In January, Amazon announced that it will form a company—together with Berkshire Hathaway and JPMorgan Chase—to cut healthcare costs for its employees. Though details were sparse, the companies seek to provide “simplified, high-quality and transparent healthcare” for their 500,000 U.S. staff. Here, Health Services Administration and Policy faculty members Stuart Fine and Thomas Martin discuss the impacts of the Amazon venture on everyday consumers.
Who will be directly impacted by this new venture?
Stuart Fine: If you’re among the more than one million people who are employed by Berkshire Hathaway, Amazon and JP Morgan Chase, or you are covered through the family health insurance plan of such folks, you received some potentially good news last week. It’s likely that you’ll soon be able to secure less expensive, higher quality healthcare services. But for the remainder of us, who secure healthcare coverage through more traditional plans, that change is not likely to impact upon you for a long, long time.
Thomas Martin: Building on the point Dr. Fine made, Berkshire Hathaway has extensive holdings of both public and private companies: See’s Candies, a real estate business, and majority holdings in major companies like Kraft, Benjamin Moore, GEICO, and Dairy Queen make up just a portion of their portfolio. The majority of their focus will be on these large employee groups and potential incentives to improve their health. I would imagine a customized conversation between Amazon’s Alexa and a Duracell or GEICO employee about their health and long term tracking of claims data.
How could this venture drive changes in the US healthcare system?
SF: One good thing about having an employer-based system is that thoughtful forces for change can act in an entrepreneurial manner and press for reforms and innovation. That’s what we’re seeing here, as insurance giant Berkshire Hathaway, investment bank JP Morgan Chase and retail disruptor Amazon now take a lead position in working to implement changes that are very likely to be emulated by others, forcing change on the healthcare industry, which is known to be particularly responsive to structured incentives. Approximately 18% of the gross domestic product of the United States relates to healthcare. Much of that money is believed to be wasted on high administrative costs and services that have little if any proven value to users.
TM: Cost transparency has been difficult to achieve in our healthcare system, mostly due to diffuse channels and differential payment structures. However, bringing together one million employees as a large cohort aids in understanding the market landscape and personal behavior. The challenges will be overcoming privacy concerns or placing enough incentives in front of these employees.
How does technology play a role in healthcare delivery, and how could that role expand in the future?
SF: We now have the ability, through the application of health information management and informatics, to determine which sources of care provide better quality for the price—a ratio that’s known as “the value equation.” And through the use of value-based insurance design (VBID), companies can assist their employees in identifying and pursuing higher value sources of care. That’s what Berkshire Hathaway, Amazon and JP Morgan Chase are focusing on. And, once demonstrated, their work is likely to be copied by others as the new model for health insurance design.
TM: The challenge with price transparency and assessing a large population like this is protecting the information and assuring the accuracy of collected data. Amazon and its web services offerings (commonly called AWS) are secure and trusted scalable sources. I could see all three companies working on a shared health and wellness digital health platform, matched to claims data. The challenge with health and wellness plans is assessments of efficacy and accurately measuring the impact on health outcomes.