Warren Buffett, Jeff Bezos and Jamie Dimon are launching their new health care initiative because health care costs are soaring for millions of their employees and Americans overall.
The average American spends nearly $4,000 toward health care each year, a number expected to balloon to more than $5,000 in 2023, according to Evercore ISI and the Centers for Medicare and Medicaid.
Source: Evercore ISI
"We find this morning's announcement fascinating as three behemoths are banding together to tackle a massive and highly complex problem. On a personal level the mission seems remarkably well placed as the government has failed at managing costs in healthcare for decades," Evercore's Ross Muken wrote to CNBC Tuesday.
The companies made headlines Tuesday morning after their announcement.
"The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints," said the press release from Amazon, Berkshire Hathaway, and J.P. Morgan.
The U.S. government now anticipates the health share of GDP to rise from 17.8 percent in 2015 to 19.9 percent by 2025. Prescription drug spending is projected to grow an average of 6.3 percent per year over the same time.
"While we expect much of the debate amongst investors to center on the impact to drug pricing or insurance rates given all of the public discourse, the reality is that is only a small portion of costs in the system," Evercore's Muken added. "Ultimately this effort will likely take many years to come to fruition and we hope the aim is to add transparency, efficiency and most importantly technology to healthcare, which we argue it broadly needs."
— With reporting by Meg Tirrell.