A better way to disrupt the healthcare system

Amazon, Berkshire Hathaway and JPMorgan Chase say they’re putting their heads together to make health care better and less expensive for their employees. Just possibly, it’s a partnership that could disrupt the US health-care system — in a good way.
The market value of insurance companies and pharmacy-benefit managers dropped on the announcement, a sign that investors think the alliance might inject new competition and press down on prices. For consumers, that’s an encouraging development. Up to now, big private employers have helped to make the American health-care system inefficient. Perhaps they’re about to start pushing the other way.
A federal tax exemption has given companies good reason to provide health insurance for their workers. But they’ve had little incentive to care whether the services that insurance pays for are worth the money. As the late Princeton health-care economist Uwe Reinhardt once put it, “For more than half a century, employers have passively paid just about every health care bill that has been put before them, with few questions asked.”
This is a main reason why Americans spend twice as much on health care, per capita, as people in other countries do. It isn’t that people in the US demand or receive more treatments, but that prices in private health care in the United States are extraordinarily high. (The government pays much lower prices for Medicare and Medicaid
beneficiaries.)
The collective expertise of Amazon, Berkshire Hathaway and JPMorgan Chase might be capable of changing things. Amazon brings outstanding technological prowess and its partners have deep experience in managing financial risk. One can imagine innovations such as better gathering and sharing of health data, systematic price transparency, and better use of telemedicine. Maybe there’ll be algorithms to predict people’s vulnerabilities to chronic diseases, so steps can be taken to protect them.
The big question is how much the three can do by themselves. To make a significant difference, they may need to join forces with many other companies, so that greater bargaining power can be brought to bear.
In their announcement this week, the three companies provided no details about specific actions they might take. But they don’t seem lacking in ambition. JPMorgan Chase’s Jamie Dimon said their effort would benefit “potentially, all Americans.” That’s a worthy goal.

—Bloomberg