Amazon Sets Out to Tackle Healthcare Costs 

February, 2018 -

This week we learned that Amazon, Berkshire Hathaway and J.P. Morgan Chase have joined forces to tackle employee healthcare costs. 

This announcement marks yet another chapter in some employers' frustration with our nation’s healthcare system. 

Employees are equally tired of the increasing cost of healthcare eating away what should be their wage increases even as employers pay for ever increasing health insurance premiums.  The healthcare system is unsustainable.  Care is expensive, insurance is expensive, and millions still don’t have coverage — either through an employer-sponsored plan or a government plan.  

The announcement was short on details — only that the program is not one of self-insurance, but something transformative. 

Everyone knows the healthcare system is complicated whether an insurer, a hospital, a physician group, a drug manufacturer or a patient. The initial reaction to the announcement is that Amazon, with its purchasing power, may be able to impact drug prices. Drugs certainly are expensive and lower costs drugs may impact the cost curve.  But that is not the only expensive aspect of our system. 

Large employers continue to search for solutions.  Many offer on-site clinics to their employees and dependents.  This is a lower cost solution that has the added benefit of convenience for the employee.  It is not, however, a total solution as employees can get hurt traveling, or have dependent children who go away to school, and small businesses or unemployed often can’t purchase insurance. 

 In 2009, Congress enacted the Affordable Care Act, the most comprehensive reform to the healthcare system in decades, after years of study by experts in government and the industry who were devoted to finding a way to address access to quality healthcare at affordable prices. 

Specific issues like maintaining insurance for pre-existing conditions and allowing children to stay on their parent’s plan until their 26th birthday were also key components.   Perhaps it was not the solution; perhaps, Amazon Berkshire Hathaway and JP Morgan Chase, extraordinarily successful businesses can do a better job fashioning a solution than Congress. 

However, the ACA or any other studied program takes years to effect change.  The question is whether these industry titans can absorb and respond effectively to the complexities inherent in our system to build a better, less expensive plan than the envisioned by the ACA.  Purchasers have some power, but all constituencies need to participate if real change — lower cost, better quality — is possible.   

We have yet to understand the implications of a partnership such as this, but with the enactment of the ACA, more emphasis on cost control and increasing quality and value, this is just another example of how the healthcare system in the U.S. will continue to evolve.




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