Jamie Dimon Rejoins the Health Fight Warren Buffett Fled

Jamie Dimon can't quit his health-cost crusade, even if Warren Buffett can. On Thursday, JPMorgan Chase & Co. announced that it was launching a new unit called "Morgan Health" to tackle the high cost and poor performance of  U.S medical care. The move comes just a few months after it gave up on Haven, a hyped joint venture with Jeff Bezos’s Amazon.com Inc. and Buffett’s Berkshire Hathaway Inc. aimed at the same problem. 

JPMorgan may have learned some lessons, but the fundamental strategy is very similar: to test out innovative health-care ideas on the bank's workers and then use what it learns to help other companies and lower costs. However, American health care isn't uniquely expensive because wealthy corporations aren't smart enough. The real culprit is a series of large and intractable policy problems. They’re a big reason Haven never got off the ground. And they are why Morgan Health is likely to struggle as well. 

Dimon, JPMorgan’s chief executive officer,  hinted at something like Morgan Health in his annual letter to shareholders last month. Through Haven, "we learned a lot about how the health-care system could be improved," he wrote. "JPMorgan Chase will continue to build on what we learned."

In the 65-page annual letter (plus a page of foot notes), Dimon proposed the following improvements:

  • Allow bigger incentives for becoming and staying healthy
  • Eliminate bureaucracy and waste in the health-care system
  • Empower employees to make better choices through more transparent employer plan pricing
  • Develop better corporate wellness programs that target obesity and smoking
  • Create better tools to enable comparison shopping for nonemergency care
  • Reduce the "extraordinary expense" for unwanted end-of-life care

The letter also argued for national insurance exchanges that offer low-cost catastrophic coverage, as well improved K-12 education on wellness, nutrition, health and exercise. And it suggested the U.S. study the way Singapore has developed its health-care programs.

Dimon identifies real issues. But they're easier to list than solve, and some of his proposed solutions have a mixed track record. For example, corporate wellness, education, and incentive plans consistently fail to deliver cost savings or improved outcomes. "Shopping" is hard when heavily consolidated providers dominate many markets. 

His letter acknowledges but doesn't dig deep into the real driver of American health costs: the world's highest prices for drugs and care. The root cause is a system under which coverage is divided between government, individuals, and many thousands of different employers, leaving even JPMorgan with limited negotiating power. Dimon's reference to Singapore is perhaps as close he gets to a real solution. But that country's health system is only possible through intense government intervention in care and prices that he might not be comfortable with, even if it were politically feasible in the U.S.

Dimon’s erstwhile Haven collaborators have taken divergent paths since shuttering the venture. While Amazon is still engaged in health care, it is selling services rather than transformation with its virtual health and pharmacy options. JPMorgan could do something similar, but it's a bigger stretch for a financial services company. As for Buffett and Berkshire, they  took a different lesson from the Haven experience. At Berkshire's annual meeting in early May, Buffett said he learned a lot about inefficiencies in how his conglomerate managed health benefits, and came to appreciate how centralizing some operations can “save real money.” But he also discovered how hard it is to more fundamentally change an industry that accounts for 17% of U.S. gross domestic product. 

"People like their doctor in general," Buffett added. "And they don't like the fact that it's 17% of GDP, but one is just kind of an amorphous sort of thing. And the other is very, very real to them. And the most prestigious people in the community are on the hospital boards and a lot of people are fairly happy with the system." 

Buffett’s sidekick, Berkshire Vice Chairman Charlie Munger, likened the experience of fighting health costs to trying to shoot a huge elephant. And while he and Buffett were happy to learn and save some money for Berkshire with Haven, they seemingly have little interest in another big game hunt — at least when it comes to health care. Dimon and JPMorgan may find themselves fighting too large a battle with too little ammunition on their own. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.

©2021 Bloomberg L.P.

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