Amazon, Walmart Take On Health Costs

Finally, the big dogs are stepping up into the fight to tame the Medical Industrial Complex (MIC) and get health costs under some semblance of control.

Walmart, Amazon, Walgreens and CVS, four powerhouse companies with great clout and reach in the U.S. economy, are making major moves into direct primary care. They are end running the big MIC players, health insurers and health care corporations. In the process, they are creating a disruptive new business model for delivering health care.

They all are expanding existing clinics or creating new ones. Walmart Health says it will charge $40 for an adult primary care visit and $20 for child. Visits through other channels can be two to four times that much.

Sean Slovenski, the Walmart executive in charge of rolling out the new “super centers for health care,” said this: “When we say it’s $20 to have your child with a primary care physician and it’s really $20 – when you come in and walk out and get the bill, and it‘s still $20, that’s quite a disruption in the space.”

If any industry needs disruption, it’s the bloated MIC that is taking $4 trillion out of the economy this year. That’s about 18% of the gross national product, heading to 20% by 2028.

After World WAR ii, President Dwight Eisenhower warned the nation about the smothering power of what he called the “Military Industrial Complex.” It was taking 5% of the U.S. economy.

Despite the enormous efforts of many private corporations, which in the end pay for all health costs in the country, the inflation rate for health care is still running at 4%-6% — two to three times the general inflation rate.

Medium-size companies, like Serigraph, can innovate and cut costs for the company and its co-workers. They can show the way. But only major payers who are expert at sourcing can force the MIC to treat employees and employees fairly.

For perspective sake, the Kaiser Family Foundation put the annual cost per family in 2019 at $20,576. Best practice private employers with full health plans are bringing home care for $15,000 or less. The employee share nationally now tops $6,000 per year.

Far worse numbers, almost beyond belief, come from the Milliman Medical Index. The big consulting company put 2020 coverage for a family of four at $28,653. Worse yet, it put the employee share at $12,285.

No wonder many Americans feel like they are not getting ahead and vote for a populist like Donald Trump. Their prosperity has been chewed up by health costs. Ironically, the president has not moved the needle on health costs. Republicans have no clue on managing costs.

The same goes for Democrats. They talk insurance, access and subsidies when the real issue is cost management. Politicians don’t do the real work of management. They listen to academics and pundits and come up with concepts like Obamacare, which increased access a bit but drove costs higher.

What happened to health care as an issue in the presidential campaign? Other issues have trumped it (pun intended).

Three of the biggest hitters in the land – Jamie Dimon of JPMorgan Chase, Warren Buffett of Berkshire Hathaway and Jeff Bezos of Amazon – joined forces in early 2018 in an effort called Haven to go after what Buffett famously described as “a hungry tapeworm on the American economy.” He was talking about health cost inflation.

Once again, though, the MIC prevailed. It figures. Dimon does investment banking for the MIC, and Buffett has investments there. They are not going to take on their business buddies. Haven has not been heard from, except to announce the departure of its CEO, a doctor/writer who probably could not spell “management.”

But Bezos is not MIC-connected, and he is an all-world disrupter. Don’t be surprised when he takes his pilot health care centers to a broader market. The same goes for Walmart’s health super stores and the enlarged Walgreens and CVS clinics.

They will use primary care as a platform for steering employees/patients to the best buys for quality and price if a patient needs more than primary care.

The big health care providers will have to compete for their business on quality and price. They will have to lower their bloated costs.

Footnote: Buffett has invested $1 billion in Amazon as it does what Haven has failed to accomplish.

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.