A HEALTH CARE HAVEN NO MORE.

• Author: Suderman, Peter
• Position: IDEAS

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 enroll-ees: 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...