Berkshire-Amazon-JP Morgan alliance can do much more than just lower health-care costs

  • The employee health-care alliance announced by Berkshire Hathaway, Amazon and J.P. Morgan won't do enough if all it does is focus on pressuring providers on cost.
  • The real leadership needed in health care is for Warren Buffett, Jeff Bezos and Jamie Dimon to create companies where the health of employees isn't thought of as a cost, but as an asset that needs to be holistically managed and improved.
  • If executed right, that will increase the corporate bottom line over time.
Jeff Bezos, Warren Buffett and Jamie Dimon.
CNBC
Jeff Bezos, Warren Buffett and Jamie Dimon.

The recent announcement of a health alliance by Berkshire Hathaway, Amazon and J.P. Morgan promises to disrupt the health-care industry (but with few details), and it has thrown the market into a tizzy. The overall reaction in the press has been that the initiative is the business community saying, "Government has failed; let us take over." But it is also private health care that has failed. Both the government and the health-care system (whether for-profit or nonprofit) are slow, bureaucratic and perversely incentivized.

Nonetheless, these three companies are well positioned to make a difference. They are large enough and influential enough to change culture — which is what cultivating health at scale is about.

First, the leadership lineup is promising. All three of these outfits think long term: Amazon CEO Jeff Bezos and Berkshire CEO Warren Buffett as individuals, and J.P. Morgan because it is a bank and understands compound interest, discount factors and externalities and the economics of long-term thinking. By contrast, government is motivated by votes and short-term results, while health care is motivated by money and short-term results. (Yes, nonprofits have budgets, too.)

While there have been efforts to address these issues — recently there has been some focus on "accountable care," where the health-care provider gets rewarded according to results — that approach is spreading very slowly. Customers like the Berkshire-Amazon-J.P. Morgan alliance, which can bargain for results-based payments, could move that needle for themselves and ultimately inspire others.

Second, the trio have access to a broad, critical-mass pool of people to work with. They get automatic scale and a bit of coercive power, vis à vis both their own employees and their suppliers. Not too much: They can't force things on people. Yet what's most exciting is that these three big employers, like other employers, have as great an interest in improving the health (and productivity) of their employees as in reducing the medical costs of their poor health. And unlike the employees themselves, they have great influence over the environment and culture in which employees spend a large portion of their waking hours.

They can take away alternatives, such as bad food. They can reward managers for treating their people decently. They can make exercise facilities convenient and good food cheap; they can relieve a lot of stress. And they can threaten to move their health-care dollars to different providers.

The real motivation for this major move

So the first question is: What is their motivation in launching this initiative? Is it three smart, powerful, rich men who see a problem — a market inefficiency, perhaps — and want to fix it? Is it to save money on health care, to invest in making their employees healthier and more productive, or perhaps to become more attractive as employers?

Starting during World War II, when wage controls prohibited employers from raising wages, they offered health plans as a competitive lure. Now, as wages stay competitive but good employees are scarce, this might also be an effective way to attract the best people. It also offers a sharp counterpoint to the gig economy, where people are basically on their own to find health care and look out for themselves. With luck, most employees will have the advantage of a clear choice between these two approaches on fair terms.

However, if the alliance focuses only on reducing health-care costs, it won't achieve as much lasting value as it could. It's universally acknowledged that the U.S. health-care system is a mess. (I once called it a calcified hairball.) Making it more efficient and cheaper would indeed be a big win and would help millions of people whose treatment is often worse than the underlying condition (whether it's excessive medication or the sheer mental struggle of interacting with a siloed, unresponsive and arbitrary system). But it still wouldn't address the bigger problem for employers (and society): keeping people healthy in the first place. Even the U.S. Army complains that it can't find enough healthy recruits.

"Numerous studies show that health care determines only a fraction (10 percent to 20 percent) of health outcomes; genetics is another small percentage. The vast majority of the influence comes from social and lifestyle factors."

The big win for the Berkshire-Amazon-J.P. Morgan alliance would be to support the health of employees rather than just attracting them with cheaper and better coverage (or paying less for their health-care benefits). Numerous studies show that health care determines only a fraction (10 percent to 20 percent) of health outcomes; genetics is another small percentage. The vast majority of the influence comes from social and lifestyle factors: where you live, how you eat, whether you get enough sleep and exercise and, yes, whether you feel you have a purpose — something you may get at work as well as at home.

There's a famous joke about this: A rich man drives by and asks three laborers, in succession, "What are you doing?"

Laborer 1 says, "Laying bricks, duh!"
Laborer 2 says, "I'm building a cathedral."
Laborer 3 says, "I'm honoring God."

Guess which of the three will take the longest to meet his maker?

This kind of change is hard to effect and requires management leadership as well as a budget. Imagine seeing your CEO eating healthy in the cafeteria or walking up the stairs to her corner office on the top floor. Imagine a manager who asks about your sleep. And imagine being surrounded by colleagues who set a healthy example — or who follow your lead when you do.

The 5 steps to creating better employee health

So here's what I would focus on (and yes, some of it can be partially implemented through digital device, but only some):

Improving resilience: It's just another name for health, the ability to gain strength from stress (whether a healthy immune system reacting to pathogens or a healthy body reacting to exercise).

The food: The cafeterias should serve only healthy food, free. Yes, employees can bring their own, but the healthy food is free. And, within limits, they can take it home to feed their families, whose health will also positively affect the employee's productivity (and the employer's bottom line) over time.

Child care and elder care: For many workers their "work" job is their second job, along with caring for and worrying about a family member. Relieving them of that worry, through child care (not child storage!) and third-party care managers will help them concentrate on work at work. Child care is key, yes, and so is elder care, though it gets less attention.

Effective internal mentoring programs (and effective training for managers): If you make people's jobs and their work relationships meaningful, they will surprise you. Treat people like robots and you'll get robots. Treat people like humans and you'll get integrity, effort and most likely some bottom-up ideas about how to run things better.

Counseling and programs for those who need them: These all sound so simple. But offering healthy options is only a start; they need to be marketed and incentivized. Convenience and social convention (what your colleagues do) will certainly help. Offer counseling and targeted programs for those who need them, whether it's diabetes prevention or reversal (there are many companies now offering validated services in this area) or properly anonymized, third-party-delivered mental health counseling or addiction treatment for those who request it. (Ideally, we can ultimately reduce the stigma and the need for anonymity.)

All these things, much more than (for example) cheaper MRIs or even a reduction in redundant MRIs, will do the most to ensure the long-term health of employees and a reduction in health-care costs, because less health care is needed. Studies show that the return on such investments is high over time and across populations, which is why the scale of the Berkshire-Amazon-J.P. Morgan initiative is so exciting. (You probably won't see these effects in smaller efforts, where they will dissipate outside the target workforce.)

So get out the calculators: Healthy employees will show up to work more regularly and get more done.

By Esther Dyson, executive founder of Wellville, a 10-year project demonstrating the social and financial benefits of investing in health. Follow Wellville on Twitter or Facebook.