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Amazon, Berkshire and JP Morgan

By February 8, 2018Commentary

While I was off climbing Mt. Kilimanjaro, Amazon, Berkshire and JP Morgan announced that they would form a new company to help tackle health spending.  This has generated enormous press reactions and at least temporarily depressed the price of some large health insurers.   (Press Release)   The press release and other statements from the group were extremely short on any specifics.  The new firm is to be “free from profit-making incentives and constraints”.  A lot of health plans and most health systems already are technically not-for-profit entities, and that hasn’t kept them from raising prices and keeping spending rising at a healthy (ha-ha) clip.  The initial focus is to be on technology solutions that will provide employees and their families with “simplified, high-quality and transparent healthcare at a reasonable cost”.  Really, that is the best you can come up with from these supposedly wonderful and innovative companies.  Sounds like the same crap we have been hearing for years.  And the technology stuff is just plain nonsense, to date all the research finds that it has almost no impact on costs or even quality.  Here is a reality check–we have allowed massive provider consolidation which has led to extensive market power in almost every major population area.  Where there is market power, there are higher prices and limited ability to negotiate those down and no incentive for the providers to actually lower their costs.  If you don’t fix this structural problem, you aren’t going to do squat about spending.

Large employers have been forced to confront health costs for decades, particularly since they perceive those costs to play a role in making them non-competitive globally.  But health is also 20% of the US economy and a lot of large companies are involved in health care, particularly drug makers, large hospital chains and large health plan firms, and those companies benefit from high prices.  JP Morgan makes a lot of money from those companies and already had to back down and reassure them that the announcement wasn’t intended to hurt their business.   Through the National Business Group on Health and other purchasing organizations, large employers were already supposedly addressing the health spending problem.  The new venture, like those older ones, is going to learn that trying to do something about health spending is more complex than they imagine.  I think that five years from now, if this new organization even exists, we will find it hasn’t made one whit of difference.

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