Posts Tagged ‘universal health care’

Universal Health Care: A Near Death Experience for Innovation

Saturday, August 8th, 2009

If economies of scale and a government system to compete with the private system are effective price reducing mechanisms, shouldn’t we have a government restaurant system to drive the cost of a McDonald’s hamburger to twenty cents?  Surely we could squeeze a few billion out of these fat restaurant middle men who stand between us and our food– even from advertising budgets alone.  And if that’ll work, why not have two national restaurant plans, and force Mickey D’s to give us burgers for free?

The national health care government plan conceit isn’t much less silly than this.  It rests on a misapplied enterprise concept of economies of scale, given muddy transference to industries and nations where it has no realistic application (unless the application is the creation of a giant systemic trap).

In itself, additional health insurance doesn’t create any health care.  The added insurance plans will be chasing after the same pool of health goods and services, overwhelming any possible pressure on insurance margins to put upward pressure on health care prices– the opposite of what politicians claim.  Government is disguising a burden as a relief, and can’t possibly have any subsequent choice but to layer mandate after mandate on all parties to try and patch the leaks on the pressure cooker they’re creating.

Which is what economies of scale really are at a government level– they’re really “economies” of force and central planning.  In a single snap shot these may appear effective, but they amount to a one stage cupboard stripping, and the true price will eventually be paid.

The first time that a king may have undertaken a castle improvement project by conscripting five thousand peasants and commanding that carpenters and masons cough up half their stock of wood and stone, he must have felt clever and efficient.  Upon further royal edicts, every peasant who could limp fast and far enough would go into hiding, while tradesmen would retire to subsistence potato farming, or change their business to cut to order (and also hide).

Disguised conscription of health care resources in the deluded pursuit of economies of scale will create shortages and higher prices just on its own non-merits (a la king, so to speak), but even worse is the blocked and severed interaction of the macro mechanisms that actually are critical at that scale– substitution and innovation.

There is some substitution on the demand side in the current system, as for example when someone uses WebMD, or does nothing for a minor or undiagnosed issue because of their value judgements about the cost or convenience.  However, suppliers are forbidden to respond to this the way they would in a normal market.

 A nurse or technician can’t run a checkup kiosk in a high traffic area to substitute convenience for the state of the art.  Nor can an unconventional and driven physician supervise a staff of a hundred technicians and try to bring us a mega-department store model of delivery to offer more or cheaper or both.  (And in case you think that’s the opposite of the direction health care should go, rest easy, since the opposite opposite is also forbidden: recently a physician practice was cut down for using a payment by subscription method to offer more personal service oriented care.)

Since alternatives aren’t allowed (to “compete with nothing”, as Clayton Christensen might put it) the normal market interplay among and between substitutions and innovations is shut down, and health care forced into one single massive channel.  This is the real cause of the rising prices thus far.  Not because the “economies of scale” are missing, but because those methods that are proposed to rescue us have already been here, and already done some of their dirty work.

It would be as if we mandate that no jewelry could be sold unless it contains at least one large top quality precious stone, and at least an ounce of gold, and that it can be manufactured only by a craftsperson with twelve years of top level training in Italy, and distributed only through a licensed and regulated employer paid jewelry policy.  And then we became disquieted when prices went up and many Americans started to go without jewelry.  (One can picture the progression.  After a few years there’d be heart wrenching stories on T.V. about young couples forced to marry without access to wedding rings. Subsequently a universal national jewelry plan would be proposed, to set right the “failure of the private sector”.)

It’s not just about offering cheap low quality stuff.  A free market constantly rips goods and services apart and bundles them back up again from a practical infinity of angles, shapes and sizes, to add quality to the cheap stuff and volume to the expensive stuff (to make it cheap).  Economically, that’s what innovation is– without it, innovation is essentially gone.

This innovation freeze from a single option market means that tomorrow’s improvements will never happen.  Even if we contend (absurdly counter to any reasonable observation) that we’re going to freeze health care at the highest available level, once again we’d be stabbing the future in the back.  We got to have better health care than our grandparents, but are willing to cut off our grandchildren from a near certain repeat of that deal to take pressure off ourselves for a few years– pressure caused in the first place by previous misguided attempts to give our present selves more.

All the evidence from centuries of real economics out in the street is that when goods and services can break into new channels and methods, it soon benefits the consumers of those goods and services. The benefits for those (public and private) who deliver the goods and services are much more uneven.  These people will tend to “talk their books” with a bias to believe that “the issues are too important to leave to chance.”

The issues are important.  But it isn’t leaving it to chance, it’s leaving it to individual decision making.  A little corny sounding, perhaps, but we might even say that it’s leaving it to freedom.

I work in the insurance industry.  The opinions in this column are my own.


By Les Lafave
Monetary and Banking Reform –
Originally Published at Strike The Root

We Can Put a Man on the Moon (And That’s About It)

Saturday, June 20th, 2009

Barack Obama, Hillary Clinton, John McCain– all of these mainstream presidential candidates used the “put a man on the moon” comparison.  The logic is that we put a man on the moon, therefore we can solve X, where X = something that inspires (and/or annoys) voters.

However, the campaigns didn’t fully explore the fun side of the comparison.  Since there are no limits to the limits that our man on the moon achievement can’t remove from the public purse, we could:

  • Give Hugo Chavez, as a return gift, a bottle of cologne that seems normal before he puts it on, but then permanently smells like Satan.
  • Prove a 12th dimension to string theory and teach everyone to understand it with a psychedelic Muppet movie, also in 12 D.
  • Develop safe nuclear human shrinking technology to take the Guinness record for world’s shortest man away from China, so we’ll still have bragging rights about something if they get their own moon walk (and own most of the earth) by 2024.

One of the first things we might notice if analyzing men on the moon today, is that there aren’t any.  If our intention is to achieve “universal health care” or “energy independence” at great expense for a week, and then stop indefinitely, then yes, we should strongly consider the Apollo program as our model.  But making Hugo Chavez smell like Satan has a practical element that most popular man-moon comparisons lack– it’s a technical closed-ended project.

No program with a time horizon of forever can possibly be simple.  Permanent universal health care is more complicated than putting a man on the moon.  The probable outcome for a man on the moon project model if used for an open-ended concept is to freeze out the future.

Realistically, no one either hopes for or expects the future.  The vision instead is of a slightly tweaked version of the past, with a little more or less of the seer’s favorite things depending on their level of optimism. We try to get rid of what we see as a thoughtless free for all and since the future on some level must be thoughtless, the best solution will be thrown away (maybe not today, maybe not tomorrow, but soon, and for the rest of our lives).

Someday blood-borne nano robot “doctors” may be mass produced for pennies to diagnose and treat us constantly throughout our lives– affordable universal health care, case closed.  But the constituencies that grow and feed from today’s top-down “solution” will do what they can to stop that, or anything else that might threaten to leave them behind.

Cost control is another piece that gets thrown out in man on the moon top-down thinking.  Government planners believe that their job is to stretch our capability and resources beyond where they can otherwise go.  In a sense that top-down conceit succeeded for awhile, in that with the help of our system of maximum credit expansion we stretched our capacity to its consumerist limit for decades, but then we inevitably found those limits with a credit collapse.

The setup and “payoff” of the credit collapse make a good example of fogging up (so to speak) economic and cost/benefit calculation, but at least the fog is sometimes perceived as fog.  The man on the moon comparison has an insidious apparent clarity– the fog itself is hidden.

The Apollo program can be looked at as the cherry on top of a rather wretched sundae, with the space program as the cream skimmed from WWII cauldrons.

Scientifically butcher 70 million people while also wasting several generations worth of non-human resources in a couple years of pyrotechnics, gather up the best and brightest survivors from that unprecedented education (including many from the enemy side), and voila, a successful “public-private partnership”, ready and able as a guiding beacon to lure the next dozen generations into a confused public-private rathole that never quite measures up because, thankfully, we never match that level of unmeasured precursor costs.

Probably there’s a sub-set of economic activities that a military command model (and a military industrial complex full of “public-private partnerships”) can do well, but one would hope to get some acknowledgement that this model isn’t appropriate for the general permanent organization of society.  (The expression here might run something like, “We put a man on the moon, you can’t tell me that we can’t destroy our future as a free society with an entrepreneurial culture to attempt energy independence and universal health insurance coverage, until our enslavement and bloatation makes it all fall apart.”)

In a scientific closed-ended project, enable or kill are pretty much the congressional choices, and the project’s actors only have to defend it to the end.  Compare that to a politically footballish, open-ended project, poked with partisan pointed sticks to see if it might bleed pork fat or stir up a crucial constituency, from now until the end of political time.  If the program might start out making partial sense, give it a decade or two– it will be staggering around the beltway like a wounded brontosaurus.

If your project is a moon walk– a highly technical, voyage of discovery type closed-ended project, politicians for the most part have to pick some project leads and let go.  Opportunities to meddle might not be zero, but the risk is always around that a committee chair ends up face to face with one of the world’s pre-eminent scientists in the field, saying, “Hi there, you don’t know crap.”  This compared to the usually mousey performances of CEO’s in front of congressional committees in finance, health care, or even oil– areas that have gradually been politicized into subjectivity and submission.  (If it’s science, we can defend ourselves, but if it’s politics, politicians win, and the chips can be cashed in for more power.)

The uncontested acceptance of the man in the moon comparison shows that the mainstream parties are biased towards a leadership model of social organization, and away from models of self-organization.  The bias was fertile ground for a credit collapse.  Underlying the inflation, debt, and burning down the house “solutions” is a pretense that good leadership makes anything possible.

It doesn’t.

In pretending otherwise, we neglect an opportunity for another (if less sexy) voyage of discovery: How are good decisions made, who can make them, at what level, and over what time frames?  It would be nice to stop boondoggling for long enough to explore this, but most of economic fashion is not only poor for such study, it’s pretty much designed to avoid the topic and pretend that everything is just a matter of stretching capacity so more men can be put on more moons.

Since at least as far back as the first moon walk debt has been treated as a solution, not a problem.  The result if not the time frame was predictable– debt is crashing on our heads. A war (and a half) didn’t help– mortgage securitization didn’t help– but in the context of the economic collapse these are just types of debt.  We know that these are secondary causes because all experience shows that regardless of any disasters– whether skirted or firmly stepped in– we would have continued exploring the limits of the debt envelope until we found them with a pop.

George Bush and Barack Obama, Angelo Mozilo and Bernie Madoff– they all could have never been born and sooner or later we’d have been right about where we are, because it was a pattern of beliefs and behaviors and not one particular action that got us here.  No president, no congress, and very few Americans have had any respect for the risks and consequences of debt for as long as any of us have lived.

In our current struggles the fading interest in checks and balances is disturbing.  Hope that we might be able to walk and chew gum– that society could be psychically capable of yearning for “the leader” while refusing compromise on the price seems like a confirmed pipe dream.  This isn’t specifically a comment on President Obama. Politicians are reflexively reaching for this trade if it might buy any partisan trinket, and we’re letting them.

Even if the general view of government always tracks toward the delusive, we could at least make a greater effort to study where government has its best odds at success—where its most muted mediocrity might lie.  Cost containment may never be a strength.  We may sometimes wish that warfare was rather less of a core competency.  A starting point might be to look only at programs that are technical, closed-ended or involve a complete hand off, and are largely non-partisan under normal, non-crisis circumstances.

Not easy, but if we could even just start to examine our systemic flaws, that would be a much prouder achievement than walking on the moon.

By Les Lafave
Monetary and Banking Reform –
Originally Published at Strike The Root