A Fix for The U.S. Health-Care Crisis – Four Walls and a Roof
Bloomberg Businessweek|November 11, 2019
The country’s largest health insurer is giving apartments to homeless people—not as an act of charity, but to drive down the extraordinary cost of caring for them.
By John Tozzi. Photograpphs by Mark Peterman

FOUR WALLS AND A ROOF

In 1986, Congress enacted a law to bar hospitals from turning away patients who are unable to pay. Any hospital with an emergency room that participates in federal health programs must evaluate and stabilize every patient who comes through the door, including those who are uninsured, indigent, addicted to drugs, or mentally ill.

No institution has a similar obligation to ensure that those people have a safe place to sleep. As a society, we’ve effectively decided that people shouldn’t die on the street, but it’s acceptable for them to live there. There are more than half a million homeless in the U.S., about a third of them unsheltered—that is, living on streets, under bridges, or in abandoned properties. When they need medical care or simply a bed and a meal, many go to the emergency room. That’s where America has drawn the line: We’ll pay for a hospital bed but not for a home, even when the home would be cheaper.

Jeffrey Brenner is trying to move that line. He’s a doctor who for more than 25 years has worked largely with the poor, many of them homeless. Recently, his place in the healthcare system has shifted. After decades in shoestring clinics and nonprofits, he’s become an executive at UnitedHealth Group Inc., America’s largest health insurer. Brenner is expected to contribute to its bottom line. He plans to do it by giving people places to live.

The research and development lab for this experiment is a pair of apartment complexes in a down-at-the-heels corner of Phoenix called Maryvale. Here, Brenner is using UnitedHealth’s money to pay for housing and support services for roughly 60 formerly homeless recipients of Medicaid, the safety-net insurance program for low- income people. Most states outsource their Medicaid programs to private companies such as UnitedHealth, paying the insurer a per-head monthly fee— typically $500 to $1,000—to manage members’ care. The company’s 6 million Medicaid members produced $43 billion in 2018, almost 20% of total revenue.

It’s a profitable business overall. But the most expensive patients, who often present a complex blend of medical, mental health, and social challenges, cost UnitedHealth vastly more than it takes in to care for them. “Can you imagine people living on the street with these disorders? Heart failure, COPD. They’re rolling around with oxygen tanks, crazy stuff,” Brenner says. It isn’t hard to find people living in similar distress around Phoenix or any other American city. And despite their extreme costs, these patients often get poor care. “This is just sad. This is just stupid,” Brenner says. “Why do we let this go on?”

Sitting in a vacant studio apartment on the second floor of one of the complexes, Brenner shows me data on a patient named Steve, a 54-year-old with multiple sclerosis, cerebral palsy, heart disease, and diabetes. He was homeless before UnitedHealth got him into an apartment. In the 12 months prior to moving in, Steve went to the ER 81 times, spent 17 days hospitalized, and had medical costs, on average, of $12,945 per month. In the nine months since he got a roof over his head and health coaching from Brenner’s team, Steve’s average monthly medical expenses have dropped more than 80%, to $2,073.

After testing the idea in Phoenix, Milwaukee, and Las Vegas, UnitedHealth is expanding Brenner’s housing program, called MyConnections, to 30 markets by early 2020. It’s a business imperative. In January, after the company announced a $12 billion profit for 2018, Wall Street analysts pressed Chief Executive Officer Dave Wichmann on the performance of its Medicaid business. The return, he acknowledged, was “not at our target margin range of 3% to 5%.” Wichmann said it would hit the target next year.

Patients like Steve wind up in the ER because they don’t fit into the ways we deliver health care. The U.S. system is engineered to route billions of dollars to hospitals, clinics, pharmacies, and labs to diagnose and treat patients once they’re sick. It’s not set up to keep vulnerable people housed, clothed, and nourished so they’ll be less likely to get sick in the first place.

The U.S. spends 18% of its gross domestic product on health care, vs. 8.6% in the 35 other countries in the Organization for Economic Cooperation and Development. America’s outsize spending on health care contrasts with much paltrier investments in social support—housing, food, education, cash assistance, and care for children and the elderly. Other nations in the OECD spend $2 on social services for every $1 they spend on health care, according to The American Health Care Paradox, a 2013 book by Elizabeth Bradley and Lauren Taylor. In the U.S., each dollar of health spending is matched by only 60¢ of social support.

That a for-profit conglomerate like UnitedHealth is in the business of taking taxpayer money to care for poor people reflects the peculiarity of U.S. social policy. Medicaid was created in 1965 in tandem with Medicare—public insurance for older Americans. Congress has since expanded eligibility for Medicaid, most recently through the Affordable Care Act, and the program now insures 72 million people, more than 1 in 5 Americans. It pays for 42% of all births.

States split the cost of Medicaid with the federal government, but it takes up an ever-larger portion of their budgets— after education, it’s usually a state’s biggest expense. To keep down costs and avoid the difficulty of running a health-care system, most states contract with UnitedHealth and its competitors to establish what are called Medicaid managed-care programs. In 2017, $264 billion, almost 50¢ of every Medicaid dollar, went toward care for the 54 million people on private Medicaid plans.

Few entities outside the government exert as much influence over health care as UnitedHealth, based in Minnetonka, Minn. The company’s health-insurance unit, UnitedHealthcare, provides benefits to 43 million Americans. About 50,000 physicians work for its health-services unit, Optum Inc. UnitedHealth also owns pharmacies and a bank and Brazilian hospitals. Its revenue last year, $226 billion, surpassed that of all but five U.S. companies; it’s told shareholders to expect long-term earnings growth of 13% to 16% annually.

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