President Barack Obama proclaimed, while signing the health care bill into law on Tuesday, March 22nd, 2010, that universal health care is now the law of the land. What a shame that the United States needs a law to institute universal health care.
The day the health care bill passed was a day to be sad on the one hand that the country took nearly a century to pass such a law. And in that prolonged debate that spanned 19 presidencies, the great American democracy, where the very purpose of public debate is to let the society and markets change without additional laws through moral suasion, had failed to create a market for health care that could provide affordable and quality universal health care until the 44th president of the United States had to spend nearly all of his political capital to sign it into law with half the country still opposed to the bill solely because of its rising costs.
The Democrats want to provide what the markets cannot through the government. The Republicans say that individual self-interest prevents the possibility of universal health care, when every doctor and health care worker, Democrat and Republican know full well that the Hippocratic Oath that governs their professional conduct, at the very outset, obligates them to providing universal health care. The problem then lies entirely with the business of health care, not its providers in the medical profession. And the current bill does not fix that broken business.
Still, the day the health care bill passed is also a day to be happy because at least there is hope that the law can act affect the health care business in a manner so as to eventually render itself irrelevant without it being repealed and redone. Redoing the health bill through endless procedural maneuvers will be a waste of time for all those who disagree with the bill, especially when the amendments cannot alter the core bill that has already been passed into law. So, the focus must be on cost-reduction.
When the policy constraint being imposed by the interest groups that supply health care is to hold back supply by keeping the total numbers and the distribution of medical personnel among the various specialties relatively constant and skewed to favor expensive medical care and inefficient processes that lead to high-cost care, it is doubtful if the supply-side interest groups will in fact act to reduce costs in the current health care market culture, health information technology or no health information technology. The information technology and process improvement components could actually add to the costs, not reduce them.
The optimists could say that this may be true in the short run but in the long run, as the changes kick in, costs would come down. However, from a doctor’s viewpoint who would like to lower his or her administrative costs of providing medical care, any cost savings in process improvements need not necessarily reduce the total cost of care but will only act to raise the profit margin of the practice, with the monies going into investment in information technology and business process improvements being treated for tax purposes as partial or full write-offs.
The proponents of the bill would argue that simply the capacity to pool large numbers of people who want to buy insurance will reduce costs because without the insurance exchanges those markets would not have been created for the insurance industry to share risks. If we now further assume that the government wisely decides to add federal employees and all other government employees to those pools to create even larger pools, in theory, the costs should come down some more because of scale effects. But they will not and again because the insurance companies will tend to transfer the savings they are providing to their consumers in the exchanges to non-exchange consumers to keep their overall profits steady. The health care principles legislated into law, as much as they are necessary, will only add to the costs some more. The Congressional Budget Office (CBO) did not take any of these analytical considerations into account.
Then how to contain costs? All the hope rests on market savvy of the health care providers. In a dysfunctional and broken health care market that has learned to rely on inflexible, large bureaucracies and direct or indirect government payouts, it has become difficult for the market participants to see the scarcity of its accessibility to both the people and their government payers. Wherever there is scarcity, there is a market.
In the case of health care, the scarcity is of a market that can supply health care at a lower cost, not of a market that demands it because all of the supply that currently exists is geared to providing it at a price that must be paid by somebody, directly or indirectly. Those who can pay are charged more either in taxes or insurance premiums or both to treat those who cannot. Ultimately, costs keep on rising, only shifting rather than being contained.
The Democrats have approached health care as a right. Hence, they wanted a law of the land that guaranteed that right. The Republicans do not see it as a right. But neither saw it as a necessity. And it is precisely because health care is a necessity that a law mandating universal care should be unnecessary. And this is also where the market opportunity for health care lies, similar to the market for food.
Health care suppliers must control their urge to remain a cog in the giant wheel of the currently broken health care market by voluntarily creating standards and menu costs for the various health care services they provide if costs are to come down. Otherwise, no reform, Democrat or Republican, even if repealed and rewritten, can reduce health care costs given the supply constraints being imposed by the health care industry besides an all nationalized health care system that treats health care workers as salaried bureaucrats.