Amazon Health Care Plans - A True Market Revolution?
Amazon is known as a master of low-cost efficiency, and now it's trying to apply those principles to health care. How will this affect the industry?
Amazon has announced its upcoming revolution of the health care market. Together with Berkshire Hathaway and JP Morgan Chase, they plan to fund a not-for-profit health care group and launch an interface for employees to access their basic care needs. Instead of creating a new insurance company, however, they aim to re-invent the health care industry by generating a new virtual marketplace where all providers should compete. Once again, the wise use of big data might play a huge role in reshaping our society and how we get access to the most basic of services. (Learn more about big data's role in health care in Can Big Data Save Health Care?)
Amazon, Health Care and Big Data – Working Together
Together with his partners, Amazon’s CEO and founder Jeff Bezos recently announced his intent to form a new, independent health company. They will develop technology solutions built for U.S. employees to provide them with “simplified, high-quality and transparent healthcare at a reasonable cost.” How is this going to work, though?
Amazon, Berkshire and JP Morgan will build an interface to connect their employees with insurance administrators, pharmacy benefit managers (PBMs) and other wholesale distributors. This new interface will eventually force all health care suppliers to provide their services through a standardized infrastructure that would constitute the new “marketplace.” Eventually, this same interface might be used as a “market standard” as Amazon makes it accessible to other large employers, small and medium-sized businesses, and even individual customers.
In other words, it will aggregate all demand by offering a superior customer experience, helping most providers (such as hospitals, doctors and pharmacies) provide their services directly to their clients without any intermediary. Once Amazon “removes the middleman,” all patient data will be aggregated and consolidated, and then be used to feed machine-learning AIs (in addition to possibly bringing costs down).
One of the biggest challenges of modern health care is the constant struggle with the implementation of new technologies. The computational and data side always represent a substantial barrier that many medical professionals must deal with whenever they need to register a new patient, transfer electronic medical records (EMR), and exchange information between hospitals and clinics. The administrative aspects of health care can slow down the whole process of delivering care to a crawl, increase its costs and reduce its quality.
A system that efficiently handles and exploits all the data coming from EMRs, test results, image scanning and administrative info might have a large impact on interoperability, preventive medicine and fragmentation in health care delivery. Data can be extracted and manipulated by integrated machine-learning AIs, which are many times better than humans (and current software) at predicting patient diagnoses and outcomes, as well as optimizing many costly aspects such as adherence to treatment or time of discharge and readmission. (As health care continues to become more high tech, hackers are adapting. Learn more in The Health Care IT Security Challenge.)
A Revolution to Renew the Current American Health Care Model?
The American health care system is extremely complicated, often stupidly so. Private insurance companies supposedly compete among each other to offer U.S. citizens lower prices or, at least, access to better care. In theory, this free-for-all marketplace should keep the prices low, but the truth is quite the opposite, with Americans paying more on average for health care than every other industrialized country in the world. Life expectancy didn’t grow as much as in other high-income nations either, as the average lifespan for a U.S. citizen is only 78.7 years, which one full year below the average in industrialized countries of 79.8 years.
Over the course of the last two centuries, many U.S. presidents tried (and failed) to implement a basic form of universal health care coverage. There are many economic, political and cultural reasons behind these failures, leaving the U.S. with an inefficient and costly health care system. If push comes to shove, Amazon’s newly proposed platform might finally bring the so-much-needed revolution that so many Americans are waiting for.
Instead of forcing a political reform that would have to deal with all the well-known barriers to single-payer models (including government gridlock and the fear of “socialized medicine”), this time the change might happen from within the system. By staying inside all the constraints of the current health care marketplace, Bezos’ initiative could be competitive enough to force the other providers to bring down their prices without forcing their hand with new rules (like Obamacare did).
Controversies and Possible Dystopian Futures
Do they have a hidden agenda? They claim their mission is “to reduce the healthcare costs for their combined payroll of nearly a million employees” and make it easier for patients and providers to access their medical records by putting “everything all together in one place.”
Is that true? Or would this transform into a Mr. Robot-like dystopia where a single massive corporation controls every aspect of human life – health care included? Is their attempt at monopolizing this market part of a larger plan that started by seizing the market on books and groceries? Is this change going to benefit the poor and finally bring down the ever-bloating costs of health care, or are these plans driven only by Amazon's bottom line? One thing that is sure, is that this purported philanthropy failed to convince most, and is going to fuel many conspiracy theorists.
Nonetheless, even if Amazon and its partners defined this health care venture as “free from profit-making incentives and constraints,” it’s somewhat hard to believe that America’s biggest bank and the world's third-largest retailer might do all this without expecting some form of profit in return. Especially if we think that these giants are directly or indirectly contributing to the amazing profits of other insurance companies already. Nobody in their right mind would expect Bezos to harm his own interests.
However, the possible benefits for the three partners may come in terms of cost cutting. Almost 250,000 employees of Berkshire, JP Morgan and Amazon are covered by health insurance which costs an average of $19,000 a year per worker. If the new system allows for a cost cut of just 10 percent, the savings can be estimated at $300 million to $500 million a year. It may just be a somewhat simple plan that brings some much-needed efficiency in a system known for its widespread wastes and abuses. And we know how good Amazon is at wrangling with supply chain inefficiencies.
The American health care market is a boon ripe for the picking, and many other digital giants have already locked their hungry jaws on it. Just to mention one of them, Google’s parent company, Alphabet, holds some nine health and science companies, all booking hefty net profits. It’s no surprise then that, sooner or later, a player as large as Amazon would wish to jump on board.
Whether this supposed technology marvel will eventually prove to be just another bauble in Bezos’ collection, or an instrument to force a much-needed change in the U.S. care system, however, only time will tell.