Two articles on marketplace forces & the future of healthcare
An essay by Jonathan Cohn (who just published "'Sick: The Untold Story of America's Health Care Crisis - and the People Who Pay the Price") appeared in the NY Times back on April 1st. "What's the One Thing Big Business and the Left Have in Common?" is about the surprising alliance between big companies like Safeway and Wal-Mart and labor unions and Democrats. In particular, the essay details the journey taken by Democratic Senator Ron Wyden of Oregon and Steve Burd, the hard-nosed CEO of Safeway. Especially interesting is Mr. Burd's story of how he became interested in wellness and preventive medicine because of his family's health history, and how he tried ingraining the habits he learned into his employees.
"Burd says the results were impressive: in 2006, the first year of full implementation, employees who enrolled in the newer plans, with the greater individual cost-sharing, had their personal health-care bills drop by 20 to 30 percent, while the company's health bill for those employees shrank by 11 percent. (It is unclear what happened to the costs of people who stayed in the old plan.)"
A long time ago I told a group of friends that if the United States implements universal healthcare, it will be because of big business. Of course this sounds counter-intuitive. But it isn't since many companies spend more on their people's health than on anything else, and thus lowering healthcare costs is a corporate issue. This essay deflty elaborates on how some corporations want universal healthcare to look like (think Mitt Romney's "individual mandate" that requires every citizen to own a health insurance policy).
(The piece came to me thanks to my pal Vik R.)
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The Economist this week updates us on the retail health clinic in "McClinics". The growing popularity of the business model among consumers is based on the problems of how doctors' offices and ERs run.
"IN NO other industry is the relationship between the consumer and the provider as unbalanced as in health care,” says Joseph Maloney of Health Stop, a pioneering retail health-care chain. In a recent case study on his firm prepared by Regina Herzlinger of Harvard Business School, Dr Maloney observed that the typical patient frequently waits a week for an appointment, then an hour longer at the doctor's office or, worse yet, is forced to go to an emergency treatment centre. As Dr Maloney summarised, “Any dry-cleaner that operated this way would be put out of business.”
The article proclaims that the boom in the concept has just started, and is driven because it offers two things: convenience and low price. And Dr. Maloney says that a third reason that would compel more consumers to get their healthcare at these 'minute clinics' is consistency.
posted by Niraj "Raj" Patel @ 4/22/2007
1 comments
1 Comments:
Big business actually wants universal health care because it will put even more pressure on smaller competitors.
Why is this? It is because universal health care will raise the basic costs of doing business - and living - in the US, because it will require a universal tax.
Think how many businesses survive today with a "mere" 6.2% employment tax - that all employees pay, even those who get all of their taxes back in a refund or EITC credit - because it is paid invisibly by their employers.
At $5/hour, plus another $2/hour in taxes and other overhead costs, the employee has to be making $7/hour in productive work for the employer to keep him employed. If the employee doesn't produce something of at least that value, the employer is losing money and not getting enough done.
Now raise that 10%, and how many employers can still afford to employ the same employees?
Fewer.
Who has the advantage in the least amount of overhead? You're right - the larger the business, the more that overhead can be spread out.
So the higher the background rate of taxes and cost of living, the more pressure there is on small businesses.
Now think about this again: 1. big businesses pay a large amount in health care costs for their employees. 2. big businesses realize they can pass universal health care, which will end up taxing the rich disproportionately to pay for the care of every-day workers. 3. big businesses also know that this will raise the background tax rate on the whole country, a condition they are better positioned to survive than their non-big-business competitors.
Voila! Big business supports socialism. It's a variation on cartelizing, where big business cartelizes against small business at the expense of 1. the rich taxpayers, 2. the poor workers, many of whom lose job opportunities when the background minimum wage rate rises higher than their starting productivity level.
Second problem. Jonathan Cohn doesn't know jack about economics.
The problem with our health care system is that it is wildly inefficient - so therefore we should turn it into a 100% government-run bureacracy?! Are you nuts? That is retarded.
Here's a great book review of Cohn's book from Amazon reviewer David Thomson (proudly also from Houston):
Jonathan Cohn Needs to Study Basic Economics, May 10, 2007
Human beings are fundamentally flawed. The doctrine of Original Sin is at least metaphorically true. Unfortunately, Jonathan Cohn seemingly believes that we are innately good. Never once does he deal with the moral hazard dilemma. Only on page 158 does he even cite an instance when somebody is caught defrauding the system.
Much of our health care crisis is the result of so many Americans believing someone else is paying the bill. Such a mindset inevitably encourages individuals to make stupid choices. On page 220, the author asserts that Bush and his allies merely conclude "Public insurance programs are bad because they have to be financed with taxes, inevitably imposing the largest penalties on either the wealthy or big business." Continuing onto the very next page, Cohn adds "this represents yet another nod to shed the burden of financing generous employee benefits."
Alas, the harsh reality is that the employer never pays for one's health benefits. They merely deduct money from your salary to pay for the health insurance. The middle class pays the majority of the tax bill. There are simply not enough wealthy people. You might tax Bill Gates, Warren Buffett and other billionaires 100% of their income---and it would barely be noticeable.
"Big business" also never really pays any taxes. The large corporations merely pass the added costs along to the consumer. At the end of the day, we will spend more for our products and services.
Jonathan Cohn is admittedly a well meaning guy. However, this is not good enough. Mushy sentimentalism will not get the job done. Devising social policies premised upon a mistaken notion of human nature is utopian and ultimately doomed to fail. They will likely even make matters worse. Meaningful improvement in healthcare will not occur unless Americans directly feel the impact in their own wallets. You should also read Crisis of Abundance: Rethinking How We Pay for Health Care by Arnold Kling and David Gratzer's The Cure: How Capitalism Can Save American Health Care.
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