R&K Blog
This post was authored by Dan Colacino, Vice President of Underwriting and Compliance at Rose and Kiernan, Inc.
This week’s announcement from Amazon, Berkshire Hathaway and JP Morgan Chase that the three companies are joining forces to enter the health care industry is intriguing… but at this point, no more than that. Without specifics, it’s hard to take them seriously. “Health care industry” is a broad term and used to define everything from the actual delivery of medical care to insuring the payment for services. Therefore, what this trio of corporate giants is referring to is as much in doubt as their intent. The vagueness showed when the stocks of health services companies, such as pharmaceutical companies, and insurance companies, like United Health, declined almost immediately after the announcement.
Will this be as disruptive as Amazon was to the brick-and-mortar retail industry? The press reports pointed to the capabilities of the three companies: Amazon’s delivery of products was likened to the delivery of services, medicines, etc. to consumers; JP Morgan Chase has the money to finance such an operation; Berkshire Hathaway has the insurance expertise. If you read this closely, what was being pointed out as strengths was no more than a duplication of the current health care system. Hopefully their ideas are more visionary than simply repeating what exists today.
The biggest driver of health care costs today isn’t the “profits” of the industry or the inefficient delivery of care, although they both contribute. Single payer isn’t the answer, either, since that’s nothing more than a refinancing of the present situation. What’s driving health care costs is poor lifestyle habits of the population – smoking, obesity, poor nutrition – which end up as high-cost cases. In fact, if you could eliminate the high-cost claims from an employer’s plan, you would see reductions in the health plan’s premium that range from 20 percent to 50 percent. That’s where the emphasis should be.
Let’s hope that these three are thinking outside the box and aren’t following the state and federal government approach of recycling ideas from years past that have never worked. Let’s hope they understand the system better and can actually impact on the rising cost of care