New health care initiative by Amazon, Berkshire and JPM-C

[Mr._Graybeard]

This is true and also a indication that there is probably significant over-investment in the industry, which is economically wasteful.

In my area there are two large, multi-hospital medical groups that dominate the most affluent suburbs in the metro region.

About 10 years ago, the larger of the two groups decided to build a new hospital in a town near me, despite the fact that the smaller group already has a hospital there. So we now have two full-service hospitals in a city of 15,000.

Of course, with a new, 800,000 square foot medical center on its turf, the older hospital had to undergo some extensive upgrades so it could compete with the new guy on every level.

 

[Breedlove]

Can you just imagine , Jeff Bezos , Warren Buffet and Jamie Dimon . These three gentlemen control over 1.5 million employees and this is where it is starting . Total those 1.5 million employees leaving the insurance pool . Healthcare is dragging the market down today with this news.

 

[bobandsherry]

I'm no expert, but IMO malpractice insurance is a red herring as a driver of health care costs. Malpractice claims and awards have been on the decline for the past decade, in part because numerous states have placed caps on non-medical awards.

Here's an article by Dr. David Belk that has an interesting take on the subject: Medical Malpractice: Myths and Realities - True Cost of Heathcare

A couple of things to point out by reading the link you provided:

FIRST - Malpractice insurance costs vary SIGNIFICANTLY by state and by area of practice. The example in your link doesn't show where the doctor practices, or his area of practice. However, as the link below illustrates, the cost for general practice (e.g. internal medicine) is can be as low as $3,300 (Minnesota) and as high as $47,000 (Florida). For those same states, the premium cost for general surgeon runs as low as $11,300 (Minnesota) to $190,000 (Florida). Then also look at why OBGYN pays, $16,000 (Minnesota) and $190,000 (Florida). So the example shown in your link is hardly representative of costs for Doctors as a whole.

How Much Does Medical Malpractice Insurance Cost?

The same article mentions that in 2015 there were $9.7B spent for writing malpractice policies (that compares with $7.6B spent in 2000). The article does mention that this is about 1% of total health care costs, but when you consider that most health care is for routine exams, I'd guess (just my guess) that most of the claims are for more invasive type of procedures - those where one sees a significant type of charge for malpractice insurance (surgery and OBGYN).

SECOND - AND MORE IMPORTANTLY - As stated in the link you provided there's an implied cost due to malpractice that isn't directly in the cost of malpractice, the cost of defensive medicine. This is the cost where doctors now are so concerned with malpractice lawsuit that they order many tests.

Many have countered that fact by saying that doctors are so terrified of being sued they’ll often order batteries of unnecessary tests on patients and make unnecessary referrals in order to avoid lawsuits. It’s these unnecessary tests that drive up our health care costs, not the direct cost of medical malpractice.

According to the information in the link you provided that runs $650-850 BILLION per year. BCBS estimated the costs to be only $45 BILLION. Whatever the cost is, it needs to be factored in when considering the cost of malpractice.

 

[kgtest]

Curious if after jumping through all the hoops for your Wellness plan if you felt you actually achieved a better level of health. My former employer had similar plan (hint, my former employer is one of these companies). Yes, I went through the horse and pony show for getting my Wellness credits, but honestly, in the end, I was no healthier. After years of basically the same 'education' I was no more health smarter. I felt it was just a way for them to increase rates, let those who were too lazy or had more than enough money pay the higher rates, and those who were more financially concerned jump through the hoops in order to save some money.

I kid you not my co-worker logs and counts her hours she spends reading books as HI workouts. If reading a book is high intensity workout, I should look like the Rock by now after all this ER reading I do lol

My Healthcare ETF took a beating on this news. But it'll be back. Look how hard it was to decouple ACA.

 

[Mr._Graybeard]

A couple of things to point out by reading the link you provided:

FIRST - Malpractice insurance costs vary SIGNIFICANTLY by state and by area of practice. The example in your link doesn't show where the doctor practices, or his area of practice. However, as the link below illustrates, the cost for general practice (e.g. internal medicine) is can be as low as $3,300 (Minnesota) and as high as $47,000 (Florida). For those same states, the premium cost for general surgeon runs as low as $11,300 (Minnesota) to $190,000 (Florida). Then also look at why OBGYN pays, $16,000 (Minnesota) and $190,000 (Florida). So the example shown in your link is hardly representative of costs for Doctors as a whole.

How Much Does Medical Malpractice Insurance Cost?

The same article mentions that in 2015 there were $9.7B spent for writing malpractice policies (that compares with $7.6B spent in 2000). The article does mention that this is about 1% of total health care costs, but when you consider that most health care is for routine exams, I'd guess (just my guess) that most of the claims are for more invasive type of procedures - those where one sees a significant type of charge for malpractice insurance (surgery and OBGYN).

SECOND - AND MORE IMPORTANTLY - As stated in the link you provided there's an implied cost due to malpractice that isn't directly in the cost of malpractice, the cost of defensive medicine. This is the cost where doctors now are so concerned with malpractice lawsuit that they order many tests.

According to the information in the link you provided that runs $650-850 BILLION per year. BCBS estimated the costs to be only $45 BILLION. Whatever the cost is, it needs to be factored in when considering the cost of malpractice.

Belk is an internist who practices in Alameda, Calif.

Yes, malpractice insurance varies widely by location and specialty. I'll buy that there were $9.7 billion in medical malpractice policies written nationwide in 2015.

So you're arguing that insurers were willing to take $9.7 billion to cover malpractice risk while hospitals and doctors did at least $45 billion in unnecessary tests and procedures to avoid lawsuits they were already covered against (by insurers, for $9.7 billion)? Something there doesn't compute.

 

[Gotadimple]

Can you just imagine , Jeff Bezos , Warren Buffet and Jamie Dimon . These three gentlemen control over 1.5 million employees and this is where it is starting . Total those 1.5 million employees leaving the insurance pool . Healthcare is dragging the market down today with this news.

This consortium is but a drop in the bucket to the total employer and healthcare market.

The following are from the Kaiser Family Foundation website. Numbers are based on the census: https://www.kff.org/other/state-ind...0&sortModel={"colId":"Location","sort":"asc"}

In 2016 including the March 2017 update to census data:
157.3 M in Employer Sponsored Plans about 50% of the total eligible
1.5 M in the Bezos-Buffet-Dimon consortium (.9% of all employer plans)
21.8 M in Private Non-Group plans
62.3 M in Medicaid Plans
44.5 M in Medicare Plans
6.1 M in Other public plans (Military, VA)
28.0 M are Uninsured
320.3 M Grand Total per the census data

 

[bobandsherry]

Belk is an internist who practices in Alameda, Calif.

Yes, malpractice insurance varies widely by location and specialty. I'll buy that there were $9.7 billion in medical malpractice policies written nationwide in 2015.

So you're arguing that insurers were willing to take $9.7 billion to cover malpractice risk while hospitals and doctors did at least $45 billion in unnecessary tests and procedures to avoid lawsuits they were already covered against (by insurers, for $9.7 billion)? Something there doesn't compute.

Not arguing anything, just shared details are reported. But I agree that something doesn't compute, just differ on what it might be.

 

[Huston55]

Good Healthcare Reference Material

The “Frontline” video below (although a bit dated - 2008) is excellent and still very relevant to all the threads discussing ‘how to improve the US’s healthcare system.’

I’d searched for it a few weeks ago (for another E-R.org thread) but, didn’t find it until now. Regardless of where you stand in this debate, it’s well worth the ~1 hour it takes to watch it. For those who can’t spend that much time, I’ve summarized key information below.

https://www.pbs.org/wgbh/frontline/film/sickaroundtheworld/

——————
Lessons from First World Health Care Systems:

Some key characteristics of the healthcare systems in the countries examined, along with (Healthcare Spending/Capita; WHO Health System Ranking*):
1. Britain($4,003pp; #18): Universal Care, Managed Care (Gate Keeper), Government Operated, Competition Among Providers
2. Japan($4,150pp; #10): Mandatory Coverage, Overwhelmingly Private, Unlimited Access, Price Controls, Competition Among Providers
3. Germany($5,267pp: #25): Universal Coverage, Mostly Private Providers & Insurance Thru Employer, Competition Among Providers, Standard Prices Negotiated Privately on a National/State Level
4. Taiwan($1,166pp; #2**): Universal & Mandatory Coverage, No Managed Care, No Waiting Times, Modern Admin/IT System, relatively new (1990s)
5. Switzerland($6,935pp; #20): Universal & Mandatory Coverage, Competition Among Providers, relatively new (1994)
==>USA: ($9,451pp; #37)

*May vary slightly by year.
**Difficult to find; sourced from different international index (Note: calculating it myself from raw data, I get $1,397pp so, it’s close.)

Also, all five countries examined have: universal coverage, no pre-existing conditions exclusions, mandatory coverage, better health care outcomes, significantly lower cost, no personal bankruptcy due to medical bills, higher citizen/patient satisfaction.

The journalist’s Three Take Aways to consider for improving US healthcare were:
1. Universal Coverage
2. Mandatory Sign-Up
3. Standard Pricing

——————

 

[Hermit]

How about: the hospitals have lots of high-cost toys they have to keep running steadily to justify the investment in them?

I think that is, indeed, part of the problem. You see the same type of problem at the colleges. The kids all want the best facilities so that is where they go and the prices go up accordingly. All the colleges I visited with my kids were in a construction boom and that was 2009.

 

[jimandthom]

Yes I have heard about the machines that do CT scans in Houston Texas . I have heard we have so many and they do not have the patients to pay them off so they must increase the prices . Instead of having maybe less and running them 24 / 7 similar to Europe or Canada.

Our massage person, lives in the UP is a Canadian citizen and has the Canadian Health Plan. She remarked one time about being tired as she a scan of something at like 2AM.

I wished her well in her recovery, but she told me it wasn't for an emergency situation, it was part of how they were utilizing the equipement 24 hours a day.

Apparently the Canadian system will refer to the hospital here for somethings if things are getting overly booked there. Seems like a reasonable way to do things.

 

[street]

The markets doesn't like the idea of these 3 large companies getting in the HI business.

 

[bobandsherry]

How about: the hospitals have lots of high-cost toys they have to keep running steadily to justify the investment in them?

If the "toys" are instrumental in saving lives, well, then maybe. But when I see hospitals spend a fortune to make the place "look nice" including glass walls with view of their outdoor atrium, wood paneling, wood and chrome accents, etc, well, that's just spending money to spend money. Hospital I went to previously had fresh flowers throughout their lobbies (they had two) and other public areas, replaced on a daily basis. And these were not small arrangements, no joke they were easily 30" high in expensive looking vase. That's just silly to spend money on crap like that.

I don't think a hospital needs to look industrial, but it doesn't need to (and shouldn't) look like a headquarters for high tech company.

 

[bobandsherry]

The markets doesn't like the idea of these 3 large companies getting in the HI business.

I don't think it's these 3 companies, but what other companies might follow their lead.

 

[marko]

Fascinated by the premise. Should be fun to watch. As others have noted though there's not much in the way of details so far. Still wondering what Bezos wants from Whole Foods.

Hard to compete against an outfit that isn't interested in profit. If they make money indirectly by reducing their corporate expense it's ok by me. If they squeeze the insurance companies, that's ok by me too.

Still, the whole HC system is such a mess top to bottom I just don't see how they can pull it off. But then, each one of them individually is 1000 times smarter than me!

 

[street]

I don't think it's these 3 companies, but what other companies might follow their lead.

True

 

[Senator]

Hospitals are in the business of revenue generation.

The revenue portion can be adjusted easily. The companies can just start new guidelines of what is 'medically necessary'. If they convince a group of Doctors to recommend annual physicals be done every two years, rather than one, it would save. Mammograms less often. Encouraging options to maximize quality of life, rather than longevity.

Some diseases are best to let run it's natural course, rather than expensive treatments that only prolong a life another miserable year. Controlling treatments, and the expenses associated with those treatments, may be part of their plan.

The dental industry already has it figured out. Attempt to get a cleaning a day before the new new plan starts and they will deny the claim.

The negotiating power of this group is MUCH less than the VA, Medicare, and Federal employees. I doubt that negotiating will do anything for the cost.

My former megacorp had a health clinic in each main building. I went several times for routine things. That may even be their eventual savings plan.

Of course they could hire Elon Musk to be their front man. He is a great talker.

 

[bobandsherry]

The revenue portion can be adjusted easily. The companies can just start new guidelines of what is 'medically necessary'. If they convince a group of Doctors to recommend annual physicals be done every two years, rather than one, it would save. Mammograms less often. Encouraging options to maximize quality of life, rather than longevity.

Some diseases are best to let run it's natural course, rather than expensive treatments that only prolong a life another miserable year. Controlling treatments, and the expenses associated with those treatments, may be part of their plan.

The dental industry already has it figured out. Attempt to get a cleaning a day before the new new plan starts and they will deny the claim.

The negotiating power of this group is MUCH less than the VA, Medicare, and Federal employees. I doubt that negotiating will do anything for the cost.

My former megacorp had a health clinic in each main building. I went several times for routine things. That may even be their eventual savings plan.

Of course they could hire Elon Musk to be their front man. He is a great talker.

Agree with you on many points, but don't think that the new health conglomerate will deviate from health norms such as allowance of physicals, mammograms, etc. The companies still want to attract talent. If they are perceived as sub-par in their health benefits talent will go where they find better overall value, especially those with families and those who are older.

It will be interesting to see how Amazon, with younger workers, works with JPM and BH who have older workers. How will they reconcile the overall differences in their workforce and how costs and risks are aligned.

After digesting the information, I think this is just clearly a play short term to reduce the administrative costs. I don't think they have a clear roadmap as to what they want to accomplish long term. They also say it's not for profit, but in the near term I expect that to change. I can tell you that JPM has a history of bringing functions internal, then within a few years with change in management they will look to explore cost of doing it internal vs. third party. There have been a series of functions that JPM has brought internal and then farmed back out to third party as they could do it for less; third party had a lower cost base, larger base to absorb fixed costs, better talent, etc.

So it will be interesting to see how long this A/B/J partnership remains intact and if it stays the course.

 

[Senator]

After digesting the information, I think this is just clearly a play short term to reduce the administrative costs. I don't think they have a clear roadmap as to what they want to accomplish long term. They also say it's not for profit, but in the near term I expect that to change.

That is exact that. In the end, it will be all for show. It may save the three companies money, but not the workers. Odds are, the employees have a highly subsidized plan already.

 

[athena53]

<snip> But when I see hospitals spend a fortune to make the place "look nice" including glass walls with view of their outdoor atrium, wood paneling, wood and chrome accents, etc, well, that's just spending money to spend money. Hospital I went to previously had fresh flowers throughout their lobbies (they had two) and other public areas, replaced on a daily basis. And these were not small arrangements, no joke they were easily 30" high in expensive looking vase. That's just silly to spend money on crap like that.

It reminds me of what DH said once when I was heading to Las Vegas for a business conference: they don't build the fake castles, pirate ships, pyramids, hotel lobbies with saltwater aquariums, etc. because they like you. They build them because they want to draw you in and make money off of you. (He was preaching to the choir; I'm not a gambler.)

I have to admit I was impressed when I visited DDIL in the hospital after she had my second granddaughter: large private room, big enough for family to hang out, break room with snacks for visitors, etc. Still, DS and DDIL were not happy with their share of the cost on their high-deductible plan.

But, to get back to the OT, I'm happy to see great minds in private enterprise try and solve this problem, especially after Charlie Munger replied to an audience question at a B-H meeting years ago that they'd put solving the healthcare issues into their "too hard" pile.

 

[jimandthom]

The revenue portion can be adjusted easily. The companies can just start new guidelines of what is 'medically necessary'. If they convince a group of Doctors to recommend annual physicals be done every two years, rather than one, it would save. Mammograms less often. Encouraging options to maximize quality of life, rather than longevity.

Some diseases are best to let run it's natural course, rather than expensive treatments that only prolong a life another miserable year. Controlling treatments, and the expenses associated with those treatments, may be part of their plan.

The dental industry already has it figured out. Attempt to get a cleaning a day before the new new plan starts and they will deny the claim.



The negotiating power of this group is MUCH less than the VA, Medicare, and Federal employees. I doubt that negotiating will do anything for the cost.

My former megacorp had a health clinic in each main building. I went several times for routine things. That may even be their eventual savings plan.

Of course they could hire Elon Musk to be their front man. He is a great talker.

While I actually agree with you on the highlited part, it has bee so engrained that life is so precious that one should never give up. Couple of quick examples--

friend of my dads was treated for prostate cancer for at least 10 years. Everytime it popped back up he went through more extensive and expensive rounds of chemo. Much of this is firsthand knowledge as I frequently drove him to and from the infusion center after he went blind.

Cousin---similar decade long story. Just retired from a univ. in Kentucky as a math prof.

Aunt who is 93, is thinking about another set of hip replacements. this is probably the 4th or more set. First was in the late 1960s. Hubby and aunt are making arrangements for trip to Galapoges(sp?)/ They have lived and travelled all over the world, so not out of the realm for them to consider.

I have read where it is frequently family and friends who convince a terminally ill person to continue with treatment.

 

[Surewhitey]

Berkshire Hathaway already owns a couple insurance companies, so creating another for them is no biggie. Once they succeed in their own coverage, they'll sell services to other companies and make it a huge profit center.

 

[athena53]

While I actually agree with you on the highlighted part, it has been so ingrained that life is so precious that one should never give up. Couple of quick examples--

<snip> I have read where it is frequently family and friends who convince a terminally ill person to continue with treatment.

I agree- I lost DH (age 78 and my mother (age 85) in 2016- both were given terminal cancer diagnoses and both chose palliative care only. All of us supported those decisions. I saw a lot of anger and desperation on the FaceBook page for people with Acute Myeloid Leukemia and their caregivers (DH died of AML). I totally understand that 30-year olds are going to elect more treatment with a low probability of success. I saw a lot of sad cases where people in their 70s (or their families) just didn't want to stop reaching for the next hope- a new drug trial, another type of chemo with a 5% chance of success. Some people were on their second stem cell transplant after the first failed, which health care systems in other countries won't cover.

But how do we ration healthcare that's expensive and has a low probability of success without running into ethical issues?

 

[karen1972]

When I heard of this I thought about the fact that many companies use to have self-funded health care plans, I know my big Mega corp use to, and then they didn't... I wonder if given the last 15 years of health care inflation if that equation has changed. They had 165000 employees and the health care was dirt cheap... they also funded health clubs in the buildings, TED talks on Health, had nurses on staff, a robust pre-natal health resource, and offered routine checkups onsite.. all to encourage of course lower health care costs.

I feel like we are just going full circle but I'm really curious what they can do and what they may be able to do for others.

 

[Mr._Graybeard]

After digesting the information, I think this is just clearly a play short term to reduce the administrative costs. I don't think they have a clear roadmap as to what they want to accomplish long term.

Yep. To have any broad impact, they'd have to get into the hospital business in a big way. Henry Kaiser did it, but it was a simpler time.

 

[MBSC]

It will be interesting, but the three companies are pint-sized to the Medicare group, or even the Federal employee group.

+1

The Office of Personnel Management is encouraging Federal Employee Health Benefits Program (FEHBP) carriers to find new ways to cut their costs for the next year.

In addition, OPM is encouraging FEHB carriers to consider how they can keep prescription drug costs low. Prescription drugs accounted for 26 percent of FEHBP costs in 2016, according to OPM.

Reference: https://federalnewsradio.com/benefi...d-new-ways-to-cut-health-care-costs-for-2019/