Amazon, JPMorgan Chase, and Berkshire Hathaway announced Tuesday the formation of a new nonprofit that aims to cut healthcare costs for the hundreds of thousands of Americans employed by the three companies.
“The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our US employees, their families, and potentially, all Americans,” said JPMorgan CEO Jamie Dimon.
One executive from each of the three companies will take a leading role in the new venture: Amazon Senior Vice President Beth Galetti, Berkshire investment officer Todd Combs, and JPMorgan Managing Director Marvelle Sullivan Berchtold.
Tuesday’s press release states the new company will be “free from profit-making incentives” and will focus on “technology solutions” to simplify the healthcare system. Details such as the company’s name, base of operations, and long-term leaders were not included in the press release.
Shares of companies across the healthcare industry dropped sharply following Tuesday’s announcement, including United Health, CVS, Cigna, Express Scripts, and Aetna. Shares of JPMorgan and Berkshire dropped slightly, while Amazon’s edged upwards.
“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 our employees and their families would be worth the effort,” said Amazon CEO Jeff Bezos.
The announcement lines up with Amazon’s first steps into the healthcare industry, which include adding healthcare supply options to its business-to-business marketplace offering.
With the acquisition of Whole Foods, Amazon now employees more than 540,000 people. The company offers health insurance to all full-time warehouse employees.
Amazon has promised to add 100,000 full-time jobs in the US before the end of 2018 and will be adding 50,000 high-paying corporate jobs over the next decade with the construction of its second HQ.
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said Berkshire CEO Warren Buffett. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”
Buffett, a Democrat, supports a single-payer system and has often criticized America’s rising healthcare costs. He noted last year during a company meeting that while taxes as a percentage of US GDP are falling, medical costs as a percentage of GDP are increasing.
Healthcare spending accounted for 18% of the US GDP in 2016 (an increase of 4.3%).
Analysts agree that America’s healthcare system is antiquated and ready for reform.
It’s “long past time” for giant corporations like Amazon to force innovation into America’s stagnant healthcare system, argues Adam Fein, President of Pembroke Consulting. “I hope this new organization can help patients and their physicians make more informed and most cost-effective decisions. Technology will be necessary but not sufficient to make positive changes.”
Author’s Note: This could be a massive effort to develop new methodologies to reduce healthcare, which is a good idea. But these three capitalist groups are missing the big picture: healthcare in the US operates as a quasi-socialist industry, and we need to straighten that out first. Costs will not go down until companies and doctors are incentivized to do so.
Editor’s note: We have written about this many times. Prices go down when the consumer can buy goods and services based on price and quality. Healthcare in America has layers and layers of bureaucracy between the patient and the quality and price of his health care. Doctors have little incentive to lower costs when the patient doesn’t even see the bill.