Friday, April 20, 2018
Editorials

Another voice: Three powerful businessmen take on health care costs

On Dec. 31, UnitedHealth Group Inc., the nation’s largest private health insurer, totaled 2017 earnings of more than $200 billion and a gross profit margin of 23.77 percent. Not quite a month later, Jeff Bezos, the Amazon CEO who once said, "Your margin is my opportunity," announced that he and two powerful partners were forming their own health care company, one that would be "free from profitmaking incentives and constraints."

This could be the biggest development in American health care since the passage of the Affordable Care Act in 2010. Or the dense and dysfunctional jungle that is the American health care system could prove impenetrable to even Bezos and his partners, Warren Buffett, chairman of Berkshire Hathaway, and Jamie Dimon, chairman and CEO of JPMorgan Chase, the nation’s largest bank.

Their companies had combined revenues of $455 billion last year and employ more than 1.1 million people. If they want to disrupt an industry that accounts for 18 percent of the U.S. economy, more power to them. The industry needs disrupting.

America has by far the most expensive health care in the world and, among developed nations, some of the poorest outcomes. There’s very little transparency about medical costs or quality, little rhyme nor reason to hospital bills and legalized profiteering. At every point in the process, there are baffling aggravations (forms to fill out, hours spent in waiting rooms, $629 Band-Aids) and little incentive for anyone in the system to settle for less costly care.

A 2015 study published in the Harvard Business Journal reported that "clinical waste, administrative complexity, excessive prices, and fraud and abuse" amounted to 40 percent of total U.S. health care spending. There’s opportunity in that.

Bezos, Buffett and Dimon haven’t yet said what form their health care company will take. They could self-insure their own million-plus employees and possibly expand later. Berkshire Hathaway is a huge player in the insurance sector, though health insurance would be a new challenge. The new company will certainly use advanced technology to reduce costs and increase transparency.

"The ballooning costs of health care act as a hungry tapeworm on the American economy," Buffett said in the statement last week. "Our group does not come to this problem with answers. But we also do not accept it as inevitable."

Amazon already has sent tremors through the health care sector with rumors that it is getting into the pharmacy benefits business. Shares of health industry companies like UnitedHealth, Express Scripts and Centene were briefly rattled by the announcement, but the entire system needs more than a brief shaking.

Long term, the only way health care costs will be contained is through a single-payer system like other nations employ. Whatever Bezos, Buffett and Dimon can come up with in the meantime can only help.

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