We all know that the United States health care system is burdened by tremendous expense. According to the Centers for Medicare & Medicaid Services, or CMS, in 2012 health care spending in the United States was $2.8 trillion (a staggering $8,915 per person). Healthcare spending is a major concern, which is why so much money, time, and effort is thrown into research to try and find a way to reduce spending or at least slow its growth.
Private insurers like industry leader UnitedHealth Group (NYSE:UNH) are at the forefront of this research, as their profits depend on reducing health care expenses so they keep a greater proportion of the revenue they collect in premiums from members.
A lot of people have worried that the easiest way for insurance companies to save on health care expenses is to reduce care choice -- we've heard about the so-called "narrow networks" in some Obamacare plans, and of course many of us have dealt with the frustration of figuring out whether a doctor is 'in-network' or not.
A revolutionary opportunity?
That's why a study recently released by UnitedHealth Group is so exciting. UnitedHealthcare (the insurance component of UNH) partnered with five medical oncology groups to do a study on 810 patients with common cancers (lung, colon, and breast cancer) and try to find ways to deliver care at the same level of quality but significantly cheaper.
And they succeeded.
In this pilot program, medical costs were reduced by 34%. And patient outcomes remained the same. Think about the opportunities to bend the cost curve if this could be expanded just to all of UnitedHealth Group's cancer spending (we don't know if that's possible yet, but many of the best practices identified here may have potential to be applied in other cancers). Based on 2013 numbers, those savings would have translated into an extra $3 billion in pre-tax profit.
But what if we could expand it even further?
According to the National Cancer Institute, cancer spending in 2010 was about $125 billion. A third of that number is a gigantic amount that could be saved.
This could be truly revolutionary. And in the video below, Motley Fool health care analysts Michael Douglass and David Williamson lay out the scope of the potential for company profit and for the general health care system.