What The New Amazon/JP Morgan Chase/Berkshire Hathaway Healthcare Partnership Means For You

Senior Contributor
01.30.18 2 Comments

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Three of the most powerful companies in the world, Amazon, Berkshire Hathaway, and JP Morgan, are teaming up to build, from the ground up, a new healthcare company. It’s a blockbuster of an announcement, right on the heels of CVS buying out Aetna. All involved are speaking realistically about it being a vast challenge, but Jeff Bezos, in the New York Times article detailing the plan, gets real with his goals: Make health care more efficient, for the three companies, and from there, perhaps, the rest of America. So what does this mean for you?

  • At its most basic, better efficiency is a good thing in healthcare: The medical system is notoriously inefficient, from the absurd amount of money spent just to get the bills sent out to the fact that despite a massive push to use digital records, most medical offices still use fax machines. As the goal of these three is to finally do what so many others have tried and failed to, namely mold a notoriously bureaucratic system into some form of shape, that would have enormous effects on your health care. Not least, it’d mean lower bills and fewer mistakes.
  • Yet this isn’t being done out of the goodness of Amazon’s heart: Remember, more Americans are insured through their employer than through any other source, with employers paying roughly 83% of the tab. Berkshire Hathaway’s Warren Buffett described it as a “tapeworm” in the statement announcing the initiative. If you manage to cut the cost of healthcare for companies, that both means more money in employee pockets to spend and more money in the coffers of companies that the two institutional investors own big chunks of. They’re starting with their own companies, and the three are quite blunt that they don’t expect to make a nickel off of this. At least, not on the front end.
  • The consequences of pulling this off are hard to predict: Keep in mind, health insurers mostly make their money off those employer plans. So more or less, this triumvirate has just declared war on the profit margins of competitors like UnitedHealthcare. Whether they can successfully prosecute that war is another matter, although employers will likely get behind any push that they think will cut costs. But also, a lot of that inefficiency is labor costs. Keep in mind that right now, we’re talking about one-sixth of the economy, which touches everything from federal spending to the wages of entire communities.
  • And they’re just one player in a much bigger game: This is a long-term plan, and the future of the American healthcare industry is anything but certain. The GOP wants massive cuts to federal spending on healthcare, which would cause its own problems, while Democrats are increasingly discussing Medicare for all, among other solutions. And with Amazon jumping into the game and CVS’ aforementioned buyout of Aetna, it appears that on the Wall Street side of things, there are deals to be made. It’s not entirely off the wall that, say, Apple or Google might decide it’d be cool to buy a healthcare company, just to cut their own insurance costs if nothing else. And none of this gets into other possible changes, like the rising push to force hospitals to disclose prices.
  • The really big takeaway here, in the end, is that even the richest people in the world have had it with our current healthcare system: Two of the world’s richest men, and three of the world’s biggest companies, are so frustrated with American health care that it’s worth it to them to spend likely billions of dollars building their own insurer, and lose money on it to boot, than deal with the current system any longer. Warren Buffett, in particular, stands out here, as he’s a man so frugal that he’s worth billions and famously eats Mickey D’s and drives used cars. That he views the system as so busted he might as well just go build his own says a lot, to Wall Street, to Washington, and to the healthcare industry. If this announcement makes one thing clear, it’s that the current healthcare industry has ticked off so many people that everyone wants to do something about it.

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