A Health Care Haven No More

Despite its access to brainpower and financial backing, it had turned out to be harder than expected for Haven to disrupt the health care market.

In January 2018, a powerhouse trio of megacorporations—Amazon, Berkshire Hathaway, and JPMorgan Chase—announced a new health care venture. It didn't have a name or a CEO or a specific product, but it did have a mission: to fix America's health-care mess and, in particular, to bring down costs, especially for companies and employees facing ever-rising medical bills.

"The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost," the companies said in a joint press release, promising that the venture would be backed with extraordinary resources and "free from profit-making incentives and constraints." The cost of providing health care represented "a hungry tapeworm on the American economy," said Berkshire Hathaway CEO and famed investor Warren Buffett. The company's goal was to put that tapeworm on a diet.

The first steps were to give it a name, Haven, and a CEO, the well-known Harvard health policy and management professor Atul Gawande. Nearly a decade earlier, Gawande had penned an influential article for The New Yorker on "The Cost Conundrum."

While researching that article, Gawande traveled to McAllen, Texas, a small city near the southern border that was one of the country's most expensive health care markets on a per-capita basis. In McAllen, he noted, Medicare spent more than twice the national average on enrollees: almost $15,000 per person, a substantial increase from the early 1990s, when the city's per-capita Medicare spending ran close to the national average. Why, he wondered, was McAllen now spending so much more?

The main reason for the cost inflation, Gawande decided, was a surfeit of unnecessary procedures: tests, scans, surgeries, and appointments that served no medical purpose and sometimes were actively harmful. Residents of McAllen were getting more care. But that didn't make it better care.

From there, Gawande drew a theory of health policy reform: America needed to expand coverage, which was distributed unequally, and it could do so by reducing spending on unnecessary services. The country could have it both ways: more coverage and less spending—and perhaps even better care in the process.

When it passed a year after Gawande's article, the Patient Protection and Affordable Care Act, widely known as Obamacare, was based at least partly on this theory. The law expanded coverage through Medicaid and subsidies for heavily regulated private insurance. A goal was "bending the cost curve down."

By one measure, Obamacare slowed the growth of national health care spending from 5.6 percent a year between 2003 and 2010 to 4.4 percent a year between 2010 and 2018. But adjusted for general price inflation, the growth rate is essentially unchanged. And overall health spending increased from $2.6 trillion in 2010 to $3.6 trillion in 2018, representing an increased share of the country's gross domestic product. Buffett's hungry tapeworm had kept on eating.

Which brings us back to Haven. In May 2020, Gawande, who reportedly had served as more of an intellectual leader than a hands-on manager, left the company, citing a desire to focus more on policy and advocacy—not an auspicious sign for a company that set out to serve as a model for health care delivery. And despite the extraordinary resources at its disposal, the company's actual work had been modest: a handful of pilot programs, according to The Wall Street Journal, including one that offered JPMorgan employees in two states a menu of health care services at a flat rate.

Despite its access to brainpower and financial backing, it had turned out to be harder than expected to disrupt the health care market. Haven would not get to try much longer. In January, the company announced that it would shut down entirely. The original dream—"simplified, high-quality and transparent healthcare at a reasonable cost"—had proven too vast and too difficult for even the most powerful players.

Haven's failure is a genuine disappointment. Like Obamacare—which has sputtered along, frustrating the public with continued high costs and regulatory inflexibility—it serves as a lesson in the arduousness of ambitious health care reform. Regulatory and practical pressures, combined with the resources, innovative thinking, and ground-level administrative competence that are necessary, make major improvements very difficult to achieve. It might be possible to starve the tapeworm. But so far, no one has figured out how.