Amazon, Berkshire Hathaway and JPMorgan Team Up to Try to Disrupt Health Care
There was quite a bit of talk over the last couple of days about CEOs Bezos, Buffet, and Dimon teaming up to take on rising healthcare costs. The NYTimes weighed in with their story, “Amazon, Berkshire Hathaway and JPMorgan Team Up to Try to Disrupt Health Care”. The article quoted Jeff Bezos, “The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort.” From the group’s press release Jaime Dimon said, “Our people want transparency, knowledge and control when it comes to managing their healthcare.” No other substantive proposals for what this group might do were at hand.
In a companion analytical piece the NYTimes questions the merits of this consortium, “Can Amazon and Friends Handle Health Care? There’s Reason for Doubt”. Unfortunately this critique focuses too narrowly on the companies themselves and does not address the structure of the US healthcare system.
Dimon’s call for “transparency, knowledge, and control” is the typical language of free-marketers. If only we could arm people with enough information and access they will make good decisions about their healthcare and market forces will drive down prices and improve quality. This flies in the face of the facts, recognized by every other developed country, that healthcare is simply not suited to market controls. See my earlier discussion “Healthcare and Markets – why don’t they work together?”. The US healthcare system is a pricing machine controlled by the doctors, hospitals, drug and insurance companies. It is also not a healthcare system, rather a machine to produce as many tests, procedures, and prescriptions as possible. The entire system is designed to incentivize these activities. Your health is incidental. No one is paid for your health only for your tests, procedures, and prescriptions.
As Warren Buffet noted in the press release, “The ballooning costs of healthcare act as a hungry tapeworm on the American economy.” American healthcare takes up over 18 percent of GDP. Nearly one in five dollars. This compares with our global developed country competitors who all have a 10 percent or lower GDP share for their healthcare systems which miraculously deliver better healthcare to the whole population. The outsized share US healthcare takes is a competitive disadvantage for US companies and the US as a whole. It is also an outrage that such profligate spending delivers such poor results.
Despite the media flurry around this announcement we should not expect much further from this effort. With only 1.2 million employees among the three companies they control less than one percent of those who receive health insurance through their employment. When it comes to the real issue of tackling the price setting by the healthcare providers this group has no meaningful leverage. And, even if they can improve people’s access to information, a useful thing to do certainly, this will not overcome the unbridgeable gap in expertise between patient and doctor.
As noted many times here, we need to look to our developed country competitors for their proven approaches to how to set up a world-class healthcare system at world standard costs.