"The ballooning costs of healthcare act as a hungry tapeworm on the American economy," said Berkshire Hathaway's Warren Buffett. The Oracle of Omaha, along with Jeff Bezos of Amazon and Jamie Dimon of JPMorgan Chase & Co., set the healthcare policy world atwitter with their plan to create a not-for-profit company dedicated to lowering their organizations' overall spend on health.
Let's explore this simile. The tapeworm is a parasite, an unwanted critter that lodges inside its human host. It robs its victim of the nutrients needed to thrive and grow. So far, so good.
Treatment is fairly simple, although hard to achieve in poor countries where helminth infections are endemic. You kill it. To prevent infection, you stamp out modes of transmission or develop a vaccine.
Here's where the simile breaks down. Are the nearly 16 million people laboring in healthcare parasites? Of course not. The healthcare system is a vital cog in our society and a healthy workforce is crucial to its economy.
That's why cancer is the better comparison for the system's unsustainable costs. The system is growing too quickly, like a tumor. To restore health, you have to eliminate the cancer, not the vital organ on which the tumor grows.
As any oncologist will tell you, such treatment is long, complex and filled with difficult choices. And the ultimate outcome is always in doubt.
The immediate reaction from most analysts was that healthcare reform by press release won't get the triumvirate very far. The stocks of insurers, pharmacy benefit managers and for-profit providers took an immediate hit, but most recovered quickly when investors realized, as had another businessman before them, that controlling healthcare costs is complicated.
Advice for the new joint venture poured in from all sides, including from other business groups that have worked for decades on the vexing questions behind their rising costs. Aggregate your buying power; go into the drug distribution business (already on Amazon's radar); promote price and quality transparency; contract directly with providers; start your own provider organization.
Each approach has its champions. And any of those paths, if chosen by the new joint venture, would represent an extension of trends already underway among the thousands of employers who provide coverage for nearly 160 million Americans.
But the question this new group needs to ask is why none have gained traction in the marketplace. None have succeeded in reducing the healthcare growth rate, which nearly every economist agrees is necessary if we're to restore rapid wage growth for average American workers.
The cancer simile is helpful here, too. The latest advances in oncology use drugs that target specific mutations. But those drugs cannot be developed until the mutations that are responsible for the uncontrolled growth of a tumor are identified.
Here are just a few of the unresolved questions about the proper tumor targets in healthcare. Is more competition the solution to provider consolidation, high prices and high physician salaries? Or is fee-for-service medicine and high variation in quality and utilization the proper target?
Are middlemen-PBMs and group purchasing organizations-driving drug and device prices to unsustainable heights? Or has a dysfunctional innovation system turned every new drug and even decades-old generics into price-gouging opportunities?
A correct diagnosis is the prerequisite for a proper cure. One place for this new venture to start is by taking a strong stand against high-deductible health plans, which are like opioids. They merely mask the pain of employers' rising costs by shifting them onto the backs of their employees, while undermining health in the process.
It will be interesting to watch what approach this new venture takes. Some fresh thinking from the business community on these issues would be welcome.
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