The news that Haven, the joint health venture between Amazon (AMZN), Berkshire Hathaway (BRK-A, BRK-B) and JPMorgan (JPM), will be dissolved next month came as no surprise to many health experts.
The venture that formed in January 2018 caused healthcare stocks to plummet in anticipation of a large-scale cost-saving strategy – largely led by belief in Amazon’s potential to disrupt another industry. But the dissolution proves what some opponents have said since the beginning: there is not enough space for employers, no matter how big, to put pressure on the system.
“Hospitals in the U.S. receive a lot of money because of market power, the employer-based health insurance model, consumer demand for a wide choice of providers and a fragmented system,” said Loren Adler, associate director at USC-Brookings Schaeffer Health Policy Initiative.
Another problem that experts noted is that Haven has never had any visible impact, even though companies claim to have obtained a vision that can be applied in the long run.
Haven’s failure “is not so much because employers or insurers have never tried to control costs. It was not always clear what new added value Haven brought to the table, ”Adler told Yahoo Finance.
Larry Levitt, executive vice president of health policy at the Kaiser Family Foundation, said that Haven is just the latest victim in a field of attempts to shoulder the costs of healthcare.
“Healthcare providers and insurers have a significant influence on the market and this is difficult to overcome when trying to control costs,” Levitt told Yahoo Finance.
Insurers have been offering plans with more restricted sets of service options and healthcare providers to help cut costs, but for larger employers this results in unattractive health benefits for employee retention, said Levitt.
“These were three very powerful companies that seemed to have common goals for dealing with healthcare costs, but these companies had their own individual ambitions and bureaucracies that Haven was unable to overcome,” he said.
Adler also pointed out the fact that, even though the benefit to financial results is an incentive, employee retention and the tax credits that employers obtain for benefits serve to maintain the status quo.
“I’m not surprised that (Haven) failed,” said Adler.
Dr. Howard Forman, a health policy expert at Yale University, told Yahoo Finance that he initially had a lot of faith in the idea that big employers like the three who formed Haven had the incentive – with so much money at stake – to be able to change of impact. But he also had doubts when Dr. Atul Gawande, a celebrated health policy speaker and thinker, was named CEO, largely because Gawande was not known as a manager, and a white paper he presented as a potential solution to the cost issue was never published.
“I’m losing faith that employers can fill that void now,” said Forman, pointing to government entities and innovation in the government sector as likely to have the most impact.
“Even though they don’t control the vast majority of (health) dollars, they control the vast majority of profits,” said Forman, noting that the most profitable patients for healthcare systems are those covered by commercial insurers.
Medicare and Medicaid tend to have lower reimbursements, usually covering less than the cost of services. For this reason, commercial insurers are seen as the bridge to the revenue gap, and more. Employer-sponsored insurance remains the majority of coverage in the country.
But the federal government, both as a payer through Medicare and as the nation’s largest employer, can move the needle, Forman said.
I am still always hopeful that large and influential employers will be more engaged in addressing healthcare costs. But, as the failure of the Amazon-Berkshire-JPMorgan effort illustrates, political engagement can be more successful than trying to disrupt the health care system. https://t.co/2tMLgpXOWI
– Larry Levitt (@larry_levitt) January 4, 2021
Reality check
The news from Haven comes amid the coronavirus pandemic, pressure from the Trump administration for greater transparency and a new Congress and a new executive administration.
“Trump certainly deserves credit for breaking the impasse” on prices, said Kitt’s Levitt, but it will be up to the next Biden government, which has already been in contact with Gawande, to induce further changes.
It is not yet known how the transparency of hospital prices can impact the health sector. On the one hand, some say it will exert pressure as transparency does in any other sector, while others say it can further confuse consumers.
“At the end of the day, what really matters is what the insurer is paying and what the person’s co-payment and deductible is,” said Michael Maron, CEO of Holy Name Medical Center in New Jersey.
That is why experts say the health system is still in dire need of reform, but when and how it is still an issue – even when the pandemic has served as a catalyst to tackle change.
“We all know that the healthcare system needs to be transformed,” said Maron. “The question is where and how, and how painful is that going to be?”
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