The announcement Tuesday that Amazon is partnering with Berkshire Hathaway and JPMorgan Chase on a new health care initiative sent ripples of panic through the health care industry. Immediately after the announcement, insurer and pharmacy stock prices dropped, fueling the dip in the DOW by over 300 points. And they haven't even disclosed what they will be doing yet.
In a press release, the trio of giants said the partnership will "address health care for their U.S. employees, with the aim of improving employee satisfaction and reducing costs. The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost." In other words, don't cancel your AppleCare yet: Whatever the three giants come up with will, at least initially, be limited to their own employees, which, combined, number nearly a half million people across the U.S.
According to Anirban Basu, a health care economist at the University of Washington, the trio could do a number of things to reform the health care system just by their sheer size and power alone. While most small and individual health care buyers have little power when it comes to directly negotiating with either health care providers or pharmaceutical companies, this partnership could change that—at least for those who qualify for it. Currently, price negotiating falls on third-party pharmacy benefit managers, at a cost then passed on to consumers.
Besides taking on bargaining power, Basu says Amazon may even open primary care clinics for their employees, but this could expand beyond their base. While Amazon and their partners have said this project will be "free from profit-making incentives and constraints," it's not hard to imagine Amazon rolling this out first for employees and then for everyone else—or at least everyone else with a Prime membership.
Amazon seems intent on making the tag line "The Everything Store" literal, from goods to services to shipping to groceries and now to health care. But, according to UW health policy expert Aaron Katz, systems that have more government control are cheaper, more efficient, and more effective than systems that exist outside government regulation—systems like ours. In much of the world, the most effective health care system is single-payer, where the government is responsible for providing health care to all citizens. But not here.
"There's a strain of American DNA that believes in individual initiative, and if individuals are free to make their own choices, they result will be better distribution of resources," Katz says. "We don't want government too intrusive in our lives, but we’re selective about it. We want the government to protect communities and respond if neighbor's house is on fire and we want government to provide for roads, national defense, etc. But we don't what it involved in health care."
Government-regulated, single-payer health care has gotten renewed attention in recent years, in large part thanks to Bernie Sanders. But today's announcement shows that it's a long way off. Amazon, the largest retailer in the world, JBMorgan Chase, the largest bank in the U.S., and Berkshire Hathaway, the third largest publicly held company on Earth, are coming together, but they aren't doing it to push for affordable health care for all. They're doing it to make the cost of doing business cheaper for themselves.