Three titans of United States business announced on January 30, 2018, they are joining forces to tackle one of the most enduring problems in U.S. society: quality affordable healthcare.
Amazon, Berkshire Hathaway and JPMorgan Chase's announcement that they will create an independent company to offer health care to their employees "free from profit-making incentives and constraints" sent a shock through the health care industry, with share prices of some incumbents tumbling on January 30.
According to a joint news release issued on January 30, the initial focus of the new company will be on technology solutions that will provide USA employees and their families with simplified, high-quality and transparent health care at a reasonable cost. Apparently, the partnership won't be Amazon-led but rather an independent company that will operate "free from profit-making incentives".
"Partnering with small and midsized businesses has given Redirect Health an edge in crafting truly affordable healthcare plans for thousands of low wage workers in companies around the country", said Berg.
The cost of providing health insurance to a company's employees grew almost 7% past year, extending not only a long-standing streak of rising costs, but accelerating that trend. Jamie Dimon, chairman and CEO of JPMorgan, said the results could benefit the employees of these companies and possibly all Americans. Indeed, between 2002 and 2016, the average amount of money a family of four spent on health care each year grew a whopping 180%. The Department of Veterans Affairs, for instance, gets a 40 percent discount on drugs, and pharmaceutical costs in countries with single-payer health care are much lower than in the U.S. That makes it even more likely that the firm will use its capital on something other than buybacks - like M&A.
Although the details haven't been hammered out yet, the initiative has the potential to disrupt the healthcare industry. "Our group does not come to this problem with answers". We've also learned most consumers do not touch the health care delivery system with enough frequency to ever be a sophisticated consumer. Instead, the initial focus will be on providing technology solutions that provide employees with streamlined, high-quality, and transparent care without profit-related constraints.
Wonder what they're going to do about drug prices.
Gatto, CEO of health care investment fund Jumpstart Foundry, said the slow pace at which the health care sector has addressed its challenges and innovated has been worrisome. "If we can make people healthier, insurance costs should go down because they won't be in doctors' offices so often". "Shares of large drug makers also tumbled, as investors fretted they would struggle to maintain premium prices, with Pfizer, AbbVie, and Merck losing between 1.6% and 5.3%".
Companies like employment-based health care, despite its costs, because it keeps the workforce captive.
"New entrants with fresh approaches like these may be just the prescription our ailing healthcare system needs", says Brian Marcotte, CEO of the National Business Group on Health.
The company is one of America's largest conglomerates, and its concentrated leadership-that is, Buffett's strong personality and unparalleled track record-made it hard to document a succession plan that would be perceived as positive. This is a huge problem in American healthcare.
"If you look at the health care economy, there are so many different areas of it, that change has been coming slowly and people are finding different areas to innovate within, but we haven't really seen a massive disruption", Hovious said. "Our health costs have gone up incredibly and will go up a lot more".