Yesterday, Amazon CEO Jeff Bezos, Berkshire Hathaway CEO Warren Buffet, and JP Morgan Chase CEO Jamie Dimon announced they are forming a partnership to use their combined purchasing power to drive down health care costs for their employees, and perhaps all Americans.
Can the world's wealthiest do what the world's most powerful could not?
Buffet and Bezos rank number two and number three on the 2017 Forbes 400, and Dimon's annual pay of $28 million keeps him well above the poverty level.
While Obamacare is officially named the Affordable Care Act, monthly premiums for families have increased 140% since it was implemented. Trump, of course, has yet to pass a health care plan through Congress.
The new organization has yet to be named. In an effort to start a trend, I will coin the name for the partnership of Amazon, Berkshire and Chase as "ABC healthcare" (ABC).
Details of the plan are few at this point, limited to a 140-word press release, but analysts see the entry of these corporate giants into health care as possibly transforming the way all Americans receive their health care.
The press release indicates ABC would seek to increase transparency in health care pricing and leverage the purchasing power and scale of 1.1 million combined employees to drive down health care prices.
While ABC is not the first to use group purchasing power for negotiating power with providers and insurers, the group will likely take it to an entirely new level.
Since 1981, employers have pooled health care purchasing through an IRS 501 (c)(9) entity known as a Voluntary Employee Benefits Association (VEBA). VEBAs were introduced into the internal revenue code in 1928, but were not widely used until 1981.
Because VEBAs have a fiduciary relationship with their clients, they are incentivized to achieve cost savings.
San Diego-based California Schools VEBA, a group purchaser for about 145,000 school employees and their dependents, has been a pioneer in using data mining to achieve cost savings for its clients.
California Schools VEBA uses algorithms to drive their members to health providers that they have identified as providing the best quality care at a cost near the regional average.
While school districts that are not VEBA members typically see a 10-12% annual increase in premiums, VEBA member school districts annual increases are in the 4-5% range.
California Schools VEBA estimates that as much as 25% of their doctor/patient encounters are waste, fraud, or abuse. However, the organization lacks the transparency to see which VEBA members are interacting with what health care providers.
While they can see the fraudulent encounters taking place, they have insufficient information to research these claims.
With the lobbying strength of hospitals, insurance companies, and medical organizations on the other side, transparency advocates have had limited success in modifying federal and state regulations to provide more transparency in health care transactions.
Most advocates welcome the political muscle of tech and finance to the cause.
