Looking Under the Hood of 'Socialized Medicine'
Varied approaches in countries outperforming U.S. on healthcare measures
by Michael Smith - MedPage Today - December 4, 2017
Americans pay too much for healthcare that falls well short of standards in other developed countries, according to a researcher who studies the issue.
But persuading people that other systems might work better often hits a roadblock, according to Eric Schneider, MD, of the Commonwealth Fund, a New York-based foundation that sponsors research into ways to improve healthcare in the U.S.
"There's a tendency to say: 'that's socialized medicine; we don't do that in the United States,'" Schneider told MedPage Today.
"And that shuts down the discussion."
Schneider was commenting on the Fund's latest comparison of healthcare in the industrialized world. It will come as no surprise to most observers that the U.S. system ranked dead last in most categories and was above the 11-country average in only one.
Does that suggest that "socialized medicine" is the way to go? Not necessarily, Schneider noted.
For one thing, Canada's single-payer "socialized" system -- often held up in the U.S. as either the gold standard for healthcare or the patient's worst nightmare -- is actually not among the best performers, Schneider and colleagues found.
And the top performers include one that looks pretty socialized, but two that are anything but.
But regardless of how they pay for healthcare, all three -- the United Kingdom, the Netherlands, and Australia -- share some salient features, Schneider said:
For the 2017 rankings, the Commonwealth Fund used interviews with patients and providers in 11 Western industrialized countries -- the U.S., Canada, the U.K., France, Germany, the Netherlands, Australia, New Zealand, Norway, Sweden, and Switzerland.
The investigators asked questions about 72 indicators grouped in five "domains": care process, access, administrative efficiency, equity, and healthcare outcomes.
For instance, the care process domain covered preventive care, safe care, coordinated care, and engagement and patient preferences. Among other things, the researchers asked patients about recent discussions with a physician on diet, smoking, and alcohol use, and also considered such things as rates of flu vaccination for older adults and avoidable hospital admissions for diabetes.
No country led in all five domains, but the U.S. came out worst overall -- in last place for access, equity, and healthcare outcomes, 10th in administrative efficiency, and fifth in care process.
The U.K. got the top spot, based on leading the pack for care process and equity, and came in third in both access and administrative efficiency, despite being 10th overall in health outcomes.
Australia was second, leading in administrative efficiency and health outcomes and coming in second in care process but trailing in access and equity, at fourth and seventh places, respectively.
And third-place Netherlands led in access, was second in equity, and third in care process, but dropped to ninth in administrative efficiency and sixth in health outcomes.
So, it's a mixed bag and nobody's perfect. But importantly, the U.S. has seen its healthcare spending skyrocket without a corresponding improvement in the various domains of healthcare.
In 1980, according to the Fund's figures, most of the 11 countries in the analysis spent from 5.1% to 8.2% of their gross domestic product (GDP) on healthcare. The U.S. spent the most but the difference was not huge.
Fast forward to 2014. The other 11 countries had seen their spending rise, but they were still grouped together, with rates of 9%-11.4% of GDP.
Fast forward to 2014. The other 11 countries had seen their spending rise, but they were still grouped together, with rates between 9% and 11.4% of GDP. Specifically:
- They use regulations to make sure that most citizens are in the pool of those with health insurance
- They create a level playing field, in which everyone has access to an essential set of health benefits, regardless of such things as age and health status
- And they have mechanisms to insure that no one is left out because they can't afford to pay
The U.S. in that year devoted 16.6% of GDP to healthcare, or about $2,887 billion -- $8,988 for every woman, man, and child. The next year, according to the Centers for Medicare & Medicaid Services, total health spending spiked, reaching $3.2 trillion and 17.8% of GDP -- nearly $10,000 per capita.
In a recent analysis, investigators led by Joseph Dieleman, PhD, of the Institute for Health Metrics and Evaluation in Seattle, noted that the cost of healthcare has risen by nearly a trillion dollars over the past 20 years.
Some of the increase is a result of population growth and aging, the researchers said in the Journal of the American Medical Association. On the other hand, changes in disease prevalence and incidence were associated with lowered costs.
But about half was due to increased spending on medical events -- the cost of a day in hospital, a visit to the ER or physician's office, a prescription filled -- which Dieleman and colleagues called "service price and intensity."
Presumably, population growth and aging, as well as changes in disease incidence and prevalence, have been pretty much the same in most of the 11 countries analyzed by Schneider and colleagues.
But service price and intensity can easily ratchet upward unless what Schneider called "guardrails" are in place to keep them in check.
Britain, Australia, and the Netherlands all impose such guardrails, which might be one reason they can deliver good care without breaking the bank.
The U.K. has perhaps the simplest system. Its National Health Service (NHS), a single-payer system, covers all medical care for anyone who needs it, with the cost structure set by the government. If you're looking for "socialized medicine," this is the place to go.
As the Commonwealth Fund numbers show, the NHS does a pretty good job. Yes, it trails in outcome measures, although there is some evidence that's improving. But overall, people get the healthcare they need, no one is left out, things run smoothly, and costs are contained.
The NHS does leave room for private insurance -- and about 10% of the population takes advantage of that -- but the impact on the public system is small.
The NHS "is an excellent system," according to Rob Read, MD, an infectious disease specialist at the University of Southampton in England. It covers everyone but there can be delays for some forms of care.
In essence, Read told MedPage Today, patients pretty much have to come for non-urgent care at the system's convenience, rather than their own. "You're sent an appointment time and that's when you have to turn up," he said.
That's where the private insurance comes in, Read said. A patient with private insurance who needs a hernia repair, for instance, can get it quickly and -- importantly -- at his or her own convenience.
The average cost per year is estimated at about $1,808 for an individual, but it varies depending on the patient and the patient's location, with services often more expensive in large urban areas.
In most cases, the private insurance is for key executives or, as in Read's case, for professors of medicine -- people whose employers deem them to be so essential that it's worthwhile paying so they can schedule non-urgent care to avoid work conflicts.
"It's convenience," he said.
In general, the private system handles things like minor surgery, while the NHS handles the heavy medical lifting, "the serious stuff [that] the private sector doesn't do," Read said.
In the private sector, care is usually provided through the company involved, which has physicians and other professionals available. Indeed, Read noted, some doctors will work four days a week in the public system and one day for a private company.
That hasn't affected access to the public system, he said -- something that has been a concern in Canada, which has a similar public arrangement but doesn't allow private medical insurance. On the other hand, Read said, faced with extra demand, the NHS has recently taken to buying some of its care from the private companies, which have their own facilities.
"It's a very interesting development," he said.
Affordable Private Insurance
In the Netherlands and Australia, the situation is very different. Both countries allow private insurance -- indeed, the Netherlands requires it for most people -- but have a series of regulations that ensures that most people have access to essential medical care.
The Dutch have a "hybrid system," according to Diederik Van de Beek, MD, PhD, of the Academic Medical Center in Amsterdam.
One part, which pays for long-term nursing and care, is a classic single-payer system: all citizens are automatically enrolled and the money comes from taxes through the national government.
The other part covers the rest of the medical spectrum -- essentially all regular, short-term care -- and for that the Dutch have a system of obligatory health insurance, provided by private companies.
The companies are obliged to cover a defined set of treatments, at fees linked to a patient's income, but can't discriminate on the basis of health status or age. Everybody has to buy basic insurance from one of the companies, but there are subsidies to ensure that poorer people aren't left out. The costs are covered by a combination of premiums and payroll taxes, which are pooled and distributed to insurance companies on the basis of the risk profile of their clients.
Dutch citizens' average cost of per year is estimated at a maximum of about $1,420 (U.S.) a year for an individual older than 18, but it could be slightly higher -- there is an "own risk" co-payment system for some services. The co-pay is capped at about $450 a year, but could be zero if patients don't use the system.
"We have private insurance, but it's regulated by the government," Van de Beek told MedPage Today. "They can make profits, but they have to reinvest in the health system."
"It's in between what they have in the U.K. and what they have in the U.S.," he said.
The basic health insurance system in the Netherlands is essentially a form of "managed competition" in health insurance, a term popularized by Alain Enthoven, PhD, of Stanford University in California.
Enthoven told MedPage Today that, in the U.S., much of the spiraling cost of healthcare has been driven by "open-ended, uncoordinated fee-for-service" medicine. There's no front-end budgeting and there are strong financial incentives to provide more care even if more care is not really needed.
The answer, Enthoven proposed, was large integrated systems that could deliver quality medical care, competing to attract patients. He cites Kaiser Permanente, the giant managed-care consortium, whose health insurance plans reimburse care delivered by its medical groups.
In essence, Van de Beek said, something similar happens in the Netherlands. Most doctors are associated with hospitals -- forming a sort of large multi-specialty practice -- and the single provider is "really uncommon," he said.
The hospitals deal with the insurance companies to ensure that medical care is reimbursed, he said, while doctors' income is usually by capitation, based on the number of patients they see. Some doctors -- those in the large academic medical centers, for instance -- are on salary, Van de Beek noted.
Down under, Australia has taken a mixed approach.
Everyone is covered under the public insurance plan, Medicare, which, like the U.K.'s NHS, is paid for by income taxes and offers essential outpatient and inpatient care. But the country also has a large system of private hospitals and practitioners, whose services are available to patients with private insurance (or to anyone willing to pay out of pocket).
The key difference, as in the U.K., is choice. A private patient in a private hospital can choose his or her doctor and can schedule care more easily than a public patient in a public hospital. And the private scheme can cover things like cosmetic surgery that aren't paid for by the public system.
Unlike the U.K., the Australian private system can and does handle some major health issues although the trickiest stuff -- transplants, for instance -- is performed in the public system.
An estimated 47% of Australians have private insurance, whose benefits can vary widely within guidelines set by the government. Broadly, Australians can buy insurance to cover private hospital care, general treatment, or ambulance services -- or any combination -- and the plans vary in what they offer.
The average cost for an individual for what is called "hospital cover" is estimated to be about $662 a year, although there is substantial variation from state to state, while "ancillary cover" is estimated at about $435 a year. Most people will buy both.
Just to make things a bit more complicated, however, the national government offers income-based rebates to some people to help pay their insurance premiums, as well as a bonus for buying private coverage earlier in life.
And even in the public system, some patients might still be asked to pay an out-of-pocket fee -- for instance, when physicians charge more than the Medicare scheme will pay -- although there is a mechanism to compensate low-income patients for such charges.
So the three countries take markedly different approaches to healthcare and yet achieve good results at a cost -- 9.9% of GDP for the U.K. in 2014, compared with 9% for Australia and 10.9% for the Netherlands -- that's dramatically lower than the 16.6% Americans spent.
And the cost of private health insurance appears proportionately higher as well. Although no apples-to-apples comparison is possible, surely it means something that the average premium for an American individual approached $6,000 in 2017 after several years of steep increases, according to the federal Department of Health and Human Services.
It's also noteworthy that the overall tax burdens in Britain, Australia, and the Netherlands don't differ markedly from the U.S., according to 2015 statistics from the Organization for Economic Cooperation and Development for the average worker: about 32% in the U.S. versus 31% in the U.K., 28% in Australia, and 37% in the Netherlands.
The Bottom Line
Are there lessons for the U.S.? Definitely, Schneider said.
One key finding -- repeated in the paper by Dieleman and colleagues -- is that prices are much higher in the U.S., he said, even though about half of medical spending goes through Medicare and Medicaid, whose fee schedules are "typically not all that generous."
Part of that, he argued, comes from the "relatively limited" competition in the private part of the market. In many places in the U.S., Schneider said, lack of competition means insurers, hospitals, physician groups, and pharmaceutical companies are "able to extract much higher prices ... than they can anywhere else in the world."
Americans are also sicker than people elsewhere, which drives up costs, he said.
When the investigators looked at healthcare and social services spending as a whole, they found a striking disparity, Schneider said.
"In other countries about two thirds of spending goes to social services -- housing, transportation, education -- and a third to medical care services," he said. "In the U.S. it's the reverse."
"To the extent we allow poverty and income-related problems, people tend to show up sicker in our system and thus require more intensive services," he said.
And, Schneider noted, the top performing countries tend to have relatively more primary and less specialist care. "That also tends to inflate spending," he said. Even though patients in many other countries actually use more medical services than Americans, the doctor they see is not usually a specialist.
Finally, Schneider said, there's the sheer volume of administrative overhead in the U.S. "There's a lot of effort and personnel needed to decide what the payment will be for a particular service for a particular patient," he said, "and there's not a lot of standardization."
Streamlining that process, he said, could cut American health spending by as much as 20%.
- Great Britain spent 9% of GDP on healthcare, or about $269.9 billion (U.S.); $4,101 per capita
- Australia also spent 9% of GDP, or about $131.6 billion; $5,523 per capita
- And the Netherlands spent 10.9% of GDP, or about $95.9 billion; $5,680 per capita
Why Trump Is Right and Wrong
About Obamacare Premiums
by Haeyoun Park - NYT - December 4, 2017
Why Trump Is Right
The median rise in premiums for bronze plans was 18 percent from 2017 to 2018, according to McKinsey.
How much the monthly cost of a bronze plan changed from last year
Data is for the lowest-cost bronze plan for a 40-year-old earning $30,000.
In many places, the cost of a bronze plan, which generally has high deductibles but low premiums, is at least $50 more a month than last year for a 40-year-old earning $30,000.
Why Trump Is Also Wrong
About half of Americans who buy their own health insurance qualify for subsidies that insulate them from the price increases. The subsidies are designed to increase if premiums rise.
Where the monthly cost of a silver plan is lower than or similar to last year, after subsidies
Data is for the lowest-priced silver plan for a 40-year-old earning $30,000.
For those customers, the cost of the lowest-price silver plan may actually go down compared with this year in a majority of counties.
Trump Is at Least Partly to Blame
Average monthly premium
Data is for the lowest-cost plan in each tier for a 40-year-old earning $30,000.
To make up for the lost funding, insurance companies increased the price of their plans, most steeply for the silver plans, though other plans also saw double-digit increases.
And Here’s the Twist
Mr. Trump’s actions have caused one unexpected result. There are now some places where the gold plan is less expensive than the silver, so some people can actually find better coverage for a lower price.
Where a gold plan is less expensive than silver, after subsidies
Data is for the lowest-cost plan in each tier for a 40-year-old earning $30,000.
In the past, the least expensive gold plans have always cost more than the least expensive silver ones.
And regardless of Mr. Trump’s efforts to scale back the health law, early data showed that enrollment in the Affordable Care Act marketplaces was higher than expected, when compared with the same period in previous years. But it will be challenging for this year’s enrollment to match last year’s, since the sign-up period is about half of what it was last year.
The CHIP Program Is Beloved. Why Is Its Funding in Danger?
by Abby Goodnough and Robert Pear - NYT - December 5, 2017
WILMINGTON, Del. — Laquita Gardner, a sales manager at a furniture rental store here, was happy to get a raise recently except for one problem. It lifted her income just enough to disqualify her and her two young sons from Medicaid, the free health insurance program for the poor.
She was relieved to find another option was available for the boys: the Children’s Health Insurance Program, known as CHIP, that covers nearly nine million children whose parents earn too much for Medicaid, but not enough to afford other coverage.
But CHIP, a program that has had unusually strong bipartisan support since it was created in 1997, is now in limbo — an unexpected victim of the partisan rancor that has stymied legislative action in Washington this year. Its federal funds ran out on Sept. 30, and Congress has not agreed on a plan to renew the roughly $14 billion a year it spends on the program.
“I’m kind of shocked, because this is something for kids,” Ms. Gardner said Thursday as her 7-year-old, Alexander, braced for a flu shot at a bright, busy neighborhood clinic run by the Nemours Children’s Health System. Ms. Gardner pays $25 a month for her sons’ CHIP coverage, with no deductible or co-payments.
Congressional leaders may provide some temporary relief to a handful of states that expect to exhaust their CHIP funds before the end of this year. It would be tucked into a short-term spending bill intended to avert a government shutdown after Friday. Lawmakers from both parties hope to provide more money for CHIP in a separate, longer-term deal on federal spending. But Republicans will almost surely need Democratic votes to pass such legislation, and the antagonism between President Trump and Democrats in Congress is so great that no one can be sure of the outcome.
The uncertainty has been unsettling to parents, pediatricians and state officials around the country. States are weighing whether to freeze enrollment in CHIP, shut down their programs or find money from other sources. Last week Colorado sent letters to CHIP families, advising them to start researching private health insurance options because there was “no guarantee” that Congress would continue the program. Texas has drawn up a detailed “termination timeline” under which the state could begin mailing insurance cancellation notices on Dec. 22, three days before Christmas.
“It crushes me to think we’re in an environment where kids’ health is up for debate — that this somehow got tossed into the wrangling,” said Dr. Todd Wolynn, a pediatrician in Pittsburgh and a member of the American Academy of Pediatrics. “There are kids on protocols and regimens and treatment plans, and their families have got to try to figure out, what are we going to do?”
Here in Delaware, health officials anticipate running out of money for CHIP at the end of January if Congress does not act.
“I’ve been around a while and I’ve never seen a program that is this popular, and that goes across the aisle,” said Stephen Groff, director of the state’s Division of Medicaid and Medical Assistance. “To be having this discussion, that we may be in a funding crisis, is beyond belief.”
Members of both parties in the House and the Senate agree that Congress should provide money for CHIP for five years, through 2022. But they disagree over how to pay for it.
In early November, the House passed a bill to extend the CHIP program. But most Democrats voted against it because the legislation would have cut funds for other public health programs and ended insurance coverage for several hundred thousand people who had failed to pay their share of premiums for insurance purchased under the Affordable Care Act.
In the Senate, senior members of the Finance Committee say they have been making progress toward a bipartisan deal on CHIP, but they have been preoccupied for several weeks with their tax bill. The committee approved a five-year extension of funding for the program in early October, but did not specify a way to pay for the measure.
As Congress dithered, Minnesota received an emergency infusion of federal funds to continue CHIP for October and November, but is expected to be the first state to run out of federal money for the program. Emily Piper, the commissioner of the Minnesota Department of Human Services, said the state would use its own funds to fill the gap temporarily.
“I don’t think Washington is working the way anyone in the country expects it to work right now,” she said. “A dysfunctional Washington has real consequences for people.”
Oregon, which expects to exhaust its federal CHIP funds this month, will also use state funds to continue coverage, said Gov. Kate Brown, a Democrat. “As Congress rebuffs its responsibilities, it is up to us, Oregonians, to stand up for our children,” she said.
Colorado was the first state to send warning letters to families with CHIP coverage. “We felt it was important that folks covered by CHIP understand what’s happening,” said Marc Williams, a spokesman for the state Department of Health Care Policy and Financing.
In Texas, more than 450,000 children could lose CHIP coverage on Feb. 1 unless the state can obtain $90 million. Even if it comes through, supporters of the program worry about the effect of cancellation warnings.
“It gets very, very complicated once the state sends those letters out and starts walking down that road,” said Laura Guerra-Cardus, deputy director of the Children’s Defense Fund-Texas. “It can really affect trust in the program. So many families still don’t realize this is coming, and the few I’ve informed, they go immediately into a state of alarm.”
Representative Greg Walden, Republican of Oregon and the chairman of the Energy and Commerce Committee, which is responsible for the program, said last week that “we need to get CHIP done” because “states are in a real mess right now.”
Democrats said Congress should have provided money for CHIP months ago, but that Republicans had placed a higher priority on dismantling the Affordable Care Act and cutting taxes.
“Because Congress failed to do its job — a bunch of elected officials who have insurance paid by taxpayers failed to do their job — children here in America are about to be kicked off of their health insurance,” said Senator Sherrod Brown, Democrat of Ohio.
Senator Orrin G. Hatch, Republican of Utah and the chairman of the Senate Finance Committee, insisted: “We’re going to get CHIP through. There is no question about that.”
Mr. Hatch led efforts to create the program in collaboration with Senator Edward M. Kennedy, Democrat of Massachusetts, in 1997. “Nobody believes in the CHIP program more than I,” Mr. Hatch said on the Senate floor last week. “I invented it.”
Doctors at the Nemours/Alfred I. duPont Hospital for Children, here in Wilmington, were continuing to see CHIP patients last week at the flagship of a system that treats 15,000 children with CHIP coverage each year. Dr. Jonathan Miller, chief of the system’s Division of General Pediatrics, said many receive therapy for developmental delays and treatment for chronic conditions like asthma and obesity.
“It provides specialized care for children that’s more comprehensive than a lot of private coverage,” he said, “which is really designed with adults in mind.”
Research has also found CHIP increasingly helps people whose employer-provided insurance is too expensive for their entire family. Ariel Haughton, a mother of two in Pittsburgh, said it would cost more than $100 more a month to put her two children on the plan her husband gets through his job as an apprentice plumber, which also requires them to pay a high deductible before the coverage kicks in. Without CHIP, Ms. Haughton said, she might have delayed visiting the pediatrician this summer when her daughter had a fever and rash that turned out to be Lyme disease.
“It makes it so much easier for me to actually take good care of my children,” said Ms. Haughton. “We’ve had a rocky last few years, but at least I can take them to the doctor without having to be like, ‘Their fever isn’t 105 so I guess I’d better skip it.’”
Olivia Carrow, who had brought her 2-year-old to the children’s hospital here to test for an infection, said her other three children were newly uninsured and she had heard they might qualify for CHIP. The 2-year-old, William, qualifies for Medicaid because of a serious condition that causes his trachea to collapse.
The rest of the family had insurance through Ms. Carrow’s job as a nurse, but lost it after she cut back her hours this fall. She and her husband started a chicken farm this year and delayed exploring other coverage options, she said, partly because of the protracted fight in Congress over proposals to repeal the Affordable Care Act.
“Not knowing how things are going to go — I feel that way about health coverage in general,” Ms. Carrow said. “It doesn’t surprise me, but it gets very sad.”
UnitedHealth Buys Large Doctors Group as Lines Blur in Health Care
by Reed Abelson - NYT - December 6, 2017
In another example of the blurring boundaries in the health care industry, UnitedHealth Group, one of the nation’s largest insurers, said on Wednesday that it is buying a large physician group to add to its existing roster of 30,000 doctors.
UnitedHealth’s Optum unit will acquire the physician group from DaVita, a large for-profit chain of dialysis centers, for about $4.9 billion in cash, subject to regulatory approval. DaVita operates nearly 300 clinics across a half-dozen states, including California and Florida.
With the purchase, UnitedHealth is increasingly moving into the direct delivery of medical care.
“Combining DaVita Medical Group and Optum advances our shared goal of supporting physicians in delivering exceptional patient care in innovative and efficient ways,” Larry C. Renfro, Optum’s chief executive, said in a statement.
Analysts praised the move as keeping with UnitedHealth’s broader goal of building a large ambulatory care business.
“The asset is strongly synergistic” with the company’s overall “mission and strategy,” Ana Gupte, an analyst for Leerink, told investors after the deal was announced.
The proposed acquisition comes after the announcement that another big insurer, Aetna, planned to merge with CVS Health. That transaction, if approved, could transform CVS’s 10,000 drugstores into community-based health care “hubs,” where people could get blood tests or help managing a chronic disease like diabetes. Executives at Aetna and CVS said that this new model would result in better care and lower costs for patients.
At a time of growing uncertainty in the health care marketplace, doctors, drugstores, hospitals and insurers are looking outside their traditional businesses to join forces. The tax overhaul proposed congressional Republicans could cut payments to federal programs like Medicare sharply and upend the Affordable Care Act, and employers and consumers are increasingly worried about the high cost of medical care.
The potential threat of new competitors like Amazon entering the pharmacy business and technology companies delivering medical care through cellphones has led former adversaries to become partners, driving insurers to team up with hospitals and doctors’ groups. They are seeking to deliver care in novel ways, outside the expensive setting of a hospital. While the combination with CVS allows Aetna to experiment with providing medical care in a retail setting, insurers are also looking to partner directly with doctors and health systems.
To change how people receive medical care, particularly when managing chronic, and costly, diseases like diabetes and asthma, the parties “are going to have to reorganize,” said Craig Garthwaite, a health economist at the Kellogg School of Management at Northwestern University.
“There’s no chance that the existing companies, be they hospital or insurers, have the right configuration of assets to be successful” at turning health care into a business where the parties are able to produce better outcomes at a lower cost, he said.
What is striking about the recent combinations, Professor Garthwaite said, is that insurers are the ones seeking to integrate the delivery of care into their operations, as opposed to a large health system like Kaiser Permanente, the health maintenance organization based in California, directing members to its hospitals and doctors. “For a long time, we thought there was a world in which Kaiser was the future,” he said.
But Kaiser Permanente has proved to be mostly an exception to the rule. Several large systems began offering health plans under the Affordable Care Act, only to end up losing money and getting out of the business.
Aetna and UnitedHealth appear to be trying to develop their own in-house network of doctors to try to change how care is delivered. UnitedHealth, which already operates a large pharmacy-benefit manager and a variety of health care services through its Optum unit, is among the most diversified and most successful insurers.
The acquisition of DaVita Medical Group, which includes such high profile organizations as HealthCare Partners and the Everett Clinic, is the latest move by UnitedHealth to expand into the realm of delivering medical care as a way of reducing costs. The company already operates medical practices in Southern California and elsewhere, and it owns nearly 250 MedExpress urgent-care clinics. The company says the clinics offer much of the same care available at a hospital emergency room but at a significantly lower cost.
Last January, UnitedHealth also acquired a chain of surgery centers, a move the company said could lower the expense of having an outpatient surgery by more than 50 percent. The company expects to perform roughly 1 million surgeries and other procedures this year.
Insurers are also increasingly experimenting with different methods of paying for care and attempting to provide better oversight of potentially expensive chronic conditions like diabetes or heart failure. To date, Aetna and Cigna have favored joint ventures with large health groups.
While these new partnerships promise to change how people get care, by marshaling better information about patients and steering them to less expensive and more convenient places, whether an urgent-care clinic or drugstore, delivering on that promise may prove challenging. DaVita, which bought HealthCare Partners five years ago as a way to become a major player in the care of people with chronic conditions, found itself struggling to make money on its medical group. In describing the group’s most recent quarterly financial results, DaVita’s chief executive, Kent J. Thiry, said they were “extremely disappointing.”
The sale, which is expected to close next year, return DaVita to its core kidney dialysis business, although Mr. Thiry said in a statement that the company expected “to pursue other investments in health care services outside of kidney care.” DaVita has been under scrutiny for its relationship with a charity, the American Kidney Fund, that helps pay the cost of private insurance for patients receiving dialysis treatment.
Consumers could also see their choice of doctor or pharmacy sharply limited under these arrangements as insurers attempt to steer patients into the groups over which they have the most control. Both Aetna and UnitedHealth insist their goal is to develop a new model of care that will be available to people outside their respective health plans, and Optum says it now works with more than 80 health plans.
Even if insurers succeed in lowering medical costs as a result of the new ventures, economists and other experts warn that shareholders, not consumers, could benefit unless the lower costs yield lower prices for coverage. There must be sufficient competition among insurers for consumers to benefit, Professor Garthwaite said.
“You need three, four or five insurance companies trying to pull that strategy off,” he said. “That’s really hard to do.”