UMN Experts: Disrupting the health care system

February 1, 2018
Jean Abraham, Larry Jacobs

Amazon, Berkshire Hathaway and JPMorgan announced plans this week to form an independent company that seeks to contain health care costs.

Jean Abraham, a professor in the School of Public Health, and Larry Jacobs, director of the Center for Study of Politics and Governance in the Humphrey School of Public Affairs, weigh in on uncertainty about this decision’s impact on the health care system.

Jean Abraham, Ph.D.

“This move is exciting, but clearly unnerving for the big players in the U.S. health system. However, few details exist regarding the specific strategy these companies intend to use to accomplish their objectives.

Economists have been studying the U.S. system of health care delivery and financing for more than 50 years. Fundamentally, health care spending is a function of the prices that are paid to physicians, hospitals and pharmaceutical companies as well as the quantity or intensity of services that are prescribed for patients.

Existing efforts to reduce spending growth can be either consumer-focused or provider-focused.  Consumer-focused efforts like high deductible health plans, Health Savings Accounts and price transparency tools to facilitate consumer shopping can have some beneficial cost effects, but they are not the magic bullet, given research evidence.  

Supply-side efforts, such as accountable care organizations and bundled payments, have also shown modest success in slowing cost growth. However, the evidence is somewhat limited given the voluntary nature of most programs implemented under the Affordable Care Act.

Disruption can be a good thing, but only when the details emerge as to what this trio of companies has planned will we be able to truly gauge their likelihood of changing the consumer experience with the U.S. health care system."  

Jean Abraham, Ph.D., is Wegmiller Professor of Healthcare Administration in the School of Public Health Division of Health Policy and Management at the University of Minnesota. Her research focuses on health economics and policy. Abraham is particularly interested in employer and employee decision-making as it relates to health benefits.

Contact information:
abrah042@umn.edu
612-625-4375 (office)

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Larry Jacobs, Ph.D.

"The promised innovation is suggestive but not clear. Large employers focusing on costs isn’t new as we’ve seen in Minnesota.  It also isn’t clear whether there are broader implications for the US as opposed to 3 companies.  Nonetheless the national need for delivering quality care while controlling cost is sufficiently critical that new ideas and efforts deserve attention."

Larry Jacobs, Ph.D., is the Walter F. and Joan Mondale Chair for Political Studies and director of the Center for the Study of Politics and Governance in the Humphrey School of Public Affairs. His expertise includes health care policy, American political history, and elections and voting behavior.

Contact information:
ljacobs@umn.edu
651-357-0345 (cell)
612-625-3384 (office)

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