Don't overhype the new health care venture
Even if Jeff Bezos, Jamie Dimon and Warren Buffett come up with ways to lower their own corporate health care costs, it’s highly unlikely their new health care venture will move the needle on overall health spending or other dimensions of the health cost problem.
The odds: Bezos, Buffett and Dimon are big names — big as they come — but the history of health care is littered with business titans who have declared war on health care costs. Amazon, Berkshire Hathaway and JPMorgan Chase may be able to get their own costs down, but that doesn't mean they can do it for anyone else.
The back story: Others have tried to tackle health care costs, including Howard Schultz of Starbucks fame and Walter Wriston when he headed Citicorp and the Business Roundtable. They sprang into action when employer premiums were rising by double digits. Premiums rose by a historically modest 3% in 2017. What would success look like now, a 2 percent increase?
The big picture: Health care costs are not one problem but many: national health care spending, federal health care spending, employer premiums, out-of-pocket costs, and the value of the dollars spent. Each has different constituencies who care about them, requiring different solutions presenting different challenges.
- Republican leaders like House Speaker Paul Ryan are mostly concerned about reducing federal spending on Medicare and Medicaid.
- The focus in health care is on “value,” getting better outcomes for the money that's spent. This mostly means weeding out unnecessary tests and procedures.
- Reducing national health spending is a different goal. What distinguishes the level of GDP we spend on health from other countries is primarily the prices we pay for everything in health care, not the volume or intensity of services we provide. These companies might make a small dent in the prices they pay, but as big as they are, they will not have the leverage to do much beyond that.
- The American people (and voters) are concerned about their out of pocket costs and the ripple effects they have on family budgets. They have little interest in “value” and want the country to spend more on health, not less.
- Employers are focused on their own premium increases. This seems to be what the big three will concentrate on, using their purchasing and information power and new technologies to drive down the rate of increase in their own health care costs.
What to watch: Perhaps other employers will try to emulate them or buy into whatever they do, but they could be successful and still have almost no impact on national health spending, federal spending, or consumer out of pocket costs.
Nor will they be immune from the forces that have hampered previous efforts. Health coverage is a popular benefit and an important part of any employer’s wage structure; they will go only so far to “disrupt” it.
Don't forget: Corporate chieftains are disproportionately Republicans and uncomfortable with solutions that require government action or regulation. Their personal doctors tend to be the leading physicians in their communities, who often oppose strong steps that would rein in health costs. They are also often on the boards of major area health systems, who can find their interests threatened by cost control efforts.
- The other side: Bezos, Dimon and Buffett are less traditional business leaders than some of the others who have taken on health care costs, and could prove more willing to rattle the health system’s cage.
The bottom line: In 1945, our namesake and original benefactor created Kaiser Permanente (we have no connection). It’s now a $65 billion organization with 12 million enrollees and about as big a disruption of the health system as any business leader could ever hope to create. Still, it is dwarfed by Medicare, Medicaid, the ACA, the VA, and the rest of the health system, and the model has never spread as early advocates envisioned.
As intriguing as the recent announcement is, experience suggests keeping it in perspective.