Amazon, JPMorgan Chase, Berkshire Hathaway: We'll Tackle Employee Health Costs With New Firm

Will healthcare become the ultimate employee discount for US employees of Amazon, JPMorgan Chase, and multinational conglomerate Berkshire Hathaway? Or something bigger for all Americans?

The 3 disparate companies announced on Tuesday in a joint statement that they will form a separate, independent company “free from profit-making incentives and constraints” to tackle the vexing problem of rising healthcare costs for employees and their families.

Details of the actual plan, such as where it would be located, who would run it, or what it would be named, were not forthcoming in the press release.

The company will focus on “technology solutions” in its drive to lower runaway health costs and increase satisfaction for employers and employees.

Warren Buffett, Berkshire Hathaway’s chairman and CEO, has talked repeatedly about healthcare costs as being a drag on the country’s economy, even going so far as to voice support for a single-payer system. In Tuesday’s release he repeated an often-used phrase, saying, “The ballooning costs of healthcare act as a hungry tapeworm on the American economy.”

Indeed, last week, the Health Care Cost Institute (HCCI) reported that Americans are continuing to pay more while using the same amount of or less healthcare.

Rising prices, especially for prescription drugs, surgery, and emergency department visits, caused overall healthcare spending in 2016 to grow faster than at any time in the last 5 years, HCCI’s annual Health Care Cost and Utilization Report said. The report analyzed healthcare spending and utilization from 2012 to 2016 for people up to age 65 with employer-sponsored health insurance.

The companies said in their statement they were aware of the challenges.

“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Jeff Bezos, Amazon founder and CEO.

“Our people want transparency, knowledge, and control when it comes to managing their healthcare," said Jamie Dimon, chairman and CEO of JPMorgan Chase.

Business alliances and associations praised the move, but one health policy expert noted we’ve been here before with similar efforts.

“We applaud their effort and long-term view,” said Brian Marcotte, chief executive of the National Business Group on Health. He said that the “industry is ripe for disruption and the collective resources of these 3 companies, emerging technologies, and Amazon’s customer obsession and supply chain savvy gives me optimism that they will pursue a consumer-focused model that will transcend the fragmented, provider-centric delivery system that we have today.”

Other employer health alliances have tried and failed over the years to control health care costs, said Niall Brennan, MPP, president and executive director of HCCI.

“I think what remains to be seen is if the execution will be different,” he said of the arrangement. “And if it’s different, why is it different?”

“People are placing an extraordinary amount of confidence and hope in the ability of Amazon to disrupt healthcare in the way that they have disrupted other businesses,” said Brennan, who was the chief data officer at CMS in the Obama administration. “I want nothing more for them to crack this nut and actually get a grip on US healthcare spending, but I’ll need to see more details, which were in extremely short supply in today’s announcement."

The most recent current employer-led effort on healthcare is the Healthcare Transformation Alliance (HTA). Glenn D. Steele Jr, MD, PhD, vice chairman of the HTA, said that the Amazon partnership “is symptomatic for what is happening across a whole set of self-insured companies.”

The HTA was formed in 2016 to reduce healthcare spending by negotiating directly on behalf of its 38 or so members for prescription drugs and insurance. HTA uses IBM software to analyze claims data.

And it works with CVS and UnitedHealth, although since those partnerships were arranged, CVS has made a $69 billion offer to buy Aetna, which itself was seen as an effort to forestall Amazon’s entry into the pharmacy business.

As to how the 3 companies will achieve their goal of being free of profit making concerns will still delivering on their goals, Brennan said "the devil’s going to be in the details.”

"How is profit maximation consistent with constraining system costs in the long run? It’s one of those inconventient truths no one wants to talk about,” he said.

Of today’s news, Brennan said, “I think it’s a measure of how genuinely concerned and alarmed people are at the growth in healthcare spending and also the caliber of the 3 companies involved that with no details, it can dominate the capital markets and the Twittersphere and the healthcare media for an entire day and probably many days to come.”