What others say: New venture aims to address health care costs

Berkshire Hathaway Chairman Warren Buffett is known as a “value” investor — someone who buys into companies that are selling for less than they’re really worth. When his company provides its workers health care benefits, however, Buffett isn’t paying for value. Instead, employers like Berkshire, which owns a diverse portfolio of financial and industrial companies, are paying ever-higher amounts for their workers’ policies and getting less coverage in return.


That problem helped drive Berkshire Hathaway to announce plans Tuesday to join forces with online retail giant Amazon and Wall Street powerhouse JPMorgan Chase &Co. to create an independent venture that aims to reduce their health care costs while improving employee satisfaction. Notably, they said the new company will be “free from profit-making incentives and constraints.”

What this new company will do, though, is anybody’s guess. “Our group does not come to this problem with answers,” Buffett conceded. Nevertheless, it’s a welcome signal that companies are finally trying to rein in the rising cost of health care, rather than simply passing more of the pain on to their employees.

For a country that spends so much on health — Milken Institute health care economist Hugh Waters pegged it at $3.3 trillion in 2016, or $10,348 per person — we’ve managed to do surprisingly little about rising costs besides complain. Fears of rationing care keep federal and state governments from responding aggressively to higher drug and treatment costs, and a whole host of factors have led millions of Americans to fall into the trap of costly and preventable chronic illnesses, such as diabetes.

With more than 1.2 million employees worldwide combined, Amazon, Berkshire and JPMorgan Chase have the kind of bargaining power that could make a dent in what their workers are spending on hospitals, prescription drugs and outpatient care. But let’s be realistic. Even employers this large don’t have a lot of leverage over the sole manufacturer of a blockbuster drug, or the only obstetrician in a rural county, or the dominant hospital chain in a region.

That’s why the other aspect of the companies’ effort — using technology to help employees better manage and obtain care — may be more promising. Because part of the solution is to reduce the demand for care by helping Americans stay healthier, and to increase competition by helping people shop more intelligently for health care services. The latter is extremely hard today, given the complexity and opacity in health care pricing. If these companies struck a blow for transparency in that area, we’d all be better off.

Amazon already sells plenty of medical devices and fitness products, and it’s reportedly looking to compete with local pharmacies for the retail sale of prescription drugs. If this new effort helps Amazon’s more than 540,000 employees stay healthier and find high-quality, lower-priced services, it could ultimately offer consumers something better than step trackers and Ace bandages. But we won’t know until we see the answers the three companies and their new venture eventually have to offer.

— Los Angeles Times,

Jan. 31


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