Q&A: Amazon, Berkshire and JPMorgan healthcare effort may be more about small fixes than sweeping change

Amazon.com Inc., Berkshire Hathaway and JPMorgan Chase & Co. said Tuesday that they plan to create an independent healthcare company that would reduce the costs and inefficiencies in the industry. The three companies gave little additional information on the venture but said they will focus on technology solutions “that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”

The Los Angeles Times spoke with Gerald Kominski, director of the UCLA Center for Health Policy Research, about what the three companies might have in mind for their employees and what that could mean for all consumers. Here is an edited version of that interview.

What are some possibilities for what Amazon, Berkshire Hathaway and JPMorgan are looking to do with this healthcare organization?

Let’s say, for sake of discussion, that this is going to be how they offer comprehensive health benefits to their employees. My guess is what they’re looking for is innovating in terms of perhaps pharmaceuticals, perhaps wellness programs. There’s been speculation that Amazon is interested in getting into the pharmaceutical business and this might be a way to open that door.

A lot of large companies already, instead of buying insurance, they self-insure. They contract with an insurance company to pay their bills for them and provide a network of doctors and hospitals, but they pay the bills of their employees in a pay-as-you-go approach. That looks like that’s what this is.

But if other companies are already doing this, what can Amazon, JPMorgan Chase and Berkshire do differently?

If there were a magic solution, someone would have discovered it by now. Having said that, there may be efficiencies they can achieve because the three companies together are large employers. It’s economies of scale — the bigger you get in a sense the lower the cost of providing or buying a service. They may be able to get bigger discounts.

The innovations are going to have to come from something like Amazon getting involved in the pharmacy business and finding a way to provide pharmaceutical benefits more cheaply. But there are pharmaceutical benefit companies that are already finding ways to achieve efficiencies, so I don’t know what they’re going to do that’s better or newer.

Although Amazon is a big successful company, I’m not sure I can speculate on what they can bring to the table to lower pharmaceutical costs other than by creating more competition.

How could the benefit of this proposed healthcare organization extend beyond these companies’ employees?

If they can find an innovative way to reduce employment-based health costs, other employers will benefit in the future because they will be able to export it by licensing it or expanding their own market and selling their way of doing things.

If it’s something that other large employers see in the future as something they can emulate or something they can license from and find a way to buy into this, then those employees will benefit. The question of [whether] this is going to broadly change the healthcare system for everybody including Medicare, Medicaid and all those other markets remains to be seen.

So you don’t think there are potential impacts on the push for single-payer healthcare and to repeal the Affordable Care Act?

I just think this is separate. There’s no immediate impact on the Affordable Care Act or single-payer healthcare. If they can discover a way of doing something better, then its going to be adopted rapidly and widely because they’ll have achieved something that no one else has been able to achieve. If they do it, then society will benefit.

But even if they fail at that lofty objective, they still may find ways of doing things better. Even if they’re small successes. Small successes in a sector of the economy that’s approaching $4 trillion a year can also be important to achieve.

The three companies say they’re focusing on cost-reducing technology solutions, which some have speculated include things like appointment booking services that make it easier for people to find a doctor. How could this be a cost-saving measure?

We should be doing these things already and the faster we do them, the better.

The idea is that if people monitor their health and are more proactive and try to maintain their health then we save money because you either prevent illness or you catch things earlier. The worst thing you can do is just delay until you’re really sick because then it’s hard to treat or your options are more limited.

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