OLIGARCHS VOW TO IMPROVE HEALTH CARE

Chris TomlinsonCommentary In the absence of government action, three of America's wealthiest and most powerful men promise to fix our health care system.

The CEOs of Amazon, Berkshire Hathaway and JPMorgan Chase announced plans last week to use their purchasing power and business know-how to impose efficiency on a system known for waste and profiteering. In other words, these companies will do for their 1.2 million employees what governments have done in every other wealthy nation.

God bless American capitalism.

CEOs Jeff Bezos, Warren Buffett and Jamie Dimon offered few details about their effort to slow health care inflation. But the most important thing to know about their new company is its nonprofit intention.

What we assume will ultimately become an all-encompassing health care company has only one goal, to provide quality care for a reasonable price. The announcement sent stock prices at for-profit insurance, drug and health companies sinking.

"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," Bezos, Amazon's founder, said in a statement.

Buffett suggested patriotism is driving the effort to replace medical arts with industrial efficiency.

"The ballooning costs of health care act as a hungry tapeworm on the American economy," Buffett said in the same statement. Last summer Buffett endorsed the idea of a single-payer health care system, what some advocates call Medicare-for-all.

The new company, yet to be named, brings together the formidable combination of Amazon's digital genius, Berkshire's relentless focus on capital efficiency and JPMorgan's finance and trading expertise. Don't be surprised when other companies join them.

The biggest challenge will be curing the industry's perverse incentives.

Doctors are paid by the procedure based on their complexity. Primary care physicians who prevent illness get paid a tiny fraction of what a surgeon gets for correcting years of poor health. When doctors make more money the sicker you get, there is a problem.

Insurance companies, on the other hand, make more money when you don't see the doctor. To prevent wasteful spending, they make doctors jump through pre-authorization hoops and limit access to expensive practitioners.

Pharmaceutical makers, meanwhile, do not price drugs based on how much they cost. Executives look at the available alternatives, or the cost of long-term care, and then maximize profits.

For example, Spark Therapeutics calculated that a person with a rare form of blindness will run up $1 million in health costs over a lifetime. Therefore, Spark priced its cure at $850,000, which the CEO argued is a bargain.

In most developed countries, health care costs are closely regulated, and governments set a reasonable profit margin. In the U.S. we give that power to private insurers, who charge us 15 percent for the service.

Privatization, though, hasn't worked. Americans spend twice as much on care and get much worse results. Industry lobbyists have defeated every effort to prioritize outcomes over profits.

Bezos, Buffett and Dimon, whose companies are worth $1.62 trillion, want to prioritize their profits. Imagine a non-profit, health care company operating like Walmart, cutting out middlemen and pressuring providers to reduce wholesale prices.

A first step would be to stop paying doctors for procedures and instead pay a flat rate for each patient, depending on his or her condition. Or perhaps pay doctors a salary.

For a hint of how much doctors overcharge, the Texas Department of Insurance recently revealed the results of a mediation process that allowed patients to contest their bills. In 1,926 disputed charges worth $7 million, doctors made $6 million in concessions.

A nonprofit health plan administrator can easily slash costs 15 percent by eliminating insurance companies and pharmacy benefit managers. Amazon, based on past performance, could bring down drug costs by 50 percent or more.

Reducing these costs is not rocket science. One look outside our borders reveals how to slash health care costs, improve patient outcomes and slow health care inflation. Bezos, Buffett and Dimon recognize an opportunity to not only improve our health care, but also eliminate a huge drag on their profits and the U.S. economy.

"Our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans," Dimon said in a statement.

Not to question their intentions, but most workers already must accept whatever insurance their employer offers. This new company could give employers even more power over our care.

Do we really want health care reform led by private corporations instead of our elected officials? That depends on how much you trust the benevolence of our oligarchs.