Studies show U.S. health care costs as a share of the economy have doubled since the 1980s to 18% of GDP, and are far higher and growing faster than those in other major economies.
On Tuesday, e-commerce giant Amazon Inc. announced it will partner with Berkshire Hathaway and JPMorgan Chase & Co to form a company to cut health costs for hundreds of thousands of its USA employees.
This isn't a surprise, some said, since Amazon has made small moves in the health care industry in the last couple of years - between a number of health care hires and applying for a wholesale pharmacy license.
The companies did not specify how many people would benefit under the new programme, but the source said domestic employees of the companies and their dependents likely amount to at least a million workers nationwide. Most recently, it has upended the grocery sector, spending $14 billion previous year for Whole Foods Market Inc. Amazon reported in October that it has 541,900 employees worldwide.
Now, I should say that I'm not a healthcare actuary, and my experience in that field is limited to the reading required for the subject-matter actuarial exam, attending training sessions, and being guinea pigs, since my employer, as a benefits consulting firm, in addition to advising its clients on pensions, also advises on employee benefits in general.
Even before Tuesday's announcement, there have been signs that Amazon is preparing to enter the healthcare market. A recent attempt by 40 big companies - including American Express, IBM and Royal Dutch Shell - called the Health Transformation Alliance hasn't gained traction either. Details are few and obstacles many, but the three firms bring relevant skills and a lot of employees to the mix. "The healthcare system is ripe for positive disruption and is in need of new solutions that improve employee satisfaction and reduce costs".
Linda Schwimmer, CEO and president of the Health Care Quality Institute, said her first reaction to the announcement Tuesday was to note that the companies were confident they will be disruptors, but without a clear plan. Still, with three of the country's most preeminent businessmen lending their support to the effort, those in the healthcare sector should take heed.
CVS's acquisition of Aetna, for example, sent a big shockwave through the healthcare industry. The companies say they welcome the efforts of Amazon, Berkshire and JPMorgan. They did not elaborate on their strategy, but said they are searching for a chief executive officer. In an interview in 2017 with PBS NewsHour, he explained that, "government-run health care is probably the best approach and would bring down costs", according to the report. "But we also do not accept it as inevitable", added Berkshire Hathaway chairman and chief executive Warren Buffett. So I could imagine, for instance, a portal or something for their employees that would help them price health care before they actually do something, maybe book appointments - stuff like that.
"While we find the combination of these companies as intriguing, we do not see how the companies disrupt the healthcare status quo immediately", RBC's Hill said. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.