Yahoo Finance Buffett on failed health care venture Haven: 'We were fighting a tapeworm in the American economy. And the tapeworm won'
At the Berkshire Hathaway (BRK-B, BRK-A) annual shareholder meeting on Saturday, CEO Warren Buffett and his long-time business partner Charlie Munger discussed the failure of Haven, the joint health care venture with JPMorgan (JPM) and Amazon (AMZN).
“We learned a lot about the difficulty of changing around an industry that’s 17% of GDP,” Buffett said. “We were fighting a tapeworm in the American economy, and the tapeworm won,” he added, using his favorite metaphor for health care.
The joint venture was formed in January 2018 with the goal of improving the health care experience and lowering costs of care for their employees. Experts said the venture, which disbanded in February, failed to take off because the health care system is just too complex with many large, longtime players and a content support group.
"The most prestigious people in the community are on hospital boards, a lot of people that are fairly happy with the system," Buffett said.
[Read more: Why Berkshire Hathaway's health care project Haven failed]
The venture did lead to savings for Berkshire, however. Employer-based health care remains one of the largest sources of coverage in the U.S., and costs continue to rise annually.
"We found inefficiencies, and ... we probably saved more than the other two partners because they knew their situation better. We found dumb things we were doing. So we got our money's worth," Buffett said.
One of the challenges in changing health care, Buffett said, is that its corporate health care costs are often hidden for the average person.
"When you aren't writing the check yourself, you may know that the health benefit from your company is worth $10,000 a year to you or $15,000, and may cost them that much ... but you don't see it. So it's something that most of the people are not seeing as a cost to them, and they like that pretty well," Buffett said.
Munger said regardless of the outcome, the venture attempted to solve a major problem in the U.S. health care system.
"Even though you shot and missed, you were at least shooting at an elephant," Munger said.
Health experts like Larry Levitt, executive vice president of health policy at the Kaiser Family Foundation, say the Haven trio aren't alone in their failure.
"Warren Buffett is hardly alone among corporate executives in throwing up his hands at controlling health care costs. Even the biggest and most powerful companies in the country don’t really have the leverage to go up against the health care system," Levitt told Yahoo Finance Saturday.
A recent survey from KFF found employers believe government intervention is needed.
The question is what do large employers do now? They are uniquely positioned, and have the resources, to take on the system and lobby for policies to restrain health care costs, Levitt said.
Amazon has made the most visible efforts to disrupt health care in the shadow of Haven's failure.
The company expanded its interest in the mail-order pharmacy business with its acquisition of PillPack, which it has now transformed into Amazon Pharmacy — with many anticipating an even greater expansion into pharmacy services soon. Its cloud service, AWS, is increasingly playing a role behind the scenes for all types of health entities, including hospitals. The e-commerce giant has also launched clinics for its employees, which some predict will expand to the general population.
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