Three Corporate Giants Form New Company for Health Care Reform

By ROGER STARK  | 
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Feb 5, 2018

Officials at Amazon.com, Berkshire Hathaway, and J.P. Morgan recently announced they are joining together to reform health care delivery. (here) The details of the new venture are sketchy, although evidently they will establish a new, separate non-profit company that oversees and manages the reform.

There is no argument that these three giants have clout in their respective markets. However, spending on health care in the U.S. is $3.2 trillion per year and dwarfs the capitalization of even these three combined. The health care delivery system is extremely complex, with multiple participants – hospitals, providers, insurance companies, drug and medical device manufactures, etc.

The most likely scenario is these three will form a company that impacts their own employees and attempts to hold down health care costs for their respective bottom lines. Undoubtedly, they will try and cut deals to control prices in prescription drugs, hospital care, providers, and medical devices. They may even set up their own insurance company that could function under the ERISA laws and not be subject to the Obamacare regulations.

Combined, they have one million employees spread throughout the world. Theoretically, this would give them substantial leverage in the health care system. The reality is that health care is local, so how national contracts relate to local care is an unknown.

With Amazon involved, obviously high tech will be a fundamental in the new company. Wellness and preventive care with the latest technology can be valuable, but the overall success at holding down costs and providing better medical outcomes is not yet substantiated with consistent data. (here)

The partnership announcement has rattled the traditional health care industries such as pharmaceuticals and insurance. Some of these companies are actually customers of J.P. Morgan and worry about competition. JPM has attempted to calm the situation by stating that the partnership will only reform health care delivery for their combined employees. (here)

This partnership does not address the fundamental problem with our health care system. Over 85 percent of health care in the U.S. is paid for by a third party – either the government or employers. This is an economic model that leads to overuse, out-of-control spending, and ultimately rationing of a limited resource.

Ironically, the leaders of these three companies understand economics and have gained their incredible success through the free market. If only they would advocate for those same free market principals in health care reform.

The most important person in the entire health care system is the patient. Meaningful health care reform must put patients, as consumers, in charge of their own medical care, just as in every other economic activity in life. Continuing the third-party payer model is not only economically foolhardy, it is condescending and violates a person’s self-reliance. (here)