Bezos, Buffett and Dimon spin a new model of affordable healthcare
Is last week’s announcement of a major healthcare partnership deal in the US between Amazon, Berkshire Hathaway and JP Morgan Chase, the solution to the country’s healthcare woes? Or is it a tacit acknowledgment that in the battle for affordable healthcare, the world’s richest and most powerful economy has been beaten?
The three companies announced they would set up an independent healthcare company for their US employees numbering nearly 1 million. Each of them has billions of dollars in earnings which they can bring to fund any such initiative. Impressive as those numbers are, their impact on US business extends beyond that with each of them considered a pace setter in their industry.
Amazon’s founder Jeffrey Bezos has already shown what he can do even with an under-threat product like Washington Post and of course Warren Buffet, chairman of Berkshire Hathaway, doesn’t flirt with ideas. So if these two moguls backed by Jamie Dimon, chairman of J.P. Morgan Chase, the financial services behemoth, are getting into healthcare, it should mean there’s finally a solution to the vexed issue.
Not surprisingly shares of health insurers, along with other healthcare related stocks, slid immediately after the announcement in anticipation of a powerful new entrant shaking up the sector.
But the reality may be a bit more grim. That three such unrelated business tycoons are teaming up could well imply that the government-supported model of affordable healthcare isn’t viable, whether it be Barak Obama’s Obamacare, Donald Trump’s Better Care Reconciliation Act or in India the newly floated Modicare plan. It is possible that affordable healthcare is an oxymoron, somewhat like cheap Chanel.
Announcing the new venture Bezos seemed to suggest that, stating in a release on the occasion: “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort.”
It isn’t the first time the failure of the US to take care of its sick and ailing citizens has been brought up. But its impact on business itself hasn’t been discussed often enough.
In May 2017 during Berkshire Hathaway’s annual shareholders meeting, Buffett dubbed rising healthcare costs, not the tax system, the number one problem that US businesses face. As he explained then, that’s because medical costs, which are borne to a great extent by business, have gone up from 5% of GDP in the 1960s to 17% today.
In a searing indictment, he dubbed medical costs “the tapeworm” of American economic competitiveness. Typical of him, his partner, Charlie Munger, Berkshire’s vice chairman, was more forthright, noting that sometimes there’s “too much medicine” and “too much chemotherapy” for people who are “all but dead.”
If this is the state of affairs in the US, after years of grappling with the issue, what are the chances of a similar state-financed system in a country like India where even basic healthcare, paid or unpaid, is of abysmal quality.
Sadly, private health insurance, which makes up the majority of the insurance schemes in India, has failed to provide adequate and low-cost coverage to those who need it most. In any case, most insurance schemes do not cover the cost of consultation or medication and are limited to hospitalization and allied expenses.
Perhaps the answer lies in companies accepting that the healthcare needs of their employees are their responsibility and building it into the cost of doing business.
It isn’t as if the model doesn’t exist. In the past, India’s public sector giants as well as some of the large private companies built efficient healthcare systems in the industrial townships they developed. In Jamshedpur, for instance, Tata Steel runs the 900-bed multi-disciplinary Tata Main Hospital (TMH) along with six clinics for its employees and their families. It also has hospitals in Jamadoba, Noamundi, Sukinda and West Bokaro, places from where it sources its raw materials. All these facilities are also available to those who live in these areas but don’t work for the company. Similarly, public sector steel companies built excellent healthcare facilities in industrial towns like Bhilai and Bokaro.
Bezos and Co. may be building a new model of healthcare, one that Indian companies would do well to follow carefully.
Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.
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