Excitement and skepticism as Berkshire, Amazon, JPMorgan announce plan to tackle American health care problems

Setting three prominent businesses — Berkshire Hathaway, Amazon and JPMorgan Chase — on course to tackle the problems of American health care drew praise and skepticism on Tuesday.

“I’m kind of excited,” said Steve Martin, chief executive of Blue Cross Blue Shield of Nebraska. “We can’t continue to let our health care system be this fragmented and inefficient.”

But Chuck Olson, chief executive of the Omaha insurance brokerage OCi Insurance and Financial Services, said Tuesday’s announcement by Warren Buffett and CEOs of the other two companies is “great PR. In the long run, they’re not going to change anything unless you can control the guy that’s providing the care.

“The question’s going to be, ‘What can they do differently that everybody else isn’t already doing?’ You can have all the money in the world, but you’ve got to pay the doctor, the provider who decides how much they’re going to charge.”

In a joint press release, Amazon CEO Jeff Bezos, J.P. Morgan CEO Jamie Dimon and Buffett, chief executive of Berkshire Hathaway, said their three businesses would form a nonprofit company to seek “ways to address health care for their U.S. employees, with the aim of improving employee satisfaction and reducing costs.”

Beyond that, Dimon said, “Our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”

The venture is in its early planning stages, they said, with the initial formation “spearheaded” by Berkshire investment officer Todd Combs, J.P. Morgan managing director Marvelle Sullivan Berchtold and Beth Galetti, a senior vice president at Amazon.

The new company will focus first on “technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost.” The press release said a long-term management team, headquarters location and other details would be made public later.

Martin, of Nebraska’s Blue Cross, said his hope is that the Berkshire-Amazon-J.P. Morgan effort would lead the way to broad improvements in health care, including ways for consumers to find the best, lowest-cost care; changes in how hospitals and doctors are paid; ways to control medical errors; and even new laws.

Martin said Blue Cross has talked with Berkshire companies about ways to improve health care.

He said he thinks the message is: “We’re going to help our employees cut through the paperwork and the multiple players, consolidate partners who are willing to be transparent with profit, get the best care for employees, build new tools that can help employees figure it out.”

Finding nationwide solutions would require changing the rules, he said, and if the three companies are successful, they could influence Congress, too. “They could let Obamacare evolve into something that both sides can accept.”

In the press release, the three CEOs talked about health care problems.

“The ballooning costs of health care act as a hungry tapeworm on the American economy,” Buffett said. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”

Putting their resources behind “the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes,” Buffett said.

Bezos acknowledged that the health care system is complex. “We enter into this challenge open-eyed about the degree of difficulty. 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.”

Dimon said the three companies “have extraordinary resources,” and people want “transparency, knowledge and control when it comes to managing their health care.”

Sen. Ben Sasse, R-Neb., who campaigned on health care issues, said the new venture is “an exciting development.”

“We need more health sector innovation,” he said. “More data and new technologies can empower patients and thereby disrupt our outdated system.”

Sasse said a major problem is that insurance pays for routine health care rather than guarding against future risks. “If we ran car insurance like we run health insurance, you’d have laws forcing State Farm to pay for your gas and schedule your Jiffy Lube appointments.”

The new initiative attracted the attention of Sen. Bernie Sanders of Vermont, who made his support for single-payer health care a central focus of his 2016 presidential campaign.

“Warren Buffett himself has indicated his belief that he thinks single-payer health care might make sense for this country,” Sanders told The World-Herald. “And I think it is interesting that three major corporate entities are suggesting — correctly — that the current dysfunctional health care system is way too expensive, way too inefficient and doesn’t work for consumers.”

Sanders noted that the new initiative is looking for a nonprofit approach.

In addition to signaling that the current system isn’t working for the business community, Sanders said the new initiative is a message to Capitol Hill that the private sector isn’t willing to wait forever for Congress to act on the issue.

Local health care leaders welcomed the companies’ effort.

“I commend them,” said Dr. Jeffrey Gold, chancellor of the University of Nebraska Medical Center. “What I hope they do is ask some of the really hard questions and really try to stretch the envelope of traditional thinking. They could turn things upside down.”

Buffett, Bezos and Dimon and their companies, Gold said, “will bring a different lens, a different perspective” to the problem of increasing health care access, improving quality and yet reducing costs. “If they can influence that balance, that is the holy grail from the business perspective, trying to reduce their costs.”

For example, he said, emphasizing wellness among their employees can reduce health care costs. “We over-fund treatment of disease and under-fund preventive measures. If they can find some elements of the secret sauce of doing this, then I think it’s going to catch on.”

Jeanette Wojtalewicz, chief financial officer for CHI Health in Omaha, said a separate company could adjust health insurance plans midyear, unlike an insurance company, as their employees’ needs change. It also could contract directly with health care providers, as Walmart and some other large employers already have done.

“I’d love to talk to Warren Buffett about opportunities where we can partner,” Wojtalewicz said. “I think they’re definitely on to something about being able to be flexible” when it comes to finding different ways to provide and pay for care. That might include bundling services, or packaging all of the services that would be required for heart surgery, for instance.

Steve Goeser, CEO of Methodist Health System, said it’s a welcome effort, and other corporations, including Boeing and Lowe’s, are trying different approaches.

“Everyone agrees that it is a problem,” Goeser said. “We’re all trying to do things to be a more efficient health care system. It’s just extremely complex.”

Taking insurance out of the equation may be one approach, he said, and forcing price guarantees or limits on cost increases is another. “But insurance companies are trying to reform and reward quality and cost effectiveness.”

At the same time, more than half of hospital business comes from Medicare patients, and the government programs don’t pay the full cost of care, he said, so the extra cost passes on to people with insurance.

The companies’ new efforts won’t stop that trend, he said, and it’s tough to tackle issues related to chronic care, people demanding the latest (and expensive) medications and doctors wanting the best care for patients regardless of cost. Methodist hasn’t raised its prices in two years, but increased use of the facilities has driven up total spending.

“As we move toward value-based payments for quality and outcomes, reducing costs, I think we can bend that curve,” he said. “But we’ve got to get a handle on the utilization of health care.”

Paul Ginsburg, a health policy expert with the Brookings Institution, said Buffett’s comment about health care being a tapeworm in the economy “is very much on the money.”

But he said it’s not clear that the companies’ effort will be “a good investment that saves enough to be worth the time and capital they’re putting into it, or is this going to be something that points the way that other employers can follow and thus becomes much more threatening to health care providers? That’s something we don’t know.”

“Hopefully, it will go beyond them and produce tools and strategies that others can use that will have a bigger effect on the health-care system.”

It’s possible, he said, “that both by putting brain power into it but also the sheer number of covered lives that they’re involving in this, those two areas are a source of optimism that this could be successful.”

Among them, the companies have more than a million employees.

Dr. Eric Schneider, senior vice president for policy and research at the Commonwealth Fund, a health care think tank, said a high-performing, affordable health care system is crucial to the nation.

“To date, improving health care has been slow and difficult work,” Schneider said in a prepared statement. “But if they develop a better health care experience for patients, and that can be extended to all who need care, they could make a powerful contribution to American health care.”

Buffett has used the “tapeworm” description before, saying health care costs are eating up the country’s wealth from within. In 2010, Buffett said the health care system was “untenable over time” and hurts the U.S. economy in relation to other developed nations.

“So we have a health system that, in terms of costs, is really out of control,” Buffett said then. “And if you take this line and you project what has been happening into the future, we will get less and less competitive. So we need something else.”

In 2012 he said he favored a complete overhaul of the U.S. health care system. Buffett has supported the federal Affordable Care Act, saying in 2012 that the Supreme Court was correct in upholding the law. He added:

“The health care problem is the No. 1 problem of America and of American business. ... In terms of cost, it’s going to require a huge change.”

Martin, who is retiring as CEO of Blue Cross in March, said the alliance of the three major businesses gives him hope that major changes in health care are possible.

“These are smart people with really smart companies that are not tied to the health care economy,” he said. “I think what they want to do is best for the workplace.”

World-Herald staff writers Joseph Morton, Julie Anderson and Bob Glissmann contributed to this report.

The World-Herald is owned by Berkshire Hathaway Inc.

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Buffett's stance on health care in recent years

3/14/2010: Buffett’s position on health care reform should be clear, but it has been subject to some misinterpretation.

“If it was a choice today between Plan A, which is what we’ve got, or Plan B, ... the Senate bill, I would vote for the Senate bill. But I would much rather see a Plan C that really attacks costs,” Buffett told CNBC.

Buffett said the current system is “untenable over time,” using nearly 17 percent of the gross national product.

“It’s like a tapeworm eating, you know, at our economic body,” he said, hurting the U.S. economy in relation to other developed nations where costs are lower even though there are more doctors, nurses and hospital beds per person.

“So we have a health system that, in terms of costs, is really out of control,” Buffett said. “And if you take this line and you project what has been happening into the future, we will get less and less competitive. So we need something else.”

7/14/2012: “The health-care problem is the No. 1 problem of America and of American business,” Buffett said. “It’s the tapeworm, essentially, of the American economy, and we have not dealt with that yet. Obamacare is a step in the right direction in many ways.”

9/18/2013: “I’ve talked about the problems of health care for years and years, going way back before Obamacare,” he said. “It hurts us in competition with other countries.”

“What we have now is untenable over time. That kind of a cost compared to the rest of the world is really like a tapeworm eating, you know, at our economic body.”

7/19/2016: “Medical Liability Mutual Insurance Co. is a gem of a company that has protected New York’s physicians, mid-level providers, hospitals and dentists like no other for over 40 years,” Buffett said in the statement. “Good things are worth waiting for.”

7/5/2017: “It was huge, what they did on cutting taxes for the rich,” Buffett said on CNBC at the time the House of Representatives approved its proposed law. “If there’s one clear-cut message that comes out of that bill, it’s that we’re going to cut the hell out of income taxes for the rich on investment income.”

7/9/2017: In a recent interview with Judy Woodruff of “PBS NewsHour,” Buffett said that from his “limited knowledge,” having the government as a single payer for health care “probably is the best system. ... We are such a rich country. In a sense, we can afford to do it.”

Resolving the debate over the Affordable Care Act, also known as Obamacare, is “way outside my circle of competence,” he said, but something must be done because the health care industry’s 17 percent share of the U.S. economy, totaling more than $3 trillion a year, can’t continue growing.

“In almost every field of American business, it pays to bring down costs,” Buffett said, but with health care, “there’s no incentive to bring down costs.” A single-payer system, he said, “would be more effective, I think.”