Warren Buffett says the U.S. health care industry must overcome its resistance to change and figure out ways to fix itself — or run the risk that the public will start clamoring for a government-run system, which could be even worse.
Buffett’s company, Berkshire Hathaway, joined forces with Amazon and JPMorgan Chase in January 2018 to create a new non-profit health care venture, with the aim of improving satisfaction and reducing costs for their combined total of more than 1.2 million employees. Last June, the company tapped surgeon and author Atul Gawande as CEO. Earlier this month, the joint venture unveiled a name: Haven.
In a new interview with Yahoo Finance, Buffett said that the health care venture will have plenty of “market muscle” and that he, Amazon’s Jeff Bezos and JPMorganChase’s Jamie Dimon can steer clear of some of the corporate bureaucracy that might affect other large companies embarking on such a project. But he also signaled that the health care industry’s entrenched interests won’t be easy to overcome.
“We’ve got a unity of commitment and an ability to execute on the commitment. The only problem is you’ve got a $3.4 trillion industry, which is as much as the federal government raises every year, that basically feels pretty good about the system,” he said. “There’s enormous resistance to change while a similar acknowledgement that change will be needed. And, of course, if the private sector doesn’t supply that over a period of time, people will say ‘We give up, we’ve got to turn this over to the government,’ which will probably be even worse.”
In announcing the joint venture last year, Buffett said that health care costs "act as a hungry tapeworm on the American economy.” In his Yahoo Finance interview, he again discussed the costs of the current system: “We've got this incredible economic machine, but we shouldn't be spending 18% [of GDP on health care], when other countries are doing something pretty comparable, in terms of doctors per capita, hospital beds per capita, and all that,” he said. “The very top stuff in medicine, I think, is very much concentrated in this country. And that's great. I want us to be the leader, but I think we're paying a price. If we're paying seven extra points of GDP, that's $1.4 trillion a year.”
Not much is known about Haven, but given the companies and CEOs behind it and its mission of disrupting the current system, interest has been intense. Buffett said the company would experiment and Gawande, while he has a plan in mind to some extent, will also learn more as he goes.
“The plan is to support a very, very, very good thinker on this subject, who's a practicing physician, and who commands the respect of the medical community to in effect, figure out some way so that we can deliver even better care, and have people feel better about their care, too,” Buffett said. “They have to perceive that they're receiving better care over time. And stop the march upward of costs, relative to the country's output.”