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.....
- Increased taxes on unearned income will cause investors to seek out tax free assets like Muni Bonds to shield wealth. This will reduce the amount of money in high risk ventures. This reduces taxable income and expected resources from the rich to cover health care costs, so the CBO forecast will be wrong.
- Taxes on innovation, like devices and drugs, reduces investment in drug companies and device companies. Investors will go after other markets. Reduction of next generation drugs and devices, which reduce health care labor content, will create pressure for more doctors, nurses and health care facilities.
- Constraint on Medicare/Medicaid fees for services will force health care operations to pass unpaid cost of care to the private care market. This will increase costs for insurance companies, driving up premiums.
- Doctors, who's profit is constrained, will retire. Fewer people will want to enter the health care profession because constraints on innovation and revenue constrain profit, which constrains salaries.
- Higher demand for health care, which should drive health care salaries up, will meet price cap regulations, resulting in labor shortages and market based rationing
- The forced inclusion of young people may increase private insurance revenue, thought it is unclear against other reductions in innovation if this extra revenue outweighs new costs. Ultimately SCOTUS will rule mandate unconstitutional.
- Requirements to accept pre-existing conditions, elimination of life time caps, etc will increase premiums
- Caps on insurance premiums with increased costs will constrain supply. Insurance companies will stop taking patients.
- With higher insurance premiums and restraint in supply of private insurance companies, businesses will elect to eliminate employer care and pay the fine
- Entrepreneurs looking for markets will avoid the constraints of the health care market, seeking riches elsewhere. Health care innovation will decline
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?
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