Editorial: Jeff Bezos and Warren Buffett’s effort to transform healthcare goes out with a whimper, not a bang

There may be no segment of the economy as ripe for reinvention and reform as the U.S. healthcare industry, which is wildly inefficient and increasingly unaffordable to ordinary Americans. This country spends more than any other on healthcare, devoting almost 17% of its economy to that sector in 2018 — nearly twice the global average — without benefiting from higher quality or more effective treatments.

So when giant online retailer Amazon and investment powerhouses JPMorgan Chase and Berkshire Hathaway announced their “Haven” joint venture in 2018 to provide healthcare benefits with lower costs and higher satisfaction to their more than 1 million employees, it raised hopes that they might come up with a way to disrupt the relentless increases in premiums and deductibles for many families covered by employer-provided plans. The companies were vague about their ambitions — the initial focus, they said, would be to provide their U.S. employees “simplified, high-quality and transparent healthcare at a reasonable cost” — but their scale and record of innovation suggested the venture was capable of great things.

This week, Haven revealed that it would be shutting down. The three companies claimed the effort yielded good information about best practices and the like, but it’s clear that the much-ballyhooed Haven is going out with a whimper, not a bang.

Its demise is disappointing mainly because it dashed the hope that its celebrated parents would make an impact on a problem that bedevils millions of Americans. You might think that Haven could wield the kind of leverage needed to negotiate not just for lower premiums, but for a different, far more efficient approach to care that rewards doctors for keeping people well rather than for treating them when they’re sick.

That’s not what Haven did, nor did the effort appear to be designed to get more bang for the bucks the companies were spending on healthcare. Instead, Haven seems to have looked mainly for ways to use technology to spur change. Maybe that’s because Amazon is a tech company. Or to be more cynical about it, maybe that’s because the partners have such deep financial ties to healthcare providers, it wasn’t in their interest to undermine the business models that have worked so well for doctors, hospitals and drug and device makers.

Regardless, premiums and deductibles continue to rise faster than inflation and average wages, meaning Americans with health benefits continue to pay an increasing share of their income for less access to care. According to the nonprofit Kaiser Family Foundation, employees paid an average of $7,470 for single coverage in 2020 and $21,342 for family coverage, which was 4% higher than the year before. On average, employees are paying almost 50% more for individual coverage than they did in 2010 while facing deductibles that are twice as high, the foundation reported.

Lowering the cost of healthcare is key to holding down premiums and making care more accessible in this country. Experts say that there are multiple factors involved, but the biggest one is that providers charge more here than they do in other countries for their services. Among other reasons, that’s because those services may include too many unnecessary or wasteful procedures, carry too many administrative costs, or use specialists or hospitals to deliver care that could be provided by a nurse or primary care doctor in an office or at home.

Nor does it help that many providers face little effective competition in their local markets, giving them the power to set prices as high as the market will bear. Even huge companies lack leverage when bargaining with dominant hospital chains or physicians groups if their employees are scattered across the country or the world, as is the case for the three Haven partners. And rather than forcing real changes in business models, insurers in the United States have largely been content to pass the ever-increasing costs on to their customers — both employers and covered employees.

Haven may not have lived up to its hype, but there are signs of progress in other areas. Big programs like Medicare and CalPERS have pushed new approaches that incentivize providers to do more with less and to actually compete, such as the flat fee CalPERS offers for hip and knee replacements, which has helped drive down the price of those surgeries for all Californians. And telemedicine, which has expanded greatly during the COVID-19 pandemic, could catch on as a low-cost alternative to doctors’ offices, urgent-care clinics and even hospitals — if providers don’t treat it instead as a source of extra revenue.

Ultimately, consumers need insurers, employers and other major healthcare payers to pull back on the ever-growing amount of money flowing into the system. As Jack Needleman, chair of the Department of Health Policy and Management at the UCLA Fielding School of Public Health, observed: “Once you begin imposing restraint on revenues, you can expect to see constraint on spending.” And that, in turn, will help break the cycle of cost increases that are making coverage and care less accessible.