In January 2018 the three companies announced a joint venture to address healthcare costs and employee satisfaction. Healthcare costs are highly inflationary and are tied to general inflation, regulations, demographic changes, technology improvements, and wealth. CMS estimates that healthcare spending in the United States will continue to grow at 5.5% per year through 2026, to almost 20% of GDP. The ABC group faces structural problems in the US healthcare system. The lower reimbursement rates of Medicare and Medicaid (2-3x less than commercial insurance), along with low hospital margins and weak balance sheets, give ABC little room on big, national hospital discount discussions. Tools and programs to reduce costs for regional or smaller employers are hard to scale, especially given Berkshire's decentralized culture. A reduction of 10% on prescriptions would save 2% of total healthcare dollars. ABC will be loath to increase deductibles, roll out narrow care networks, or other mechanisms that may help reduce costs but lead to negative employee satisfaction. Digital tools and tech can't truly address social determinants of health and have low use/impact. Wellness programs and incentives tied to them tend to increase costs due to program costs and false positives. Evidence of value-based care savings is scant and case studies tend to focus on small savings for infrequent procedures. The impact of shopping for healthcare, as it's done now, is worth perhaps 1-2% of total healthcare spending. Innovation in employer-sponsored healthcare, for now, will have to be by subtraction of wasteful programs. The changes people hope for will take longer than five years.
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