The amazing clarifying effect of being out of money

April 16, 2012 at 5:15 PM Leave a comment

When I talk to people about why this time around in health care reform is different from past efforts, most times I end up saying at one point or another, “Being out of money has an amazing clarifying effect on people’s thinking.”  Sometimes people laugh, and other times people just stare back quizzically.  For those other times, here’s the thinking.

First, health care is a marketer’s dream.  There are few other products that people feel might result in their premature death if they don’t get it.  (There are a bunch of products that will result in their premature death that sell well, too, but that’s another story.)  Because of this draw, it’s been easy to sell to people, in increasing quanities and price.  So compelling is the sell, that we were willing to incur hundreds of billions of dollars of debt as a nation over it in the past decade.  We borrowed so we didn’t have to limit it, or face down the sellers of it to demand lower prices.  We made it mostly painless for ourselves by separating widely the cost from the point of use using a mechanism called insurance.  We use this kind of financing mechanism commonly in this society for really expensive things, and it’s very effective in mitigating any market forces to control costs.

But there comes a day of reckoning, even with products whose value we obfuscate to this degree.  For a product this compelling, that’s when you’re out of money.  And this is why this time is different.  We are out of money in about twelve different ways.  The federal deficit is a topic of dinner time conversation in households that do not contain economists.  States are steadily defunding higher education, elementary education, roads, bridges, etc., because there is no money left after spending on health care.  Employer contributions to health care premiums have more than doubled in the past decade, and employee contributions have nearly tripled.  A Health Affairs study in September of 2011 showed that for the archetypical family of four, almost all increases in wages for the decade 1999-2009 were eaten up by a combination of inflation and health care costs.  In other words, we are spending almost all income increases created through better productivity, on health care.  Health care is the Thing That Ate New Jersey, or at least its budget.

So the obvious punchline: this cannot continue.  After years of sustained denial, I am watching the health care industry begin to come to grips with the thought that this one isn’t going away.  Many of us who have made whole careers out of building stuff that we knew we could use and get paid for irrespective of value to patients, are having to rethink the game.

Many of us will complain this is not fair, that the game should continue as it has, because it is the only one we know, and some good does come out of it.  This will fall on the deaf ears of everyone who pays for this stuff, and are out of money–governments, employers, and individuals.  It’s not so much that they don’t want to empty their bank accounts to pay for more growth for American health care; it’s that they already have, and there is no more in the cupboard.  It’s time we start thinking about health care as a finite commodity.  For while our good will and intent might be unlimited, our ability to fund even things we greatly value, is not.

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