Health industry stocks plunged on Tuesday with word that corporate powerhouses Amazon, J.P. Morgan, and Berkshire Hathaway were partnering to create a new, nonprofit company to “focus on technological solutions to provide coverage for U.S. employees at a lower cost.” But if Jeff Bezos, Warren Buffett, and Jamie Dimon were less than clear about precisely what their new venture will do, their bottom-line objective to help corporate employers like themselves dramatically reduce the cost of their workers’ health care is straightforward. With a combined market capitalization of $1.5 trillion and 1 million employees, their potential savings are enormous. CNBC sources claimed that “this effort can cut J.P. Morgan's annual $1.25 billion medical expense by up to 20 percent.”
Whether the new entity will use its combined buying power to drive down the cost of treatments; negotiate drug prices; or pioneer a technology platform for real-time cost comparisons, insurance customization, and health record management (i.e. “Amazon Health Services” or “AHS”) is still to be determined. As Amazon founder and CEO Bezos put it:
“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.”
Or as Buffett, the Berkshire Hathaway chairman and CEO explained:
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.” [Emphasis mine.]
But with all due respect to the Oracle of Omaha, there is already an answer to this problem, one which America’s economic competitors discovered years ago and still share today. Whether in the nationalized system of the UK, the single-payer systems of Canada’s provinces, the mandated health savings accounts in Singapore, or the universal coverage regimes nevertheless dependent on private insurers in France, Germany, Switzerland, and Japan, the solution for cost control and price transparency is the same. Whether negotiated directly or through a national association of insurers, the government sets the prices for prescription drugs, tests, treatments, hospital stays, and pretty much everything else.