What do you think about poor old Jose?
What do you think about poor old Jose?
I really don't understand that much in the world. Most of my experience relates to innovation and creating businesses. I have a good sense of politics, but don't understand how politicians can shift their opinions so readily. I operate on a principle of facts. When facts are limited, I operate on principles that have worked in other situations. When faced with new options or ideas, I try to understand comparable situations. I guess my lesson in life so far is that new ideas are a lot harder to implement than first imagined, so its worthy to understand the risks and design a system that avoids those risks.
As a human, I like the idea of everyone being able to see a doctor. I believe everyone in this debate feels the same. I also believe everyone should be allowed to eat, but I don't see taxing the rich to feed the poor. So, on the issue of caring for my fellow man, can we say we are all on the same team?
If I were a racist.....
So, the question becomes how do we improve the environment so that more people can access health care if they choose? I had a liberal MIT professor who studied housing projects in the late 60s. He concluded that housing projects were a bad thing. He was called to congress to get a whipping from Tip O'Neil. After giving his testimony on his conclusions, the congressmen accused him of being a racist. Perhaps an ivory tower academic who did not care for the less fortunate. The Professor responded "Dear Mr. O'Neil, if I were a racist I would be for public housing!"
You see, his conclusion was public housing concentrated together the part of the population having the hardest time operating in the economy. It brought together the most challenged into a single crucible of despair. Rather than intermixing these folks with mentors and more successful people, it placed unwed mothers along side of criminals, in which children looking for father figures sought out the worst models in society.
Just like Expedia.com......
I was watching Meet the Press on Sunday. Steny Hoyer, was the guest. After he wrongly asserted that polling showed the American people widely support health care, he said that health care reform was about creating open markets and competition. I looked up his resume on his congressional site. It had no information about his private sector experience, just a long list of accolades for political accomplishments (legislation not results). I went to Wikipedia to get more details. There I found his entire career has been in politics. He got a law degree and then went into the state legislature. Hmmm..... Wonder where he got his experience understanding competition. I don't know much about politics, but I do know a lot about competition and innovation in business, because its been my vocation for 20+ years.
This idea of an exchange seems to be the magic bullet to competition, at least that what Mr. Hoyer thinks. I have heard him mention many times, "You can go on line and shop for health care just like getting a ticket on Expedia. So, health care will be competitive". He might want to think about this some more. If putting up a web site was all it took there would be hundreds of Expedia like sites serving the public. And maybe there are hundreds. But to be successful, it takes skills beyond just putting up a web site, like unique access to plane tickets, long term contracts, proprietary deals, unique insight into customer behavior, presentation of customized solutions, etc. Expedia needs to offer something unique to keep customers coming to it. Expedia sells a fungible item, an airplane ticket from A to B. You can sell a ticket on line because there is little debate about its quality and value. The customer understands what is at A and B. The customer knows why it is worth traveling there. They understand essentially what kinds of planes there are. They understand a great deal about the product, so buying airplane tickets on line works.
Last I checked, health care is a complex product. Different people have widely different needs. Insurance is a shared risk pool, so people offering health care have different offerings and criteria. If Hoyer was right that an "Exchange" is the magic bullet to competition, why hasn't someone put up a "Health Care" exchange already? Hmmm......
It is a system.....
The Health Care market is a system, change an incentive in one area and the rest of the system will adapt to the needs of the market. Congress is stepping in with their list of constraints to control the system. Congress seeks to offer health care to everyone, or most everyone, through various rules, regulations and taxes. As they seek to expand care, they actually are constraining it. At a macro level, there is a lot of innovation to come which will improve health care. There is a lot of unfinished science. So, as a system health care is not done innovating. In markets where innovation is essentially complete, regulation helps. In markets where innovation is incomplete, regulation disrupts and slows innovation. And here are some reasons why.....
This is still a market in search of innovation. The government is stepping in to regulate cost and delivery. Government operates on 30-50 year regulatory cycles, very slow to change. Innovators operate on 5-10 year cycles. With increase control by government, innovators will look elsewhere for rational markets. Taxes will drive down incentives for health care investment in R&D, driving demand for more labor. Reduced salaries and other market constraints will cause the best and the brightest to go into other markets, much how the "Quants" moved from aerospace to Wall Street after the fall of Russia.
Hurting those you love the most......
Congress is seeking to expand care to help those without. A good cause. But, given how the market works the Health Care legislation will reduce the supply of doctors and technology, reducing quality of care overall. More people will have insurance so to speak, but with declining quality. Everyone will have an insurance card, but not everyone will be able to access health care because the constraints on talent, devices, and drugs a defacto form of rationing will occur (death panel or not). The well off will seek care through private means. The not well off will be stuck in the system, just like the "Housing Projects" stuck people in despair. So in the end, we are trading one system for another system of care, but patients will be no better off.
As defacto rationing ensues, the 30M with no insurance but some access to doctors will become 30M with insurance, but no access to doctors. I wonder, in the end who is the one without passion for those without health care?
The Man who Predicted the Depression
Ludwig von Mises explained how government-induced credit expansions led to imbalances in the economy.
Frankly, persistent low interest rates are like life support for an ailing patient. If we are going to have death panels, it would be nice to have them right now - so the weak industries are displaced. I know that Obama wants to end the boom bust nature of our economy, but it is the boom bust that keeps our economy vital. If wants to be a tree hugger, he should learn from the environment. Forest fires are healthy for ecological balance.
On top of low interest rates, it does not help that now the strategy is to tax and burden productivity to death:
Easy money and these kinds of taxes discourage innovation and productivity enhancing endeavors. The only way to pay for all the people in retirement is to increase output per unit worker of those still working. As people retire, they will keep moving investments to income producing, rather than growth oriented, investment. This means there will be even less investment in innovation. But, innovation is the only way to do achieve the gains required to balance the economy.
Health care and Cap and Trade work to constrain the economy. I guess the bright spots will be Bad universals healthcare will discourage immigration and reduce the number of people needing care. Declining economies will reduce industrial output and CO2. So if you love the environment and hate immigrants this might be your time to be happy.
I however think its a sad state of affairs when our government and our people give up on the prosperity that made us great.
I have been working on crystallizing my thoughts on how to fix health care. I am frustrated that the proposals in Government all seem incremental, taking the solutions we have but locking them in under yet more centralized government control. We are the most innovative and productive nation on earth, but we seem ready to fix health care by expanding the status quo and replicating the plans of other lesser countries (Europe, Canada, Etc).
I received my issue of the Atlantic last night on my Kindle DX and found the article I wish I had written: How American Health Care Killed My Father - The Atlantic (September 2009). The author very thoughtful integrates his business experience, loss of his father, and political thinking into a very complete approach for health care that drives consumer choice, reduces cost and motivates innovation.
Key highlights of his article include:
In health care, the notion of a free market seems foreign to some. Won't those companies cheat individuals? Insurance companies and doctors can't possibly do what is right for the patient in a free market because they will just be focused on making a $. The reality is the market is already being perverted in various ways depending on the direction of various regulations about what can or can't be funded. Hospitals do everything they can to squash new innovative surgery centers that are set up to take advantage of Medicare's unwittingly payment of higher margins on lower end surgical procedures. Loopholes will all ways be found in every system. But can they be corrected quickly? Only in a market based system.
Government has a key role in assuring integrity and standards in the system, but price really should be a function of consumers engagement with doctors to determine the best price, innovation and quality. Because of constraints driven by Medicare and insurance companies, the most costly health care is typically someone who pays out of their own pocket, but those same people are probably the cheapest people to treat because the doctor does not need to file claims etc. This is a market perversion driven by a top down driven regulatory environment.
The author goes on to suggest the broader implementation of Health Savings accounts, a form of major medical insurance that kicks in for the absolute worst case tragedy that costs more than 50K (with no cap), and various other thoughtful modifications.
Between the Atlantic Article, the WSJ OpEd article from Whole Foods CEO, and the plan at Safeway, exists an answer to health care I can live with that will drive innovation, reduce cost, and expand coverage.