Tuesday, July 28, 2009

Health Care Pessimism

As I hear about Obama and Congress's plans for health care reform, I am encouraged by the fact that people seem interested in discussing these important issues, but remain pessimistic that the most important issues will be addressed. I was ruminating on this recently when I read a piece in the Washington Post: Focus on Health Savings Obscures Other Issues.

It seems to me that there are three major parts to our health care issues:

Coverage: Obama's efforts seem focused on coverage. Small government Republicans will probably resist any single-payer or pay-to-play efforts that give government more control over how coverage happens. From the administration's perspective, the upside to selling this sort of reform is that it doesn't impact the entire health care industry. It simply changes how the bills are being paid.

Inefficiency: We pay more than any other nation for health care, but do not get the best health care in return. I call this lack of correlation "inefficiency." The fact that other countries are getting more bang for their health care bucks implies that we should be able to decrease our spending and improve our results at the same time. Improving the efficiency of the system seems like an obvious goal, but the problem is that many corporations are making money from this inefficiency. Inefficiencies do not result in money floating off into space. Inefficiencies result in more people having unnecessary jobs. Inefficiencies also result in more executives and managers having fancy cars, houses, boats, and vacations than they should have. Improving efficiency is not difficult because it is hard to identify strategies. It is hard because the people who benefit from inefficiency like their jobs, cars, homes, and vacations.

The Tidal Wave: Health care costs are going to increasingly grab a huge share of GDP and the federal budget. Note that these are two separate issues. One (the GDP side) is tied to efficiency in general, while the other (the health care share of the federal budget) is tied to entitlements. The entitlement issue is a tough one: As the government works to increase coverage, that will put upward pressure on The Wave, while efficiency efforts will put downward pressure on The Wave. Ultimately, it seems to me that the only hope is to find ways to increase efficiency so much that increased coverage is more than paid for.

Note also that increased coverage (if done smartly) can drive efficiency up. For instance, providing better prenatal care could prevent costly post-natal issues. Providing better services to decrease obesity could prevent costly diabetes, back, and heart issues. Preventive care is efficient and makes sense, so why hasn't it been done more? Jobs, cars, homes, and vacations. We need to find ways to incent organizations (governments, hospitals, doctors, and corporations) to innovate in ways that drive efficiency up.

Addressing all these issues will be tough, but improving our health care system is a moral imperative that cannot be ignored.

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