America’s faith in the ability of billionaires to solve its problems has taken another knock. Three years ago, the triumvirate of Jeff Bezos, Warren Buffett and Jamie Dimon unveiled a joint initiative to fix the US healthcare system. The Haven venture will dissolve in February. Even the bosses of Amazon, Berkshire Hathaway and JPMorgan were no match for this sprawling, rent-seeking industry.
US healthcare, which has dealt poorly with coronavirus, is worth almost $4tn a year. It is just the kind of legacy set-up tech should be able to skewer.
High provider prices and convoluted insurance contracts mean the US is twice as expensive, per capita, as other developed countries at around $11,000 a year, according to the Kaiser Family Foundation. The UK, by comparison, spends less than $5,000.
Costs rise more quickly than inflation. In 2020, the average employer-sponsored family premium increased 4 per cent to over $21,000.
The trio’s plan was good one. They wanted to use the combined heft of their 1m-plus combined workforce in a non-profit, tech-driven venture, to show what could be achieved without intermediaries.
But disruption alone is not a valid business model. Haven’s public plans were hazy. Hiring renowned surgeon Dr Atul Gawande as chief executive, someone better known for writing about healthcare than running a business, suggests the project prioritised talking over doing.
Haven not only failed to meet its own goals, it spurred consolidation that conferred more pricing power on the industry.
Health stocks dropped when the venture was announced in January 2018. Shares in pharmacy group CVS Health fell 6 per cent. So did the stock of health insurer Anthem. Panicked rivals moved fast. Two months later Cigna bought large pharmacy benefits manager Express Scripts for $67bn including debt — paying a premium that was not covered by expected savings. Meanwhile, the Trump administration declined to cap drug costs.
The killer blow to Haven may have been Amazon’s waning interest in a collective effort. Mr Bezos has not given up on his plan to Amazon-ify healthcare for customers and employees. The ecommerce giant has launched online prescription service Amazon Pharmacy and a virtual primary care facility for employees.
If Mr Bezos wants to win credit for increasing competition, rather than opprobrium for suppressing it, US healthcare is still a good place to start.
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