Consumerism Cheapening Health Care? Get Over It…

People like to scoff at the idea of blending health care with shopping.  Uttering the very words “consumer driven health care” sends shivers down the spines of “purists” – your local medical specialist, whose life-saving work necessitates the confidence and ego driving the indignancy of the thought.  Does consumerism cheapen health care?  Well, yes…if you caught the double entendre.  Those of you who are too good to have your profession sullied by associating it with value probably think so as well…but not in the good way.

Check out these two posts from Brian Klepper on The Doctor Weighs In Blog.  The first, entitled “The Myth of Healthcare Consumerism” points out a recent study that shows only 19% of people would research their doctors and switch providers if they found their doctor had received a low rating.  Now, even if this number is lower than expected, I don’t think healthcare consumerism has anything to worry about.  First of all, as the post points out, 19% is 38 million adults.  Secondly, the data says nothing about using online research to find a provider in the first place.  Switching doctors is difficult and inconvenient.  Picking one in the first place isn’t…and it certainly will only get easier as more information comes available to make an informed decision.  This is sort of the point.  Surveys ask people to describe what their behavior will be in a given set of circumstances.  These circumstances have never existed…so the utility is unknown.  However, the early sites seem to be showing promise.  How many hits do you think drugs.com or wedmd.com get in a day?  My startup, doctorpricing.com gets thousands a month and it’s still a beta version.

Klepper’s second post: “Health Care and the Gathering Storms” compromises the theme of his first.  Warren Brennan, the CEO of SMA Informatics in Richmond, provides economic data (S&P/Case Shiller Home Prices Indices, wage data) that supports what any informed American already knows – we are experiencing and economic contraction that may become, or possibly already is, a recession.  The individual consumer makes up 70%+ of our country’s economy, and health care has been riding a wave of economic prosperity that is ending.  The conclusion?  Health care businesses (doctors, hospitals, technology companies, etc.) are going to hurt just like every other industry.  What can we deduce from this?  Health care consumers are, at some level, price sensitive, just like every other type of consumer.  It is a basic tenet of economics. 

Why do Americans spend more per-capita than any other country in the world on medical care?  Because they can….  When the can’t any longer, they won’t.  Price matters.  And it’s going to matter more as health care costs continue to outpace inflation by 200-500 basis points.  Employers will no longer be able to provide standard insurance to employees…cheaper alternatives like High Deductible Health Plans will become more mainstream.  People will have to manage some of their own health care risk…one way or another.

At least I hope so…for the sake of all of us…

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Are Free Markets a False Idol? Or is Regulation a Trojan Horse?

Peter Goodman of the New York Times writes an interesting retrospective of free markets entitled “The Free Market: A False Idol After All?”  The article’s basic conclusion is that unfettered free markets (unhampered by regulation)…systems merely based upon ideology, cannot stand without some basic rules of government.  And I don’t disagree.  In the short run, the market can be as fickle and irrational as Lindsay Lohan after a few Vicadin, some blow, and a rude text from her boy-toy of the week.  Just watch any blue-chip stock get slaughtered after missing some analyst’s quarterly earnings estimates by 2 cents.  But Adam Smith’s invisible hand, in the long run, will put resources where they can be invested most efficiently…creating the most value.  And I truly believe that.

The problem illuminated by Goodman’s article isn’t that we have government regulation…it’s that the same knee-jerkedness that renders a short term market stupid is what’s driving legislation through Congress.  Politicians are elected for a term of years, not decades, and in order to make a difference…an elected official must be able to pass a bill quickly, no matter how hastily researched or ill-conceived.  Republicans and Democrats alike are killing America’s competitiveness in an increasingly globalized world.

The latest disgrace is the Bush Administration’s efforts to freeze adjustable mortgage rates for families who cannot afford the contractual step-ups in rate that will soon torpedo many of them into foreclosure.   Bill Gross, who manages one of the largest bond funds in the world at PIMCO (Pacific Investment Management Company), is one of the most brilliant minds in the world when it comes to markets and capturing value…and even he is pro-bailing out the American Idiot.  Now, Gross, who is quite possibly the greatest bond trader alive today, may have some super-complicated, multiple-degrees-of-separation reason for why this will create value that none of us can see…but based upon the interviews he has given, and the articles he has written, it’s just plain ole bleeding heart self-defeating behaviour.

To bail out people who borrowed more than they can afford is to teach America that the government will always be there to bail them out.  There’s no way a society who doesn’t have to develop its own good judgement will ever compete in a global economy.

To quote the article: “Every regulation reduces people’s freedom,” said David R. Henderson, a libertarian economist at Stanford University’s Hoover Institution. “The more regulation we get, the worse we do.”

Enron and Worldcom cooked their books and stole from their employees.  The government’s knee-jerk reaction was Sarbanes-Oxley, which is so cumbersome and expense to comply with, that companies are leaving the U.S. rather than spend the billions required to comply.  Two bad apples (really bad apples, granted), sparked hastily drafted regulation that is making good companies so uncompetitive in a global market, that they are actually leaving the country for freer markets.  

There’s a fantastic, tongue-in-cheek article written by former bond trader and author of “Liar’s Poker,” Michael Lewis, where he jokes about how an overly paternalistic America has dared him and his wealthy, productive friends to up and move to Dubai.  His point is that pandering politicians can scapegoat successful people, because they are easy targets, and work to tax the hell out of them…b/c they must be doing something evil…making so much money in the first place.  How can these select few entrepreneurs and hedge fund managers earn so much money?  They must be unethical and worthy of our scorn.  As soon as someone makes $100mm, a mentality has been created that has trained people to try to pull them down.  Its driven by jealousy, guilt, and in the case of people like Hillary Clinton, pathological ego (and hypocrisy).  Michael Lewis ends his comedic piece daring the IRS to tax him more…he’ll always stay a step ahead.  And if not, its a mobile world.  There are plenty of places with low taxes who will encourage the forward-thinkers, the innovators, thecreaters of wealth and value.  Are free markets a false idol, or is the belief in the notion an expression of envy and a lack of foresight?

If these sentiments trickle into health care, we will be a third-world, possibly Arabic-speaking country withing a few generations..

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