By Francis M. Miller
The implementation of Obamacare is taking on the appearance of the fog of war described by Clausewitz.
Obamacares advocatesare self-righteous in pressing for implementation. The loyal opposition conservatives are skirmishing and employing guerrilla tactics. They hope the law will fail of its own accord. The problem with this drama-of-the-gifted is that it obscures health cares central issue and begsseveral really important questions.
By now even the most fervent advocate of Obamacare has to admit that this law will do nothing to bend the cost curve.
Hyperinflation in the health sector has been the dominant issue for three decades. It is rising health care costs that have made health care unaffordable. It is ironic that as health care hit 15 percent of GDP, the percentage of uninsured hit 15 percent of the population.
This correlation between rising costs and the uninsuredhas tracked for many years. Now we are about to inject another trillion dollars into this system on steroids.
Changing the mix in the risk pool to lower premiums is a temporary and fleeting solution to a major structural problem. When the self insured and young healthy invinciblesdropped out of the market long ago, they left high-risk patients with high costs.
Premium costsexploded. Segmentation of the health care market really began when we shattered thelarger community risk pool byestablishing Medicare and then Medicaid. In the end, what was left was aminority segment in the marketwhich inflated faster than the market at large and eventually made insurance unaffordable.
Trying to reassemble these shards of the old risk pool is a day late and dollar short strategy. To put the burden of shouldering the cost of insurance for those with pre-existing conditions on the backs of youth who are otherwise healthy is perverse and regressive.
Worse itis aninsufficient strategy to solve the problem of inflation in health care as a whole.
Obamacare attempts to introduce competition between financial intermediaries, ie. insurance companies. Thisis a fools errand.
Insurance companies have profit margins less than 5 percent and are a lemon that cannot be squeezed.
THINK! If you wanted lower-priced, higher-quality automobiles, would you squeeze Ford Credit or GMAC? No, you would apply disciplining forces to the manufacturers.
The mezzanine of intermediaries that finance health care are oligarchs for sure. But they have little capability to improve productivity and efficiency within providers in the market.
They can use blunt force traumato negotiate discounts, but that is a one time effect that creates its own distortions. Government is merely using the insurance companies toinduce cost-shifting, a task it has come to see aspolitically distasteful.
Health care providers have long been given protected franchises. Most hospitals are now castles on the hill. Doctors are the knights who drive their BMWs across the drawbridge over the moat. It is a medieval system that defies change.
The number of hospitals that fail because of market forces is negligible and statistically insignificant. There is simply no disciplining force within the health provider communitythat would result in better economies of scale or the elimination of dead-weight loss.
Health care supply and demand are stalemated. It is a landscape populated with protected enterprises, none of whom feels any real threat to their existence.
The United States spends nearly double what the socialized democracies of Europe spend and we get fewer results. You would think a capitalistic, competitive system would, instead of spending 18 percent of its GDP, spend less than the socialists we routinely criticize. In spite of spending double, ask any policymaker and he will tell you there is a shortage of doctors. We have decided to injectvast new sums into an already overheated andinflated system and the political establishment suggests it will flatten the cost curve. It is pure insanity.
As a society, we need to pause and step back from this situation.
First, we must answer the question of what is the role of health care in our collective future. I would argue that if you spin the globe you will quickly conclude that the 6 billion people on planet Earth desperately need health care to advance.And, the United States needs a replacement for the manufacturing base we have lost.
The post-industrial economy must reposition health care as an export industry. And, all those countries who sell us their manufactured goods must be convinced of the merits of buying American health care. Ditto for education and public services.
The overriding reason we must apply the harsh, survival threatening disciplines of market forces to health care is because we mustcreate the carrots and sticksto improve their efficiency and productivity. It is a matter of survival of the nation state.
It is not so much for our internal consumption, but to be in a position to compete with socialized countries.
In an ideal world American health care would cost less than 7 percent of our GDP. Until we have put it on a diet, there is no hope than anyone outside our country would buy what we have to sell.
Economists and financiers who have studied the micro-economics of industrial enterprises know what it takes to lower the average unit costs of a good or service. Health care does not have its own set of physics and it does not defy the laws of gravity.
Health care costs are inflationarylargely becausegovernment policies subsidize and insuranceencourages dead weight loss. The failure ofhealth providersto reduce their average unit costs has arisen because they are sheltered and protected.
Their economic poweris derived froma rich history of political and social power. It forms a golden triangle that defies outside intervention. Every attempt to intervene merely ends up with greater stimulus in the forms of subsidy in the name of access for some disadvantaged group.
We all know the current situation is unsustainable. Only the Kool-Aid drinkers continue to believe that Obamacare will solve health cares cost problems.
The trend lines for all public entitlement programs suggest 2020 as a date certain. At that point either Thelma and Louises convertible is going to run out of gas or we are all going off a cliff with them.That is, unless you are a person who truly believes it doesnt matter where society spends its resources or that export imbalances mean nothing in the fate of a countrys wealth creation abilities.
I have little faith that redemption or enlightenment will come from either of the present political parties. Both the Democrats and Republicans are intellectually bankrupt on this issue.Show me even oneperson who has articulated a vision of what health care should mean to our society or how we might achieve its ultimate possibilities. I feel like I have fallen down the rabbit hole into Wonderland or been swept up to the Land of Oz.
In the end, reality will surely come face-to-face with denial. The failure to truly reform the current health care system has set us up for the need to abandon the system in favor of some new paradigm.
When that reckoning occurs, some will be left behind. Others will move forward briskly with enthusiasm.
An efficient health care system as an export industry is our new manifest destiny.
Francis M. Miller is the past president of the Colorado Business Coalition for Health and the vice chairman of the Colorado Health Data Commission. He founded the first consumer cooperative for health care called the Alliance and is the current president of Health Smart Co-op.