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The Albatross Around America’s Neck: How health-care opacity neutralizes competition and fuels a corporate race to corner health-care markets


Consolidating and cornering health-care markets

In November, Optum Health’s CEO, Dr. Amar Desai, announced that his company now employs about 90,000 physicians, or 8.4% of actively practicing U.S. doctors. It added almost 20,000 doctors in 2023 alone, increasing its physician capacity by 29%.

Optum, a subsidiary of the country’s largest health-care conglomerate, UnitedHealth Group, is involved in nearly every other health-care delivery sector, with investments in a major pharmacy benefits manager (PBM), in ambulatory surgery centers, behavioral health, rehabilitation, and other important care niches.

Optum is the largest and arguably the most aggressive organization working to consolidate and control as much of health care as possible. Many health plans, provider organizations, public corporations and investor firms are working to horizontally and vertically integrate health-care services, seeking ever-tighter control of their delivery, pricing and financing.

Opacity kills U.S. health-care competition. Transparency can revive it.

Optum and other U.S. health-care organizations have purchased influence to capture regulatory policy, shaping legislation to consistently favor the health-care industry’s interests. For decades, quality, cost and pricing information have been as opaque as possible, rendering most purchasers unable to understand the costs of care or how the care they needed would compare with another providers’ offerings. With performance information unavailable, health-care competition has been all but nonexistent, allowing health-care costs to skyrocket and quality outcomes to be relegated to a secondary concern.

Worse, without competition, the major legacy health-care firms have had every reason to favor the status quo, and so they have stifled innovations that would bring us better health and lower costs.

How does our current system work?

Optum’s announcement seems like a good opportunity to consider the ramifications of this relentless drive to maximize profits by cornering health care and cost. We use “profit-driven” here to refer to organizations that value profit over a care mission. Realistically, this term includes the majority of large health-care firms, with both for-profit and not-for-profit legal standing.

The U.S. has had almost eight decades of increasingly concentrated, corporate, “profit-driven” health-care power since the establishment of employer-sponsored health plans after World War II and the formation of Medicare and Medicaid in the mid-1960s. What has happened as profit-driven health-care organizations came to dominate markets across the country? 

By any objective measures, profit-driven health care has been catastrophic for average Americans, American businesses and America’s economic security. It is a failed experiment that has become an economic burden we can no longer afford. 

Over the 73 years since 1950, the costs of U.S. medical services rose 3.7 times faster than general inflation. In 2023, we spent $4.7 trillion on health care, almost one-fifth of the U.S. economy, and more than double the per capita health-care costs in other developed countries. 

Excessive costs have become an enormous hurdle for U.S. global competitiveness. They have also effectively captured American workers’ wage gains. Relentlessly rising public sector health-care spending has been managed by reducing investments in other critical needs, like education and infrastructure.

Mainstream Americans have suffered most under this system. More than 40% of us have health-care debt, some 12% owe more than $10,000, and more than half of those in debt to hospitals have insurance. Two-thirds of personal bankruptcies in the U.S. are at least partially associated with medical debt. About 7% of Americans cannot afford or qualify for health coverage in 2023. 

Much of the worst health-care exploitation occurs not at the frontlines of care, but by middlemen - insurers, drug distributors and PBMs — positioned between patients and their care. In each major sector - health information technology, supply chain, care delivery and finance - the most successful firms have developed mechanisms of excess that profoundly increase unit pricing and utilization of services. As an Economist analysis recently pointed out, in 2022, nearly 45% of all U.S. health-care expenditures, up from 25% a decade before, flows to only nine intermediary firms.

Exorbitant spending has not brought us better health. Data from the Organization for Economic Co-operation and Development (OECD) show that, compared to other developed countries, key U.S. health outcomes - e.g., life expectancy at birth, infant mortality, safety during childbirth, management of asthma, diabetes and other chronic diseases, heart attack mortality - are consistently last or nearly last. In other words, objectively we have the lowest value health care of any developed nation.

Many Americans despair that the game is rigged and locked. Survey respondents worry most about cost and that the system is too focused on profit. Reports about programs and policies that favor health-care firms but harm patients are so mind-numbingly frequent that more than half of Americans believe our health-care system is substandard.

Reasons for optimism

All this gloom notwithstanding, there are two silver linings. First is a groundswell of activity around a still little-known but potentially hugely consequential law, the Consolidated Appropriations Act of 2020 (CAA). 

The CAA requires the employer sponsors of Employee Retirement Income Security Act self-funded health plans to be the fiduciaries of those plans. Individual corporate officers who oversee a company’s health plan are personally liable if health-care costs are excessive or quality is lacking. Health plans must remove “gag clauses” from contracts that have allowed them to withhold data from their self-funded employer and other health benefits vendors. Brokers, third party administrators and PBMs must disclose all their sources of revenue. 

The provisions of the CAA apply to all non-governmental businesses with self-funded health plans, but many or most employers are still unaware or have yet to take these mandates seriously. If this possibly applies to your organization, now would be a good time to demand detailed guidance from your health benefits advisor.

Earlier this month, an employee of Johnson & Johnson filed a class-action lawsuit alleging that her company’s health plan imposed drugs costs on its enrollees that were as much as 250 times the cost that any patient would pay if they purchased the drug without insurance. Our understanding is that cases like this are mushrooming, that they will require employers to engage far more actively in their health plans’ management. Health-care companies will be forced to release data that make care and cost far more transparent, bringing competition that drives innovation into the market. 

Second is an explosion in innovative health-care point solution firms that focus dedicated expertise on high-value health-care problems like cardiometabolic chronic diseases, musculoskeletal care, maternity, cancer, surgery and specialty drugs. Some of these firms are “high performers,” guaranteeing superior results - better health outcomes and/or lower costs than conventional care - which often means that they cost less than they save. 

Traditional health plans have been slow to work with these new value-based managers. They may believe that point solution offerings will disrupt longstanding network arrangements or reduce their health plans’ profitability. As a result, many point solution firms are going around health plans and contracting directly with employers. It has taken time for these value-focused health-care management organizations to get market traction, but that traction is occurring now, and it is accelerating.

We have the tools. Can we do things differently?

U.S. health care’s extortionate costs and mediocre quality raises important questions about America’s future. Will we allow ourselves to be held hostage in perpetuity by a health-care industry dominated by profit-seeking at any cost, that can buy the influence to remain in power and that has dedicated itself to withholding the information that can facilitate a competitive market? Can we marshal the political will to make American health care more financially feasible? Very strong solutions are readily available, but they require that employers and other health-care risk-bearers consider thinking about and acting differently about the problem. 

It is time for a national conversation that acknowledges that an opaque and non-competitive health-care marketplace is not an acceptable model for a critical national resource. Given our decades-long experience of the carnage it has wrought on our country, allowing it to remain materially unchanged would be blind stupidity, and certainly against the American people’s interest.

We have the tools now to bring about change. Challenging such a powerful industry is a daunting undertaking that will require the active backing of America’s business community. Only one group is larger and more influential than health care, and that is everyone else. 

The evidence is clear that allowing the U.S. health-care industry to continue to operate unchecked into the future is most certainly a recipe for national ruin. Health-care purchasers have begun to make tremendous strides toward making information available and fomenting a far healthier competitive environment, but concerted actions that focuses on value, expectations and accountability are still critical. 

1 comment

1 Comment

Of course Optum Health is a benevolent company, saving everyone money on their healthcare.

There are only 62 stocks on marketwatch that are higher than their stock right now. Why is that not a huge red flag? You can't be beholden to shareholders AND patients/people. I would say to cap their profits, but then they just shift revenue to another one of the many entities that they own.

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