You are here
Amazon, Warren Buffett join forces to tackle health care
[WASHINGTON] Retail behemoth Amazon has joined forces with two other titans of American business - Warren Buffett's Berkshire Hathaway and JP Morgan Chase - to tackle one of the most enduring problems in the country: quality affordable health care.
Jeff Bezos' Amazon, Mr Buffett's firm and the financial giant said on Tuesday they would create a nonprofit health care plan to "provide US employees and their families with simplified, high-quality and transparent health care at a reasonable cost."
"The ballooning costs of health care act as a hungry tapeworm on the American economy," Mr Buffett said in a statement. "But we also do not accept it as inevitable." The billionaire investor acknowledged that the group "does not come to this problem with answers" but is ready to invest its "collective resources" to "check the rise in health costs."
The trio could become a disruptor in the health care industry just as Amazon has in retail, using their combined data, technology, buying power and customer contacts to improve delivery while cutting costs.
A source told AFP the companies purposely made the announcement - which was thin on details - so they could begin searching for a CEO without upsetting financial markets.
The companies did not specify how many people would benefit under the new program, but the source said domestic employees of the companies and their dependents likely amount to at least a million workers nationwide.
"Hard as it might be, reducing health care's burden on the economy while improving outcomes for employees and their families would be worth the effort," Mr Bezos said.
But he cautioned that success will require "a long-term orientation."
GOAL TO 'CREATE SOLUTIONS'
Rising health care costs in the United States, the only major world economy that does not provide universal medical coverage to its citizens, have been a perennial political issue.
President Donald Trump failed to convince Congress to abolish Obamacare, the system put in place by his predecessor that allowed individuals to access private medical insurance and provided other protections while trying to limit spiraling costs.
But he has managed to undermine it, reducing the timeframe allowed to enroll, cutting the advertising budget, and eliminating in the recent tax reform package the requirement that every person have health insurance or pay a fine.
That "individual mandate" was a concession to the insurance companies to ensure they would have enough customers - especially young, healthy Americans who do not need medical care as often - to cover costs for those who need it more frequently, like the chronically sick or elderly.
Without the requirement, many more Americans may find it hard to secure a health insurance plan they can afford.
Studies show US health care costs as a share of the economy have doubled since the 1980s to 18 per cent of GDP, and are far higher and growing faster than those in other major economies.
About half of Americans get their insurance through their employers, while the rest depend on government assistance or are uninsured, according to data from the Kaiser Family Foundation.
Jamie Dimon, CEO of JPMorgan Chase, said the new initiative would benefit employees and "potentially, all Americans."
Morningstar analysts said the move is "an intriguing partnership that opens up Amazon to a more serious push into other health care products and services" rather than "directly entering the market through an acquisition."
The new initiative will be spearheaded by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a managing director of JPMorgan Chase; and Beth Galetti, a senior vice-president at Amazon.
Health care share prices sank on news of Amazon's push into the sector.
Insurers such as Cigna and Dow member UnitedHealth Group lost 7.2 per cent and 4.4 per cent, respectively, pharmacy chain Walgreens Boots Alliance tumbled 5.2 per cent, and pharmaceutical giants Merck and Eli Lilly both lost about 1.5 per cent.