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July 10, 2018

The long road to healthcare innovation

Summary:

Although the general reaction to the selection of Atul Gawande as CEO of the Amazon/Berkshire Hathaway/JPMorgan Chase medical joint venture known as ABC was positive and although I continue to think he was an inspired choice, Dan Munro says in an article this week: “Not so fast!” 

The article, which I highly recommend, basically says the problem with U.S. healthcare is too entrenched to be solved even by an innovative venture with cachet and clout, run by someone Dan admires greatly. In particular, Dan argues, the U.S. won’t be able to overcome the odd system that developed here during World War II, when companies were ordered to freeze wages but were allowed to offer health benefits tax-free. Because individuals pay for care with after-tax money, the U.S. relies more than any other country on employers to provide healthcare, introducing a series of mutually reinforcing distortions into the market that inflate prices and make a solution near-impossible.

I confess that, while I always try to find a solution, Dan’s piece reinforces the pessimism I’ve been developing while reading “An American Sickness: How Healthcare Became Big Business and How You Can Take It Back,” by Elisabeth Rosenthal, a Harvard-trained physician who left medicine and spent two decades as a reporter at the New York Times. She lays out in excruciating detail how all the players in healthcare—hospitals, doctors, Big Pharma, insurers, you name it—learned to game the system, and why they will just keep exploiting their edge. She offers a list of 10 rules of the “dysfunctional medical market,” including:

  • More treatment is always better. Default to the most expensive option.
  • As technologies age, prices can rise rather than fall.
  • More competitors vying for business … can drive prices up, not down.
  • There are no standards for billing. There’s money to be made in billing for anything and everything.

Not a pretty sight.

She offers a series of ways to counter the dysfunctional forces, but they’re mostly small ball, and I don’t see any better options for now, given the constraints that she and Dan describe. She basically says to be demanding both about what treatments are prescribed and about prices—as ABC will surely be—but it seems we’re stuck searching for incremental progress while we wait for the current system to finally become so onerous that something has to give. 

Have a great week anyway. 

Paul Carroll
Editor-in-Chief

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About the Author

Paul Carroll is the editor-in-chief of Insurance Thought Leadership. He is also co-author of Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years and the author of a best-seller on IBM, published in 1993. Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.

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