning was that controlling healthcare costs required some kind of deep magic that only they could access. If that were so, then their venture might have been truly ambitious.
But it’s not so. There’s no mystery about why America’s healthcare system is so expensive — roughly twice the cost, per capita, of the average spending in other developed countries. The solution was set forth in a seminal 2003 paper by Gerard F. Anderson of Johns Hopkins and the late Uwe Reinhardt of Princeton, titled: “It’s the Prices, Stupid.”
Americans had fewer hospital admissions per capita and shorter stays per admission than other developed countries, they pointed out, but paid more per admission and per day. The same goes for pharmaceutical prices — the U.S. paid the highest prices, by far, for drugs.
“We have good ideas on how to reduce costs,” health policy expert David Anderson of Duke University told me at the time of the Haven launch. “They mainly involve a variety of ways of saying, ‘No’ or at least saying, ‘No, not at this price.’”
Part of the problem is the profit motive that infuses much of American healthcare. The founders almost had their finger on this aspect when they talked about creating a venture “free from profit-making incentives.” But that was never more than a glimmer in Haven’s program.
Haven’s founders didn’t even have to look overseas for examples of national healthcare systems that had solved the mystery of costs. They only had to look at Medicare, Medicaid and the Children’s Health Insurance Program. All three public programs did perfectly well in controlling costs, and still do.
All place limits on reimbursements to doctors and hospitals, some more stringent than others. As the Kaiser Family Foundation reported, the spending by America’s public healthcare programs very closely matches that of other developed countries, at about 8.4% of GDP.
Where the U.S. is an outlier is in spending by the private sector, through commercial health insurance. There the U.S. spends an additional 8.6% of its GDP on healthcare, compared with only 2.4% by other countries.
As I wrote then, the problem of healthcare costs in the U.S. boils down to political will and political power. The healthcare lobby comprises hospitals, physicians, pharmaceutical companies, device manufacturers and health insurers. All have an interest, individually and combined, to fight efforts to cut their take of the pie.
The end of Haven suggests that Buffett, Bezos and Dimon never took on the political forces that govern the American system of healthcare. These three billionaires certainly had the combined heft to have stood up to the healthcare interests.
They might have lost the battle, but their voices would have been heard. And by focusing on the political component of the system rather than seeking some mythical technological grail, they would have been offering a prescription suited to the malady.
But Haven doesn’t appear to have been much more than a press release. That goes to its hiring of Atul Gawande, a high-profile Boston surgeon, Harvard professor and well-respected writer on healthcare issues for the New Yorker, as its chief executive. Gawande glittered as a frontman for a high-profile venture, but he had no experience running a corporate operation. He stepped down in May.
In a way, the three billionaires may have left the healthcare landscape in worse shape than they found it. The end of Haven will be taken by many people to be a signal that the American problem can’t be solved at all — if these three can’t manage it, who could? But it can be solved in the U.S., just as it has been solved across the developed world. The founders of Haven just had their eyes on the wrong prize.