Healthcare in a Minute – March 2018

Buffet, Bezos to Get Into the Health Insurance Business

By George W. Chapman

Warren Buffett, CEO and chairman of Berkshire Hathaway, has long purported that U.S. healthcare costs are the underlying reason why U.S.-based firms find it difficult to compete globally. Businesses in other countries spend less than half on healthcare as their U.S. competitors. Buffett is teaming up with Jeff Bezos, CEO of Amazon, and Jamie Dimon, CEO of JP Morgan Chase, to develop a system of care for their combined 1 million employees that is “free from profit-making incentives.” The headquarters and management team are to be announced. The mere threat of this alliance caused  healthcare stocks (United Healthcare, Anthem, Aetna, Humana, etc.) to drop. Industry observers have noted, however, that there already is a nonprofit system in place. It’s called Medicare.

Federal Budget Passed

On Feb. 9, Congress finally passed, and the president signed into law, a two-year $400 billion budget. Among the healthcare-related items are: $6 billion to fight the opioid epidemic and treat mental illness; $2 billion for National Institute of Health research; $90 billion for disaster relief; accelerates the closing of the infamous “doughnut dole” in Medicare Part D (drug) coverage; delays funding cuts to disproportionate share (more Medicaid and indigent care than average) hospitals; continues funding of the National Health Service Corps; expands the VA Choice program which allows vets to seek care from the private sector; repeals the Independent Payment Advisory Board which used to make seemingly arbitrary budget cuts to Medicare; continued community health center funding.

Uninsured Rate Up

It should come as no surprise that the number of uninsured Americans increased, by an estimated 3.2 million people, to 12.2 percent of the US population in 2017. That’s up from the record low of 10.9 percent in 2016. However, 12.1 percent is far better than the 18 percent uninsured rate before the ACA went into effect. The individual mandate repeal takes effect in 2019. The CBO estimates that repeal will cause 13 million people to drop health insurance  over the next decade.

Cost of US Healthcare

It’s well established that we spend almost twice as much on healthcare, $10,000 per capita, as any other industrialized nation. In 2016, we spent $3.3 trillion, which was 18 percent of our GDP. Interestingly, several studies have shown we actually use about the same amount of healthcare as other countries. The major cost culprit is price. We simply pay a lot more for care than most countries. Neither population growth nor aging can account for the fact that we pay far more. A study by the Institute for Health Metrics and Evaluation in Seattle, published in the Journal of the American Medical Association (JAMA), found that 63 percent of the increase in spending from 1996 to 2013 was due to the combination of more being done for patients during office visits/hospital stays and inflated prices. U.S. hospital prices are 60 percent higher than those in Europe. Another report, from the Healthcare Cost Institute, found that spending per person reached an all-time high in 2016 in employer-sponsored plans despite lower utilization. According to the report, increasing prices were the major factor in rising costs. Between 2012 and 2016 drug prices increased 25 percent and hospital prices increased 24 percent.

Opioid Crisis

A large bipartisan group from the House of Representatives has made fighting the crisis a top priority. They are focused on getting a package of eight new bills passed and signed by Trump. Among the eight bills are: directing funds for substance abuse centers to rural areas; requiring states with federal health grants to track written scripts and what pharmacists dispense; forcing all Medicare Part D scripts to be electronically transmitted to curb pharmacy shopping; and stopping illegal trafficking of opioids. In his state of the union address, Trump noted that 174 people a day die from an opioid overdose and that he is committed to fighting the epidemic. To date, there has been little funding to fight the battle.

Killer Air

Pollution was responsible for over six million global deaths in 2016. That is 12 percent of all global deaths that year. While not officially listed as the “cause of death,” pollution is strongly linked to lung cancer and emphysema, according to the Institute for Health Metrics and Evaluation. Two thirds of the six million deaths are due to outdoor or ambient pollution, which is caused by vehicles, coal fired plants and steel mills. Deaths per 100,000 due to ambient pollution are highest in central Africa, India, China and Pakistan.

Team-Approach to Care

A physician can no longer do it alone. Several factors, including the pending physician shortage, uncertainly in Washington, increased regulations and moving target reimbursement methodologies, have made it all but impossible for physicians to effectively keep up. According to research by the AMA itself, consumers prefer coordinated healthcare that is delivered by a physician-led team. The key is the physician is responsible for providing a safe and effective way of delivering and managing your care. Well-trained staff should be able to handle several of the chores traditionally handled by the physician including: data gathering and recording, taking vitals and history information, and patient education. The team approach allows each member to perform at the maximum level of their training, be they medical assistant, LPN, RN, care coordinator, PA or NP. Many visits may not even require a physician.


The much ballyhooed, potentially game-changing merger of the insurance and pharmacy giants, is facing another hurdle. Aetna shareholders filed a class action complaint alleging that a document filed with the SEC contains incomplete and misleading information to win over Aetna shareholders. The Aetna shareholders believe the price offered  by CVS is unfair and inadequate.

Medicare Advantage Plans

Currently, about 60 million seniors are covered by Medicare. Twenty million of them chose to enroll in a Medicare Advantage plan offered by commercial carriers. Among the larger players: United’s enrollment grew 7.3 percent, Humana’s grew 5.8 percent and Anthem’s grew 3 percent. Ironically, these large for-profit insurers have become increasingly dependent on Medicare and Medicaid for their bottom lines. M&M accounts for almost 60 percent of the revenues of the five largest publically traded insurers in the US.

George W. Chapman is a healthcare business consultant who works exclusively with physicians, hospitals and healthcare organizations. He operates GW Chapman Consulting based in Syracuse. Email him at

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