Health Care - Big Government, Big Costs, Big Employment

The cure for Apple is not cost-cutting. The cure for Apple is to innovate its way out of the current predicament.

Steve Jobs (1955-2011), Co-founder and Chairman, Apple Corporation

If the past is any indication of the future, voters should view election-day promises about Obamacare lowering costs with a skeptical eye.

David Kessler, Senior Fellow of Hoover Institute, "Obamacare's Bogus Health Savings," Wall Street Journal, March 14, 2012

March 14, 2012 - Everybody knows how you cut health costs You encourage self-care. You set aside a finite amount of money for health care. You have consumer pay for their care when it exceeds that amount. You cut demand. And you innovate your way out of your high cost predicament.

It’s all about changing the first law of supply and demand - if demand increases and supply remains unchanged, it leads to higher prices and higher quality – to the second law of supply and demand - if demand decreases and supply remains unchanged, then it leads to lower prices and lower quality. Or you modify the first law by defying the law of supply and demand gravity by creating a new law that says you can maintain or even increase quality while cutting costs and increasing demand.

Of course, it’s easier said than done – with government growing bigger each day, consumers expecting “free care” as an entitlement, expecting universal exellence, and more doctors to supply that quality.

I was thinking of these issues in light of news of the day, not necessarily in this order.

• Doctor Seuss’s movie “The Lorax” is number in gross box office reciepts for the second straight week with total revenues of $122 million.

• The Congressional Budget Office has just estimated the total cost of Obamacare will be $1.76 trillion from 2013-2022 rather than the $940 billion originally projected.

• Health care job growth is accelerating - The Bureau of Labor statistics says health care gained 49,000 new jobs in February, including 28,200 in ambulatory setting and 15,400 in hospitals. This comes on top of 43,300 new jobs in January 2012 and 296,000 new jobs for 2011.

This news confirms what I wrote in The Health Reform Maze –

“ I do not believe the federal government, no matter how ‘progressive’, will be able to unravel, restructure, consolidate, or simplify America’s health care system. Government cannot deliver on its premises or promises.”

“The medical-industrial complex is so sophisticated, so ingrained, so necessary to carry out government programs, that it will drive any post-reform innovation and collaborative effort to achieve quality, cost-effective healthcare.”

It all adds up to healthcare, government, and the medical industrial complex as a big, big, big business consuming 18% of the GDP.

As I noted in a tongue-in-cheek parody of “The Lorax” in a previous blog.

Government is government!

And government must grow!

It has to grow bigger,

so bigger it gets.

It biggers the size of medical groups.

It biggers the size of hospitals.

It biggers the size of health plans.

It biggers the size of the load states must carry.

It biggers the size of Medicare and Medicaid.

It biggers the size of the tax bill.

And it figures,

on biggering,

and biggering.

To grow even bigger,

It belittles voices of individual patients.

It belittles voices of independent solo physicians.

It belittles voices of small entrepreneurs.

It belittles voices of individual innovators.

It belittles the voice of the market.

And it figures,

on belittling,

and belittling,

until it grows as big,

as it can get.

So what is government to do to cut costs? It cannot reverse aging. It cannot prevent or end chronic disease. It must protect its citizens. And it must provide care at a cost taxpayers can afford.

How? It can make patients aware of care’s true costs by giving patients and families a set amount of money, say $10,000 for an individual and $15,000 per family per year. If those amounts are exceeded, the individual or family must share costs by having “skin in the game.”

This is the basis, in one way or another for health savings accounts, for Medicare means testing for the affluent, for Medicare premium support plans, for block Medicaid grants to the states, and for the doctrine of “self-responsibility." It’s about cutting demand by cutting money available for care.

Cutting demand while maintaining quality will require innovation - and political courage. An apple a day will not keep the doctor away.

Tweet: To cut healthcare costs, public and privae payers must cut demand by having consumers share more of the cost of care using their own money.