Amazon, JPMorgan, Berkshire Hathaway team up to lower healthcare costs for their workers — and maybe everyone

From today’s LA Times:

Three of the nation’s most formidable companies — Amazon.com, Berkshire Hathaway Inc. and JPMorgan Chase & Co. — sent shock waves through the healthcare industry Tuesday by announcing a joint plan to reduce healthcare costs for their U.S. employees.

Although the companies said their focus mainly would be on providing improved healthcare for their own U.S. workers, which total nearly 1 million, the move immediately triggered speculation that any solutions they develop could spread throughout the industry.

That sent healthcare, drug and health-insurance stocks tumbling even though the three companies provided few initial details about their venture, with investors guessing that the trio’s initiative eventually could crimp sales growth and profits for others in the healthcare field.

Consumers might see a benefit if the companies could develop a blueprint for curbing the surge in healthcare and drug costs while maintaining or enhancing patient care, a scenario that government and the industry so far have struggled to achieve.

The speculation of a disruption to the industry was fueled by the stature of the three companies’ billionaire chief executives: Amazon’s Jeff Bezos, who already has radically changed the retail industry; Warren Buffett, the famed investor who also oversees dozens of companies under Berkshire’s umbrella; and Jamie Dimon, whose JPMorgan Chase is the nation’s largest bank with $2.5 trillion in assets.

Bezos and Buffett also are two of the nation’s richest people, with net worths of $119 billion and $92 billion, respectively, while Dimon’s net worth is just over $1 billion, according to Forbes.

The three said they would start “an independent company that is free from profit-making incentives and constraints” and that its early focus “will be on technology solutions” that would provide “simplified, high-quality and transparent healthcare at a reasonable cost.”

Read the complete article here.

Why the U.S. Spends So Much More Than Other Nations on Health Care

From today’s New York Times:

The United States spends almost twice as much on health care, as a percentage of its economy, as other advanced industrialized countries — totaling $3.3 trillion, or 17.9 percent of gross domestic product in 2016.

But a few decades ago American health care spending was much closer to that of peer nations.

What happened?

A large part of the answer can be found in the title of a 2003 paper in Health Affairs by the Princeton University health economist Uwe Reinhardt: “It’s the prices, stupid.

The study, also written by Gerard Anderson, Peter Hussey and Varduhi Petrosyan, found that people in the United States typically use about the same amount of health care as people in other wealthy countries do, but pay a lot more for it.

Ashish Jha, a physician with the Harvard T.H. Chan School of Public Health and the director of the Harvard Global Health Institute, studies how health systems from various countries compare in terms of prices and health care use. “What was true in 2003 remains so today,” he said. “The U.S. just isn’t that different from other developed countries in how much health care we use. It is very different in how much we pay for it.”

A recent study in JAMA by scholars from the Institute for Health Metrics and Evaluation in Seattle and the U.C.L.A. David Geffen School of Medicine also points to prices as a likely culprit. Their study spanned 1996 to 2013 and analyzed U.S. personal health spending by the size of the population; its age; and the amount of disease present in it.

They also examined how much health care we use in terms of such things as doctor visits, days in the hospital and prescriptions. They looked at what happens during those visits and hospital stays (called care intensity), combined with the price of that care.

The researchers looked at the breakdown for 155 different health conditions separately. Since their data included only personal health care spending, it did not account for spending in the health sector not directly attributed to care of patients, like hospital construction and administrative costs connected to running Medicaid and Medicare.

Over all, the researchers found that American personal health spending grew by about $930 billion between 1996 and 2013, from $1.2 trillion to $2.1 trillion (amounts adjusted for inflation). This was a huge increase, far outpacing overall economic growth. The health sector grew at a 4 percent annual rate, while the overall economy grew at a 2.4 percent rate.

You’d expect some growth in health care spending over this span from the increase in population size and the aging of the population. But that explains less than half of the spending growth. After accounting for those kinds of demographic factors, which we can do very little about, health spending still grew by about $574 billion from 1996 to 2013.

Did the increasing sickness in the American population explain much of the rest of the growth in spending? Nope. Measured by how much we spend, we’ve actually gotten a bit healthier. Change in health status was associated with a decrease in health spending — 2.4 percent — not an increase. A great deal of this decrease can be attributed to factors related to cardiovascular diseases, which were associated with about a 20 percent reduction in spending.

Read the complete article here.