Amazon, Berkshire Hathaway, and JPMorgan Chase are creating a new business designed to lower healthcare costs for US-based employees in a move that could shake up the managed-care industry, says a Business Insider report. The companies were not specific about what kind of enterprise they aim to create, noting only that they wanted to improve employee satisfaction while reducing costs, according to a joint release. Still, the report says, the news was enough to send shares of managed-care providers lower.
Americans on average spent $714, or 1.6% of their take-home pay, on out-of-pocket healthcare costs in 2016, according to a report from JPMorgan. That was up 3.6% from the year before and up 13.5% from 2013. The bank also found that the US spent 18% of gross domestic product on healthcare, up from 13% in 2000.
The report says the rising cost of healthcare has been a focus of Berkshire Hathaway’s chair and CEO, Warren Buffett, and his partner Charlie Munger for some time. In May, the pair criticized the healthcare system and suggested that a single-payer healthcare system in the US could be the long-term solution. Buffett and Munger also lavished praise on Kaiser Permanente, a large managed-care consortium. Kaiser Permanente is made up of multiple branches to handle a variety of healthcare needs and operates its health plans on a not-for-profit basis, with a mix of for-profit businesses and health centre mixed in to help subsidize the other parts of the group.
The report says the latest announcement was short on details, but given the Berkshire partners’ praise of Kaiser Permanente and the stated goals of the new group, the Berkshire-JPMorgan-Amazon healthcare business could take a similar approach. The companies, which employ a combined 1.1m people worldwide, plan to create a new, independent company they say is “free from profit-making incentives and constraints.” Initially, the release said, it will focus on technology solutions designed to “provide US employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” Buffett is quoted in the report as saying. “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.”
The new initiative will be led by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a MD of JPMorgan Chase; and Beth Galetti, a senior vice president at Amazon.Business Insider report