A Good Health Care Deal, but Only for Some

Medicare, by law, is not allowed to negotiate discounts on drug prices. But you can bet Amazon-JPMorgan-Berkshire will. Millions of American companies do not have the power, knowledge or data to drive down prices charged by labs or hospitals. But this new company most likely will.

Recent history shows that when the medical system loses income from one sector (in this case, three huge corporations), it is adept at making up for it in another. As the Goliaths wrestle over how much they should pay or be paid, the Davids — small companies, individuals who purchase their own insurance and the uninsured — are often left footing the bill.

Those bills can be astronomical, like $5,000 for an M.R.I. scan or $100,000 for knee replacement surgery. Hospital systems argue that they have to charge such prices because government insurers — Medicare and Medicaid — don’t pay enough to cover their costs. Medicare disputes that. And “covering their costs” is a fungible calculation that can include multimillion-dollar executive salaries.

Commercial insurers negotiate down from those high prices. But while good negotiators can get great deals, others will miss out. And the uninsured often get bills — and collection notices — asking them to pay the highest prices of all.

Some big companies have made efforts to curb prices, with some effect. The supermarket chain Safeway has deployed a technique called “reference pricing,” in which it calculates a price sufficient to pay for a high-quality lab test and radiology test. Employees must select a provider that comes in under that bar or pay the difference. Providers have an incentive to drop prices for this big pool of employees. With reference pricing, Safeway saved $2.6 million on lab tests over three years.

Boeing also contracts directly with systems in Washington and California for some employee care, bypassing insurers. But neither Boeing nor Safeway is likely to have the fearsome arm-twisting clout of this new conglomerate.

The pharmaceutical industry knows it will need Amazon to deliver drugs. Hospitals might want Chase to finance equipment purchases. And who would dare alienate Warren Buffett, who has called health care costs “a hungry tapeworm on the American economy”? The three titans are also likely to insist that the best hospitals — the Sloan Ketterings and Cleveland Clinics — be available to their workers.

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Yes, they may use technology in smarter ways to benefit patients. This might include home monitoring of heart rhythms and blood sugar; diagnosing via telemedicine and iPad; delivering prescription medicines to doorsteps; and bringing medicine into the 21st century with online billing and payment. They may also be able to provide employees some degree of pricing transparency so that they can make better choices.

In doing so they will probably be able to reduce the high administrative costs associated with our health care system, an estimated 25 percent of hospital spending, and give patients more control of their care.

How can the rest of us get in on the deal? If the new health care company permits outside firms and individuals to buy into whatever they create, that could set off a revolution. That new company would, essentially, become a novel insurer — although one that is cheaper, more efficient and patient-friendly. And that could be good for the entire health care system.

But what if the three corporations try to turn their health care company into a profit center? This week’s announcement said the new company is “free from profit-making incentives and constraints.” That doesn’t quite say “nonprofit.” If the long-term game plan of the Amazon-JPMorgan-Berkshire offshoot is to function as a business that is sold to the rest of us to please shareholders, then we may end up pretty much back where we started. And that is not where we want to be.

Elisabeth Rosenthal, a former New York Times correspondent, is the editor in chief of Kaiser Health News and the author of “An American Sickness: How Healthcare Became Big Business and How You Can Take It Back.”

A version of this op-ed appears in print on February 2, 2018, on Page A23 of the New York edition with the headline: A Good Deal, but Only for Some.


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Article source: https://www.nytimes.com/2018/02/02/opinion/healthcare-berkshire-amazon-chase.html

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