The Summary


We in this country do not know how to view healthcare.  

Is is a right?  Some have loudly said: "Dam those insurance companies."   I suspect that only a small fraction of the populace has reviewed the history of healthcare in our country, and the slow bleeding of competition while the costs have increased.   It is seen as a big maze of a lack of effectiveness, and many want the government to do something about it.   Well they have done more of the same as the means not to solve the basic problems but to gain more control. 


Why is it that the productivity of healthcare is considered one of the worst while the costs have gone up well above inflation?  In fact the growth of healthcare costs (or fraction of the total GDP) have increased nearly as much as the cost of government over the past 40 years.  Why is that so?   Why is it that the Post Office is bankrupt and not capable of fixing itself?  Does this relate to healthcare before ObamaCare and perhaps even more so now that ObamaCare has passed?


Why is healthcare on this cost increase curve while electronics is on a continued downward slope?   Certainly the service nature of healthcare makes it different, but the largest difference is in bringing on new technology that is productive.   Most of the technology increase in healthcare is done in an environment of no cost pressure.   The difference in outcomes is quite obvious.



What do the Canadians feel about their healthcare system?

The video at right is a small measure of their discontent.   Most people in countries with socialized or centralized healthcare systems like their healthcare system, until they need some care not approved by the panel.  


ObamaCare considers the Canadian system as the model, despite all of the deficiencies.     If you need care in Canada it can be very fast, if you are a pet, as pet care is far superior in service and wait time than human healthcare.    

Various Stats on Healthcare costs:   Link

Business spending as a percent of wages and salaries: rose from 7% to 10% from '87 to '07.

Household HC spending: from 4.9% in '87 to 6% in '07.

Gov HC spending as a % of Rev: 17% in 2000 up to 32 and then stable at 28% in 2007 – for Fed

20% rose to 24% in 2007 for State and Local.



Excerpt from High and rising health care costs: Demystifying U.S. health care spending

The health care industry has many characteristics that would lead one to expect relatively small increases in productivity over time. For example, there tends to be little competition among providers on the basis of price. Extensive third-party coverage dilutes consumer incentives to be price conscious, and benefit structures tend to offer little reward for choosing a low-priced provider.

On the other hand, Medicare administered pricing likely increases incentives to be efficient in producing individual services or, in the case of hospitals, admissions. In a study for the Medicare Payment Advisory Commission, Lichtenberg (52) outlines a number of additional factors leading one to expect relatively low productivity growth in hospitals. These include high labor intensity, low investment in computers and software, and low investment in research and development, although one should raise the question of whether the latter two factors result from lack of incentives to increase productivity.

He notes that government statistics on constant dollar output and American Hospital Association data on full-time equivalent staff suggest productivity growth at less than half the rate of the general economy. Cutler and McClellan (20) note that from 1960 to 1999, the medical component of the Consumer Price Index exceeded the overall index by about 1.8 percentage points a year, suggesting either increasing market power on the part of medical providers or much lower rates of productivity increases.

They suggest that the gap is due to lack of adjustment for quality increases, arguing that a quality-adjusted index for treatments for the conditions examined in the study would show productivity gains exceeding those for the economy as a whole.


Motivations from the different sectors of Healthcare:

Pharma / Device “My job is innovation that helps people . . . it's up to the doctors to control use.”

Payers “We want to pay for the right things there’s things, but there s little data…and our customers want us to control costs.”

Clinicians “My job is doing everything I can to help my patient . . . if I say no to studies, I might get sued.”

FDA “Safety, not cost effectiveness, is my job.”

Consumer-Patient “I want the best of everything. Don’t ask me to pay more.”



The history is largely ignored and has not been taken into the thought process.  What do you think of this?