Radical cure for the US health system

Can a legendary investor, the king of online retail and the head of America’s biggest bank find a cure for what ails America’s health care system?

The trio of Warren Buffett, Jeff Bezos and Jamie Dimon have had enough success in their respective industries that they are at least being given the benefit of the doubt.

They have announced they’re forming a new company to address health care costs for their US employees, and possibly for many more Americans.

The news was enough to rattle investors in established health insurers and trigger a sell-off in their stocks.

Their announcement on Tuesday didn’t include many specifics, but based on their very different business backgrounds it’s possible to see what each of the three business titans might contribute toward tackling the health care problem.

For starters, they’re heads of huge operations: Their three companies – Buffett’s Berkshire Hathaway, Bezo’s Amazon.com and Dimon’s JPMorgan Chase – have a combined market worth of US$1.62 trillion (NZ$2.19t).

Bezos is 54,and by some measurement he’s now the wealthiest person on the planet.

Amazon grew from a book retailer into one of the world’s most valuable companies in part because it’s extremely skilled in distributing products.

It’s long been willing to lose money in order to offer customers lower prices than its competitors can bear, and in the process gain a loyal customer base.

But Amazon has never been consistent at turning profits because of its focus on sales growth. That’s what many investors fear about it.

Investors in health care have long thought Amazon was going to get into that field and force companies that make and distribute medications or medical devices to drastically lower their prices.

When the three companies said they wanted to create a partnership ``free from profit-making incentives and constraints,’' Amazon would seem to be the blueprint.

The companies said their project will focus on technology that provides simplified and transparent care.

Jefferies & Co analyst Brian Tanquilut said there is a good chance the new firm will eventually try to negotiate prices directly with health care providers like hospitals, bypassing companies that act as middlemen.

``The initial plan for the new entity will be on partnering with and/or acquiring various consumer-orientated health care technology capabilities,’’ he said.