The technological announcement of the year is Amazon, Berkshire Hathaway and JPMorgan Team Up to Try to Disrupt Health Care.
Three corporate behemoths — Amazon, Berkshire Hathaway and JPMorgan Chase — announced on Tuesday that they would form an independent health care company for their employees in the United States.
It was unclear how extensively the three partners would overhaul their employees’ existing health coverage — whether they would simply help workers find a local doctor, steer employees to online medical advice or use their muscle to negotiate lower prices for drugs and procedures.
Details are scant but hopes are high in this joint BusinessWire Statement.
Three Statements
- Warren Buffett: “The ballooning costs of healthcare act as a hungry tapeworm on the American economy. 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.”
- Jeff Bezos: “The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Jeff Bezos, Amazon founder and CEO. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
- Jamie Dimon: “Our people want transparency, knowledge and control when it comes to managing their healthcare.The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans”
Details Scant, Sceptics Abound
CNBC says this is a Lot Tougher Than It Looks.
- Evercore health-care analyst Ross Muken: “Bending the overall health-cost curve isn’t about controlling drug prices, modernizing the supply chain or improving devices. Those are all relatively small parts of spending and some of those parts are deflationary already. This is about getting to the guts of the system and where the inefficiency lies, which is physicians and hospitals. A majority of the costs in the system sit within organizations that are difficult to reform. Furthermore, trying to tackle physician compensation also seems like a heroic effort and one that is likely to cause massive uproar, particularly amongst the senior population.”
- Mickey Chadha, a vice president at Moody’s: The new joint venture “could be disruptive” and put competitive pressure on pharmacy giants CVS and Walgreens and pharmacy benefit managers, but the regulatory burden around every aspect of health care puts “any new entrant in the space at a huge disadvantage. Companies like CVS, Walgreens, United Healthcare, Aetna and Express Scripts already have large scale, which allows for better vendor and drug manufacturer contracting and the ability to serve national clients.”
- Gary Claxton, vice president of the Kaiser Family Foundation, said the biggest driver of health costs is the money spent on sick and very sick people. “It’s not clear what private payers can do” to drive down those costs, Claxton said, referring to insurance plans such as those offered by Amazon, Berkshire Hathaway, J.P. Morgan Chase and other businesses, as opposed to large publicly provided health coverage systems such as Medicare and Medicaid.
Tough or Impossible?
Gary Claxton nails the largest problem: “The biggest driver of health costs is the money spent on sick and very sick people.”
Right to Die
Does your policy cover lung cancer? Why should it have to?
But if it doesn’t, why are you entitled to treatment?
I am a strong believer in the right to die. Spending hundreds of thousands of dollars to keep someone alive for an extra few months is absurd.
Lack of Choices
Obamacare mandated Gold, Silver, and Bronze options. I propose letting insurers offer whatever plans they want.
Basic coverage might cover emergencies, but not long-term cancer treatments.
The marketplace, not government bureaucrats should come up with plans and pricing. Let people pick the options they want.
Mish Health Care Proposals
Published fees: Fees for routine services, medicine, and operations need to be published, not set by government mandate. Whether or not someone is insured, the fees should be the same.
Shopping Around: People should be encouraged to shop around for the lowest-cost provider. Insurers can help. Want to go somewhere else? If your policy covers what you seek, fine. If not, you pay extra.
Foreign Services: Bloomberg reported Heart Surgery in India for $1,583 Costs $106,385 in U.S. Demand treatment in the US? Fine. You should have to pay for it with higher premiums. It’s a free choice. Obviously, this provision does not apply to emergency services like an accident or a heart attack.
Drug Pricing: Allow imports of drugs to increase competition. Medicaid and Medicare should buy in bulk from the lowest cost provider.
Right to Die: No one should be kept alive if they want to die. Nor should someone be artificially kept alive if they do not have insurance, or their spouse or designated appointee wants to pull the plug on their behalf.
Right to Refuse Service: If someone is not insured, hospitals should have the right to refuse service.
Medicare/Medicaid: Currently, those over 65 do not care what things cost. Incentives are necessary to make sure they do. This includes forcing overseas treatment for those able to travel. Once again, spending hundreds of thousands of dollars to keep someone alive for an extra few months is beyond absurd. Medicare should be no different on foreign care or shopping around.
Patent Restrictions: Patent laws need to be revised to prohibit making minor changes and renewing patents for extended periods again and again.
Eliminate State Restrictions: Allow any insurance company in any state sell insurance in whatever states they want.
Bezos Factor
My proposals provide significant cost savings opportunities forced on drug providers, allowed by hospitals, and allowed by insurers, at a huge benefit to insureds.
Some of my proposals require significant changes to Obamacare. So what?
With Buffett, Bezos, and Dimon on board, such changes are not impossible.
I do not dismiss anything out of hand when Jeff Bezos and Amazon are involved.
Mike “Mish” Shedlock
Large companies are going self insured and sending their employees out of country for routine procedures, saving money, with better clinical outcomes. The U.S. health care industry now ranked about 38th among industrialized nations, also touts iatrogenic disease (death by doctor) as our third leading cause of death, and the most expensive health care in the world. For every doctor we’ve got 10 administrators. It’s no secret, if you want to live, you make sure you have a doctor outside the U.S. that you can go see fairly quickly. Here they’ll just let sepsis or bacterial infections take you. To much liability now in U.S. health care, the doctors are better off refusing to acknowledge your symptoms, unless your bleeding, have pus sacks, or a blood infection your good. If you’ve got cancer they’ll diagnose that later as well, it’s cheaper to diagnose in it’s latest stages, and more profitable with lots of cutting. They don’t do much outside of cutting and prescribing.
Oh. Yep, I’d guess the same thing about poll results.
@realist Out of curiosity, where did you get those numbers? Sorry, probably easy to find, but figure you have the URL in your browser cache. Thanks. … … Well, again, if the US .gov site is correct in saying half of US spending is on Medicare/Medicaid/VA (the US’s single payer system)and these numbers you found are correct, then it seems the US has a broken single payer system. Very broken. Which goes against the narrative of how Medicare is very cost efficient. I get skeptical when the same people assert conflicting information. (Note: Medicare’s affect on the US medical “system” goes well beyond what they spend and the patients they spend it on. But that’s another story.)
@realist My problem with using longevity as a measure isn’t that it’s just one data point, it’s that “longevity” is a terrible data point in the modern world. Random number not dependent on health systems. So, “What are good data points?” One answer to that question might be “Where are people happy with their systems?” But health systems are geographic monopolies. So that question is really a useless, “Where are people inclined bitch about what they have?” …And so on, down the rabbit hole. Anyway, I personally doubt the US system costs twice as much as others. It’s pretty much logically impossible for that to be true and the “fix” to be adapting a single payer system, for one thing. For another, medical costs, pricing and billing in the US are flying 3-dollar bills.
There was a guy on Bloomberg who was arguing for this and gave the reasons why it is a good idea, and everything he said (removing the middlemen, negotiating drug prices etc.) was an argument in favor of a single-payer system. Hmm… Maybe that is why Taiwan rejected the US system and adopted Medicare.
Thanks for chiming in on this Mish. I know you have standing in this given your history.
One thing that continues to befuddle me is why, year in and year out, the number one most unfilled job position is for nurses. I understand that LPNs are generally dumped on in the workplace and it’s not in any way glamorous, but geez with all the money flowing through the system you’d think they’d step up and pay them a little more. I’m sure an LPN who’s been up all night taking orders from a doctor making 10X their salary for 10% of the effort feels pretty lousy about her career choice.
@realist You gotta watch out with comparisons of life expectancy between health systems. Yes, it’s a popular thing to do, but I’m surprised to hear you echo that popular tune. Life expectancies are effectively the same in *all* the “industrialized” countries. Simple reporting differences, cultural differences, and genetic and diet differences each probably dwarf any health system in contribution to life expectancy – whatever “life expectancy” is.
One thing I find interesting about the usual narrative about health systems in the US and abroad is a fact not stated when discussing costs and outcomes: The US already has a single payer system. According to that system’s .gov sites, the US’s single payer system accounts for half of US health spending. And according to single payer advocates, England, Canada, and Australia’s people spend the same half of US spending, in total, for their complete health care. So, single payer advocates, maybe start by fixing your dramatically failing Medicare/Medicaid.
Within the past 2 weeks I had a CMP, Lipid Panel and CBC with differential done for $66. I ordered and paid for the tests via walkinlab.com (the specific test was called Cardio Plus Blood Test Panel) and the draw and analysis was done by LabCorps.
Warren Buffett: “The ballooning costs of healthcare act as a hungry tapeworm on the American economy.” Denninger keeps pounding the table about the monopolizing in the health care industry that has driven prices to multiples of what they should be. No one will enforce USC15. No one wants to really fix the problem.
the real key to savings on health care i suspect is cutting out the vast army of bureaucrats, both public and private, that the system supports. hundreds of thousands of insurance company employees, government employees and medical/hospital staff have to be paid with dollars that could otherwise be used to provide actual medical care.
I have no sympathy.
Further, it is becoming more and more evident that these corporate scum bags are knowingly sending opioids into the black market. They have no shame or morals.
Maybe if the drug companies were subject to market forces, they would work on drugs that were cost effective.
Truthseeker — they care about the money and protecting their turf from competition. ATT needed protection. Comcast needs protection. Solar panel companies need protection. Wine distributors need protection. Every subsidized industry will tell you the same thing. Let the market prevail. Tired of being raped.
Bezos and company will probably be the ones that will remove the doctor from healthcare. It will become an online office visit that does samples by mail prescriptions through the Amazon channel. It will be for their employees then later rolled out to Prime members. They can’t cut costs without cutting services.
Mish, one problem with limiting spending on almost-dead people is, at the time, you don’t know whether they are almost dead. You know they have a problem, sure. But the future ain’t always clear.
@truthseeker Remember that drug companies in general are not necessarily American. “Drug companies” are probably more accurately called “European”. But, yeah, oddly enough companies, generally, charge what the market will bear.
Last time I saw figures on this, the estimate was that half the average person’s lifetime expenditures on health care were spent in the last 6 months of life. That is why, for example, England’s National Health Service is able to take a lower share of GNP than in the US — at the expense of patients dying while on long waiting lists for treatment. I agree with Mish on this point — but this is a moral & ethical issue, not just a medical one. Note that both Hillary’s unsuccessful effort to reform health care and Barry’s disastrous ObamaCare both focused on intrusive regulations, and shied away from the moral questions. We need a better class of politicians — ones who have the humility to back off.
Mish: The question is not why can’t drugs be imported from other countries. The question is why Congress has passed laws that allow drug and medical equipment companies to collude to fix prices. Antitrust laws do not apply. I’m not hopeful.
The regulations as they exist now will be used to quash any attempt to provide low cost care. Obamacare will be wielded as a club to beat any cost savings.
Insurers don’t seem to have an interest lowering cost.
Not only prices must be published, they must be the SAME for EVERYONE. OR, the uninsured end up subsidizing the insured (often employed…).
If one is paid out-of-pocket, quite often (usually?) the price is jacked up significantly, simply because there isn’t a master agreement dictating lower prices.
That’s insane. If one is insured, the SAME service would cost LESS (even though the provider has more overhead dealing with the Insurer).
Turns out the different prices are charges for SAME service (!!!), subject to your personal status (insured or not).
“Standard Of Care” leads to over treatment and drives up prices.
Malpractice awards is another issue.
Lab Corps prices are outrages. Trivial labs cost $100s vs. $10s (at most) abroad.
Allowing hospitals “the right to refuse service” is never going to happen in a modern, Western nation. Criminalizing major medical insurance, while making catastrophic/hospitalization only policies either mandated or included as part of an expanded FICA tax and keeping some medicaid program for the disabled and indigent would dramatically reduce medical expenses in this country and improve outcomes.
I’m with Mish on the right to die issue. And to go a step further, doctors and hospitals must have the balls to tell a terminally ill patient to go home and die in the comfort of home and loved ones. A huge percentage of medical cost is ‘heroic’ procedures on elderly that don’t provide any measurable amount to the quality of life. I have doctor/nurse friends that constantly tell me how a 100k+ was spent to keep an elderly/terminal patient alive for a few days or weeks. This is not some barbaric thinking, it’s how much of the world operates, let loved ones go when the time has come.
If you want patent protection for your drug, you have to accept price caps. It’s that simple. You can’t charge whatever you want and be completely protected from competition
The biggest expense is prescription drugs. Anything that doesn’t tackle that will fail. Average cost for cancer treatment is over $100k/yr. Mostly chemo costs. by 2030, it’s projected half of all americans will be diagnosed with cancer at some point in their lives. I don’t need a calculator to know there is no way, we as a nation, can afford that.
1) MDs order alot of extra tests and procedures to avoid malpractice suits. 2) The public clinic next door to the public clinic my brother runs does things like give kids with colds gamma globulin shots: $8K each. Reason: certainly no medical or ethical justification. The clinic runs on grants, the more money they spend the more they can ask for next year. Fix those two types of things and the cost of medical care will plummet to about what it is in the EU.
so where does my right to die and their right to euthanize me cross paths? it’s impossible to see the future, patients get better, they don’t know why, how many times have you seen someone who was given a terminal diagnosis years ago? for the previous generation environmental and workplace hazards proved the axiom that women live longer, they have less stress and the amount of toxic chemicals in the kitchen is limited to a degree. now that they are entering the workforce and choosing not to have families the health benefit wears off.
I do medical research; I’m not an MD although my brothers are. They claim, and I agree, that the cost of care could be cut in half by two things:
1) Improve information access – many doctor visits are just because online information is incomplete or inaccessible. 2) Value-engineer testing over visits. Data is more reliable and less expensive than expertise. Before you see someone, you should typically run a battery of tests so you can have a data-driven conversation. 3) Remind people when they are choosing to be sick. 4) Prescribe lifestyle changes more than drugs. 5) Be realistic about the value of outcomes. Acknowledge that some patients will never recover from major interventions. Do you want 2 years of pretty good quality life with an untreated condition or a year of recovery followed by ten years in a bed? (A slight expansion on Right to Die) 6) If you’re facing ten years in a bed, expand options for patient to choose death.
There is relatively easy solution: One) drop the Medicare age to 55, this takes the highest tail risk off the private insurance companies Two) let people pay forward on their Part B benefits, and raise the SSN retirement age to 69. This means you get health benefits sooner, and you have to wait longer for retirement benefits, so the books balance out. Three) Continue to fund Medicaid, its a not the giveaway most people think, its healthcare you pay for by asset confiscation. To that end partner with Reverse Mortgage companies to help people meet catastrophic bills. Instead of promoting equity lines of credit to invest in the stock market and vacations you really can’t afford use those financial products to pay off your healthcare bills. Four) My Job is KILLING me! Assume people who no longer have jobs will live longer healthier lives.
Great post, Mish. We especially need to allow insurance companies to come up with policies that offer selective coverage, and which exclude the expensive bleeding edge technologies and expensive, futile, end of life care. I’d add another – requiring the medical industry to be clear about pricing. Consumers can’t price shop now because it’s impossible to find prices.