Ok, I’m sure no-one needs to have the absurdities of the anti-reform rhetoric to be pointed out any more times. (At least, no-one likely to be reading this.) How can a government programme be both so ruthlessly efficient that it will drive insurers into bankruptcy and yet at the same time utterly bloated and inefficient because the government can’t run anything properly?
Instead, let’s ask the question: how does health care coverage in the private and public sector really compare when we try and put simple ideological questions to one side...?
By definition, the private sector exists to make a profit. In certain contexts, usually in competitive marketplaces with low customer switching costs, profits require efficient delivery and therefore tend to encourage great quality and service. But not all contexts are competitive, and health insurance coverage isn’t one of them. The insecurities attached to coverage and its link to employment mean that the cost of switching is extremely high.
(Amongst other things, this leads me to conclude that if a meaty public option becomes watered down in the final bill, an appropriate executive branch response would be to brush off the old Sherman/Clayton book and start applying a bit of anti-trust law to these huge companies. If they want to present a fiction of themselves as lean, green, private-sector business machines, hold them to it. It also makes me think that elements in the bill that loosen the link between employment and coverage may turn out to be extremely important, even though all the attention at the moment is on the public option.)
As everyone knows, there’s two ways of increasing your profits: reducing your costs or increasing revenues.
When it comes to private health coverage the second element trumps the first. This is for the simple reason that death comes to us all sooner or later, but most of us would like to live forever. However much we spend on treatments that keep us alive, we’re still left wanting more. It’s not like you buy a chocolate bar, eat it, and aren’t hungry any more. Until someone invents an immortality pill, there’ll always be more drugs and treatments to spend our money on.
The nature of the market and product determines the business strategy. Selling cigarettes? Killing your client base? Focus on new customer acquisition. Selling health care? Keeping your clients alive longer? Get new products to market that offer a way to keep your customers going so that they can be around to buy more drugs from you in the future.
This is why the private sector has managed to be so amazingly innovative when it comes to developing new health techniques. But it also means that senior executives in hospitals and drug companies who concern themselves with strategy are going to tend to focus on new treatments rather than efficiency savings.
At the end of the day, the resources that can potentially be spent on health coverage are only limited by our ability to pay for them. Our demand for health is essentially infinite. This is what is driving the relentless growth in private sector costs. It’s only partly about the 30 percent that ends up as profit. We’ll always be in the market for new and ingenious ways to keep ourselves alive – and by extension ill much more of the time!
When the private sector does think about cost savings, moreover, it seems to prefer excluding applicants through rescission rather than delivering efficiency savings in health care services. It’s a simple fact that it’s much easier and more reliable method to sit with a pen and strike out badly filled-in coverage forms than it is to march up and down buildings devising innovative new ways to manage business processes.
Public spending, though, is not driven by the same imperatives. People always go on about how the private sector world is focused on the dollars, but in this case it's government that has a bottom line, absent in the private sector. The question of coverage will always be filtered through the question of “what can we afford to deliver?” rather than “What new things can we sell?” Even when this is not explicitly highlighted in the debate (for political reasons, usually), it forms a background presence as a tax-cutting or deficit-reducing movement.
While the private sector will tend to try to limit payouts, then, the public sector by contrast will try and restrict treatments. Insurance companies will tempt you in with a new wonder drug, then try and devise ingenious ways of kicking you out for not filling a form out correctly; the government will say that the new super-drug is too expensive and so can’t be deployed. Result: the private sector is heartless; the public sector rations.
Think Of the Children
52 minutes ago
