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Amazon, Berkshire, JPMorgan to Create Healthcare Company

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Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#11
post #6

I've always wondered what's stopping someone from creating a non-profit and just having people join it in order to give the non-profit ability to negotiate lower prices. I imagine there's a cost to set this up, but is that cost less than the marginal cost of each employee and the savings they would (presumably) receive if enough people joined?

The US healthcare system worked for the majority of people until roughly the last 15 years, and then it began failing gradually up the income ladder. So if you look more recently, the last ten years in particular, that would be the window where something like this would especially begin to matter. It wasn't done before, because it didn't make sense for large entities to bother; things have gotten bad enough that now it makes sense.

The average annual premium for families for health insurance was $5,791 in 1999. The median was even lower. Today it's closer to $18,000.

The system worked at $5,791, the average family could afford that without much problem. At $18,000 the system breaks apart and fails for the typical family. Wages for the US were even further beyond comparable nations back in ~1999. With very modest real wage growth since 1999, especially at the median, that $18,000 cost essentially represents money in the economy that should have in part gone into wage growth.

These large companies now have a powerful incentive - for several different reasons - to begin hammering down the cost of healthcare. Their action on this front is a positive fortunately, these companies are extraordinarily powerful, both politically and economically. If they're dead set on bringing down the cost of healthcare, that's exactly what will happen, and they'll gather other very willing partners and the momentum will likely roll.

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#12
Here's what this is about. Large successful companies contract out their health insurance and care to external companies. Most of those companies are profit centers- they provide a service, but they take a very large profit on it. Much of that profit is just waste- it's money that goes to people who aren't innovating, or providing value, just acting as gatekeepers (note: this is just my opinion, not provable fact).

Companies like Amazon know they can provide that same service- or a simplified version of it that focuses on effective treatments that don't cost a lot of money- far more cheaply, because they have willingly forgone short-term profits.

Whether this saves money and provides adequate care remains to be seen.

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#13
post #7

> The three companies said they plan to set up a new independent company "that is free from profit-making incentives and constraints." I wonder if they will be setting it up as a health insurance cooperative, an organizational structure in which the primary goal is to serve its members, rather than to generate value for external shareholders: https://en.wikipedia.org/wiki/Health_insurance_cooperative It's not at all…

One of the benefits a profit motive brings to insurance companies is pushing back on improper billing by providers (doctors/hospitals) and negotiating lowest possible care and drug rates. Tech-focused insurers like Oscar also invest heavily to help guide members toward better care paths, which if done well lead to better care at less expense (for both the member and insurer).

Unrelated: one of the worst parts of insurance is the customer service quality. How does an internal, non-profit insurer staff itself to do this well? If they commit to this even at the risk of it being unprofitable, that would be most awesome —- but I’m skeptical.

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#14
post #6

I've always wondered what's stopping someone from creating a non-profit and just having people join it in order to give the non-profit ability to negotiate lower prices. I imagine there's a cost to set this up, but is that cost less than the marginal cost of each employee and the savings they would (presumably) receive if enough people joined?

I've thought about this before as well. It seems like there would be room for something like Mozilla—a non-profit arm for healthcare insurance, perhaps with car, home and other types of insurance as for-profit. Then again, I know little about how these companies operate. That and I'm sure it requires a large amount of capital to start such a company.

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#15
post #7

> The three companies said they plan to set up a new independent company "that is free from profit-making incentives and constraints." I wonder if they will be setting it up as a health insurance cooperative, an organizational structure in which the primary goal is to serve its members, rather than to generate value for external shareholders: https://en.wikipedia.org/wiki/Health_insurance_cooperative It's not at all…

This feels like a setup for a broader push into healthcare by these companies. The sector is still growing, Amazon is already working out the pharmacy space. "[F]ree from profit-making incentives and constraints" sounds like the strategy they've used so far to dominate sections of online retail.

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#16
post #5

Tragedy of the commons much? It's disturbing to see corporations occupy the vacuum US policy has left here.

>> occupy the vacuum US policy has left Others might argue this is free market at work.

It's market participants, with a huge stake, trying to fix a disastrously broken government-corporate healthcare system that has gradually failed for about a dozen big reasons over the last 20 years.

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#17
post #6

I've always wondered what's stopping someone from creating a non-profit and just having people join it in order to give the non-profit ability to negotiate lower prices. I imagine there's a cost to set this up, but is that cost less than the marginal cost of each employee and the savings they would (presumably) receive if enough people joined?

I've thought about this before as well. It seems like there would be room for something like Mozilla—a non-profit arm for healthcare insurance, perhaps with car, home and other types of insurance as for-profit. Then again, I know little about how these companies operate. That and I'm sure it requires a large amount of capital to start such a company.

[deleted]

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#18
post #5

Tragedy of the commons much? It's disturbing to see corporations occupy the vacuum US policy has left here.

>> occupy the vacuum US policy has left Others might argue this is free market at work.

It depends on whether or not you view healthcare as a basic right for citizens (in the same sense as education and law enforcement etc.)

The free market coming up with a co-op approach that may only benefit the handful of companies involved only benefits me if I’m in one of those companies.

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#19
post #2

This sounds very promising especially considering Amazon's logistical expertise and amount of financial resources these 3 companies have.

Unless the business model looks more like Amazon Prime Video than AWS. And looks exactly that way to me: fixed-rate subscription fees, upselling add-ons, heavy bespoke negotiation with suppliers, etc.

EDIT: Do downvoters care to explain their views?

Re: Amazon, Berkshire, JPMorgan to Create Healthcare Company

#20
post #7

> The three companies said they plan to set up a new independent company "that is free from profit-making incentives and constraints." I wonder if they will be setting it up as a health insurance cooperative, an organizational structure in which the primary goal is to serve its members, rather than to generate value for external shareholders: https://en.wikipedia.org/wiki/Health_insurance_cooperative It's not at all…

One of the benefits a profit motive brings to insurance companies is pushing back on improper billing by providers (doctors/hospitals) and negotiating lowest possible care and drug rates. Tech-focused insurers like Oscar also invest heavily to help guide members toward better care paths, which if done well lead to better care at less expense (for both the member and insurer). Unrelated: one of the worst parts of insu…

You're correct that a profit motive leads for-profit health insurance companies to push back on improper billing and negotiate prices, because whatever profit they are able to eek out goes to its shareholders.

But the same motive applies to co-ops. The member-owners of a co-op don't want their costs to be inflated by improper billing or inflated prices, because if they are able to reduce their expenses, then the member-owners benefit in the form of lower premiums.

In both cases, the shareholders want to get their money's worth, it's just that in the case of a for-profit company, those shareholders are often external investors, but in the case of a cooperative, all shareholders are also members.

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