So Amazon, Berkshire Hathaway and JPMorgan Chase have formed an alliance and are getting into the healthcare business.
You might have seen the headlines on this last month; it was undoubtedly huge news. But what does it really mean to everyday working Americans? Is there the potential to truly disrupt the industry in the way these three corporate giants hope?
Maybe, maybe not. Assessing the viability of their plan requires a good deal of guesswork, if only because the partnership shared so few details about how it plans to move forward. The partners will, for now, focus on their own employees in the U.S., so it wouldn’t be wise to extrapolate too much right away.
According to their statement, the new alliance will pursue technology solutions to provide health care and lower costs. The real game-changer, at least in how the alliance sees things, is that it will be “free from profit-making incentives and constraints.”
It all sounds so promising, I know. The problem is the savings they’ll achieve by banding together will largely be in marketing and administration. Those are sizeable expenditures but don’t begin to approach the amounts spent on doctors, hospitals and medication.
Of course, I don’t doubt that Jeff Bezos, Warren Buffet and Jamie Dimon can negotiate more favorable terms with service providers. There also are deep pockets of inefficiencies and unnecessary complexity in healthcare that offer real market opportunities for cost-savings. But will it all be enough?
While the three companies together employ more than 1 million people, more than 150 million Americans are covered by their employer’s health plans, limiting the partnership’s sway over the largest insurers and pharmacy benefit managers.
Perhaps more to the point, the question we should ask is whether this effort really will improve the health of employees? In a culture that expects more, does anyone really want cheaper healthcare?
Major employers, including Walmart and Caterpillar, have tried for years to address the costs and complexity of health care, all to little avail.
The immutable fact about health care is that it tends to be local. Companies can’t simply prevent hospitals and doctors from raising prices. They just don’t have the leverage.
Bezos, by the way, acknowledged the challenges ahead in the alliance announcement:
“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
Google and Microsoft can attest to that. Both started health ventures in recent years with little success.
Scott McGraw is Vice President of CCIG’s Employee Benefits division. Reach him at 720-330-7924 or firstname.lastname@example.org.
CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.