The recent news from Amazon, JPMorgan Chase and Berkshire Hathaway that the three companies plan to team up to create a new company to manage the health care needs of their employees has prompted a flurry of excited pronouncements about what this new venture means for the future of health care delivery in the United States.
Fox Business praised the new company as nothing short of “revolutionary,” while Bloomberg enthused it had the potential for “disrupting the broader industry.” CNBC predicted the group could succeed “where insurers and government have failed.” Others pointedly interpreted the joint venture as a free market counterpunch to the government’s overreach in the sector, symbolized most recently by Obamacare, a target for hatred by conservatives. “It shows how health care reform should work in this country,” Investor’s Business Daily editorialized. “You don’t need government calling the shots to bring meaningful reforms.”
Never mind that the details for the new company are few. Other than the announcement of the joint venture, leaders from the three companies have been unable to say what their new organization will do exactly. But that hasn’t stopped the sort of irrational exuberance that often greets the slightest hints of innovation from the private sector, especially in the realm of health care.
Yet all these responses ― from touting the new venture as an innovative disruption to hailing it as a needed private sector response to the government’s failure ― demonstrate a lack of historical perspective on how health care has operated in the United States and how our strange system of tying health insurance to employment has created our present circumstances. In this light, the new venture from Amazon et al. isn’t a radical intervention in the system but merely a natural evolution of what is already in place. More importantly, it’s a response to the failure of free market capitalism, not the government.
The new venture from Amazon et al. isn’t a radical intervention in the system but merely a natural evolution of what is already in place.
Throughout the 20th century, attempts to create a government-run health care program were repeatedly thwarted by those who argued that individuals, rather than the federal government, should be in charge of their own medical decisions. Yet instead of individuals, employers became the arbiters of most Americans’ health care through a system of employment-based health insurance.
That system stands in marked contrast to what other developed nations built in the 20th century. In Western Europe, progressive governments created state-run health care systems to care for their citizens as part of the extensive social safety nets developed in the first half of the century. In the U.S., Theodore Roosevelt’s bid for the presidency in 1912 on the Progressive Party ticket included the first call for “a single national health service.” But the opportunity died when Roosevelt lost the election, in part because his plan had been decried as “socialized medicine.” That slur would prove incredibly effective at stalling other attempts at health care reform throughout the 20th century.
Rather than forming a state-run health system, the federal government offered companies incentives to provide health insurance to their employees through a series of tax measures in the 1940s and 1950s. With those incentives and a booming post-World War II economy, employers found that offering health insurance to their employees was one of the best ways they could recruit and retain workers in a scarce labor market.
What started as a competitive advantage provided by some companies soon became the basic standard Americans expected from their employment. That worked well for those with a job. But it also left many Americans ― particularly the elderly and the poor ― without coverage, something the private market seemed unwilling to fix.
For a radical overhaul, for a true disruption, there’s really only one possible actor: the federal government.
Medicare and Medicaid, signed into law by President Lyndon B. Johnson in 1965, would fill in those gaps. Like all efforts to provide any sort of government-based health care, the programs faced stiff opposition from business leaders at the time. But they were also the logical consequence for a nation that had opted for an employment-based system rather than a comprehensive federal program. In such a scenario, the government had to pick up the slack for the people the private sector was not serving.
Medicare has had its challenges, of course, but it is worth noting how happy Americans have been with the program historically. Less satisfied are those Americans with employer-based insurance and, not surprisingly, those who lack health insurance altogether.
In this context, it’s important to recognize that the new health care company Amazon, JPMorgan Chase and Berkshire Hathaway are launching has been prompted by their own dissatisfaction with current private market options. Their plan offers a critique of what free market capitalism has generated, not an indictment of the federal government.
It also bears repeating that this joint venture will serve only the three companies’ own employees. While the new company may have lessons for other employers, it will not provide the sort of wholesale disruption of the American health care system that so many have breathlessly predicted. More likely, it will merely be yet another tinkering at the margins, yielding small ripples of innovation rather than a tidal wave of change.
For a radical overhaul, for a true disruption, there’s really only one possible actor: the federal government. That’s something Warren Buffett, the chairman of Berkshire Hathaway, understands. Just last year, he argued that government-run health insurance “probably is the best system.” But conservatives in Congress often backed by influential business leaders have not allowed the federal government to bring about that result.
That the billionaire investor would advocate such a measure should help us rethink what really counts as disruption in this economy. That his company would join forces with Amazon and JPMorgan Chase to create their own health care company should also chasten our expectations of how much the free market can bring about the large-scale change that is truly needed for health care in the United States.
Neil J. Young is a historian and author of We Gather Together: The Religious Right and the Problem of Interfaith Politics. He hosts the history podcast “Past Present.”