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The big tech innovation from Amazon-Bershire Hathway-JP Morgan joint venture could be…

Narrow networks?  That is one proposition from Bill Gurley, a general partner at Benchmark Capital, in an article from Business Insider.  Berkshire Hathaway vice chairman Charlie Munger, prefers the Kaiser model.

“If the whole nation had Kaiser Permanente care, the average quality of the care would go way up and the cost would go way down,” Munger has said.

Narrow networks are becoming standard, especially amongMedicare Advantage plans, or private insurance alternatives to Medicare. About 35% of Medicare Advantage members were in narrow network plans, while 22% were in broad-network plans in 2015, according to the Kaiser Family Foundation. They’re also common in the Affordable Care Act marketplace.

But still, the majority of health plans aren’t built around narrow networks, especially employer-funded plans, which proponents of narrow networks say keeps healthcare costs high.

“I don’t know how we get to reform until there’s narrow networks,” Gurley said.

Sure, narrow networks could reduce cost by lower the price paid to providers.  But is that really going to fix the system.  One easy way to lower cost is just to create narrow networks based on cost, and ignore quality.  Because quality of care is so hard to measure, narrow networks appear to be a solution since cost declines, observable quality may decline modestly or not at all, but quality factors important to patients (but perhaps not payers) is likely to fall dramatically.  This is why there was the managed care backlash years ago.

Amitabh Chandra is skeptical that the Amazon-Berkshire Hathaway-JP Morgan can solve the health care problem in ways that larger organizations that specialize in health care (e.g., Kaiser Permanente, United Healthcare) have not yet thought of.

It appears that Atul Gawande is hiring people for this joint venture project. How exactly he plans to create a new paradigm to improve quality and reduce cost, however, is not entirely clear.

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