AmazonCare – The New Solution?

 

Amazon delivers packages. Can it deliver better healthcare?

The stock market believes they can. The market responded to the announcement that Amazon, J.P. Morgan Chase, and Berkshire Hathaway would enter the healthcare insurance business by selling off healthcare stocks.

But just because Jeff Bezos, Jamie Dimon, and Warren Buffet want to work together to lower healthcare insurance costs, doesn’t mean they will solve the complex system of healthcare delivery. Many others have tried before.

Robert Laszewski, insurance industry analyst, recalls similar efforts in the early 1990s by leading employers in the Minneapolis-St. Paul market. That effort failed and he believes this one will, too.

To put this into perspective, Amazon, J.P. Morgan Chase and Berkshire Hathaway employ a little over one million people. That’s a lot of employees, but it’s only about the same number of covered lives as Blue Cross Blue Shield covers in Rhode Island and Delaware. Laszewski doesn’t see this as enough to make a real impact.

These industry titans believe they can change the status quo through improved data. No doubt they have used data effectively in their businesses. But Laszewski says by comparison, UnitedHealth, through its Optum data technology subsidiary, has detailed health care utilization information on over 115 million consumers, four out of five hospitals, 67,000 pharmacies, 100,000 physician practices, 300 health plans, and government agencies in 34 states and D.C.

Here is Laszewski’s prediction: “After a few years of high profile press releases and trade association presentations this one will end up in exactly the same place all of the others have. Nowhere.”

The Wall Street Journal editorial board seems to be in agreement. “The new creation will represent hundreds of thousands of employees, which sounds like a lot but isn’t enough scale to change U.S. health care, and the question is how transformative this enterprise will aim to be, A brick wall of interest groups – hospitals, insurers, the AMA – will resist any change and make Uber’s fights with taxi cartels look like minor league ball.”

The press release says the group will form an “independent company that is free from profit-making incentives and constraints.” But WSJ says the problem isn’t profit. In fact, profit often is the incentive that drives innovations and cures for diseases. The fundamental problem is that the cost of a service is disconnected from underlying value. Patients don’t know the price of services and consume health care as if it’s free since government or employers are the third-party payers for most Americans.

Further evidence that profit isn’t the problem comes from looking at government-financed healthcare. The government doesn’t care about profit – and that’s part of the problem. They have no difficulty spending the taxpayer’s money – and still they can’t deliver quality healthcare!

Quality healthcare that doesn’t waste money will only come when healthcare spending is tied to the consumer’s pocketbook. When choosing the way you spend your healthcare dollars is just as much a part of your budget as what you spend on groceries, then we will see the cost of healthcare go down and the quality go up. Competition for those dollars will lower the cost of healthcare treatment and raise the quality – because that’s what competition does in every other business.

 

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