The announcement last month that Warren Buffett’s Berkshire Hathaway, tech giant Amazon and JPMorgan Chase were teaming up on a new healthcare venture came with very few details on what the companies hoped to do.
But in a wide-ranging CNBC interview on Monday, Buffett shed some light on the project’s goals — and they are far more expansive than some had suspected.
Buffett laid out a grand plan to solve large, sweeping problems in the U.S. healthcare system by fundamentally changing how the industry works, and he said the private sector is in the best position to make those changes.
Buffett said the goal of the group is “to find ways to take cost out of the system, while not impairing the quality of what people receive, and that’s enormously complicated.”
Following the joint announcement of the healthcare venture, some speculated that the companies would simply come together to cut down on middleman costs or bargain for better insurance coverage for their employees.
“We’re looking for something much bigger than that,” Buffett told CNBC. “That can be part of it. But we are hoping to figure out a way that the constant increases of percentage of GDP can be at least halted — and, hopefully, that we could find a way where perhaps better care could be delivered, even at somewhat lesser cost.”
The U.S. spends 18 percent of its GDP on healthcare, the highest in the world, and that number continues to grow. The sweeping goal of stopping that growth goes far beyond Amazon, Berkshire and JPMorgan’s combined 1.1 million employees, which is the venture’s initial focus. It would require changes at every level of the healthcare system, likely including government regulations and payer systems like Medicare and Medicaid.
Buffett took aim at the healthcare system’s cost-cutting incentives, or lack thereof, as one place where the industry needs innovation.
“The system, by its very nature, is not cost-conscious,” he said. “I mean, if you were a young medical person and let’s just say you’re working on prostate cancer — which I had — the rewards… are going to come if you do something that develops something better for prostate cancer, which they should. But they weren’t gonna come to you if you … reduce the cost of treating it.”
Buffett made several comparisons between the U.S. healthcare system and those of other industrialized countries, which on the whole tend to have better health outcomes while eating up much less of a country’s GDP. “We have got a huge, competitive disadvantage in American businesses, far more important than any tax change, in terms of our healthcare costs,” he said.
But he also said that the private sector is in the best position to fix that problem. “Usually, that’s the case,” he said, “and I think that’s probably the case in healthcare.”
The majority of other industrialized countries offer universal healthcare or require all residents to have health insurance, two systems that require a huge amount of government involvement. Japan, one of the healthiest countries in the world, does not have a universal healthcare system but does require everyone to have health insurance, with the government footing the bill for anyone who can’t afford it.
That leaves the three companies in uncharted waters, attempting to make a grand change to the healthcare system using just the industry and private sector. Buffett said he knows the task will be difficult — in fact, he reitreated that point several times throughout the interview.
But he said the three companies have the resources and determination to make a change. “We’re determined, we’ve got the money, we’ll stick with it,” he said.
“The job now is to get the right CEO, and that’s an enormously important job and we can’t afford to make a mistake,” Buffett said. “That is our first and most important order of business. And then we go forth.”
