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Dr. Jonathan Gruber How can companies disrupt the American health care system in a meaningful way?

The health insurance market is overdue for the kind of innovation Amazon, Berkshire Hathaway and JP Morgan Chase are planning.

Jeff Bezos arrives for the premiere of "The Post" on December 14, 2017 in Washington, D.C.Mandel Ngan / AFP - Getty Images
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The main thing that employees of Amazon, Berkshire Hathaway and JP Morgan Chase should know, in the wake of the announcement on Tuesday that their companies are joining forces to bring down health care costs, is that there are lots of ways that their companies can lower costs without harming employees’ health.

The one problem for their employers, though is that experts have a lot of good-sounding ideas about how to reform the health care system in this country, but not a lot of evidence about what works. But, essentially, we spend a lot of time thinking about what a completely new type of entity — the sort that these companies say they are trying to start — could do. There are really three things that the new entity could do to tackle the companies’ costs for providing health care to their employees.

The first is doing what insurers should already be doing: Actually getting employees to go to the right providers. That's the lowest-hanging fruit and probably the first step any company attempting to lower their costs should take. A company like the one seemingly envisioned here needs to create smart networks of good, reasonably-priced providers and incentives for people to use those networks, so that employees are actually going to the most cost-effective providers to deal with their illnesses. Insurers should be doing that, but they haven't been doing a good job of it in recent years. About a decade ago, though, insurers started charging people real money if they went for unnecessary scans, and then the number of such scans dropped enormously, demonstrating that it is possible.

Setting up the proper financial incentives and combining them with real, good transparency tools that get people to shop around for health care would be an important development.

It’s also an area in which technology could conceivably come into play. Setting up the proper financial incentives and combining them with real, good transparency tools that get people to shop around for health care would be an important development. There are transparency tools out there, it's just they're so bad that people don't use them, so, if you can develop better tools so people can effectively shop, then the incentives to do so can work.

The second thing for a new entity to look at is getting more care coordination — which insurers also should be doing and aren’t. A really disruptive entity should make sure that people’s care is properly coordinated by providers, so it's delivered efficiently: That can really lower costs. For example, ideally, you’d want to develop a system in which patients don't go home from the hospital before they're medically ready, and then end up back in the hospital, costing more money. Once again, that's something that insurers should be doing, they just haven't been.

Now, none of these sound like what is being talked about by Amazon, Berkshire and JP Morgan, except maybe the idea of making it easier to shop around, though it would be radical for employers to do. They typically have just left those decisions to insurers and insurers haven't done a good job.

The more radical out-of-the-box solution would be government regulation of prices, but that's not what insurers are going to do or these employers are going to do.

The third thing is by far the most important, but also the one that companies have been trying to figure out forever: Getting employees to take care of their health. Employers have been trying this for a long time, because having healthier people to insure is easily the most effective way to lower health care costs: Tons of employers already give their employees Apple Watches or Fitbits, offer them rewards if they lose weight, try to help them quit smoking, and none of it works. Can they do it better than other companies have been able to? I wish them the best of luck, but I don't know what they mean to do that's above and beyond what employers are already doing.

The more radical out-of-the-box solution would be government regulation of prices, but that's not what insurers are going to do or these employers are going to do. Given that we're going to have a free market determination of health care prices, then getting employees to go to more efficient providers and coordinating their care would make the delivery of health care more cost effective.

And, together, they are big enough to make an impact for their employees and, if it inspires other employers to take the reins from these sort of non-innovative insurers and actually do the work, it could have enough of an effect to impact the cost of health care in America.

As told to THINK editor Megan Carpentier, edited and condensed for clarity.

Dr. Jonathan Gruber is the Ford Professor of Economics at the Massachusetts Institute of Technology, the director of the Health Care Program at the National Bureau of Economic Research and the president of the American Society of Health Economists. From 2003-2006 he was a key architect of Massachusetts’ health reform effort, and served as a technical consultant to the Obama Administration to help pass the Patient Protection and Affordable Care Act from 2009-2010.

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