The Virtuous CIO  

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November 7, 2010 — Health Care

Last week's election changed the political landscape somewhat. The voters rather resoundingly rejected the President's view of the way things are. The Congress began moving back to the center and the Left made excuses. The Right promised to restore the country and everything would be alright. Everyone has their own spin and people are getting dizzy. And this is an IT Management column. What give me the credibility to talk about health care? Simply the fact that I am probably as qualified as most everyone else currently pontificating on the topic.

High Tech has moved into medicine with a vengeance. CPU cycles and software are doing things beyond what was fantasized in Science Fiction not too many years ago. A revolution in the pharmaceutical industry is improving our longevity as well as the quality of our retirement years. Diagnostic equipment is vastly more powerful and intelligent than clinicians would dare to dream. But along the way something funny happened. Virtually every industry has used Information Technology to enhance performance and functionality while driving down costs. The medical establishment has seen these benefits, except for cost – and cost has skyrocketed.

Rather than getting involved in the circus where people shout economic and governmental philosophies at each other, I want to try to localize some key issues. I definitely have an economic and governmental philosophy, which I follow, but I am somewhat pragmatic about it. The only things immutable are a handful of scientific laws and the Bible. And I don't propose to change those.

Think about this. Someone introduces a new medical diagnostic device or treatment. It's very expensive and the insurance companies decide (for whatever reason) not to cover it. What happens to it? Two things, in general: wealthy people take advantage of the machine because they can afford to. And the cost rapidly declines. As this happens, more people decide to take advantage of the device or treatment. Eventually the prices hits a floor, and it becomes a routine procedure.

The best example of this is Laser Keratectomy. In this procedure, the doctor uses a laser to reshape the lens in the patient's eye, providing a cure to nearsightedness, among other things. When first introduced, you could expect to pay ten to twenty-five thousand bucks. Out of pocket. The insurance companies were quite gleeful in refusing to cover it. I could go out tomorrow, if I desired, and have the procedure done for $500 per eye. In an eye doctor's office. Quite low risk too. Would anyone care to speculate what this would have cost if it were covered under most insurance plans? I thought so too. Full body scans are also not covered by insurance plans, generally, and the cost is rapidly coming down. There is some debate about their worth, but, once again, it appears to be sensitive to the market.

The rub comes in when trying to apply the market forces to everything and everyone. If nobody had insurance, then prices would rapidly drop and hospitals would either have to get efficient, or go out of business. The problem would be for those with life threatening illnesses who could not afford treatment. This was the norm in the latter part of the nineteenth century and it worked fairly well – except for those who could not afford treatment.

The great screaming dilemma of the current health care crisis is that nobody has a workable solution. The liberal solution requires rationing. There are a number of honest liberals out there who will admit this. If we look at the nationalized systems in Canada and the United Kingdom, the net result is rationing – no matter what they try to call it.

The conservative solution is to turn everything over to the free market. Competitive insurance plans will be able to cross state lines. Stifling regulation will be removed. Ambulance chasers will be chased off. The net result will be an efficient and probably innovative health care system with millions at the bottom falling out of it, without coverage.

The pragmatic middle will tinker with the existing system, but try to keep it (let's face it, Americans like the the current system just fine). Ultimately this will bankrupt the country just as badly as the nationalized solution.

As a general rule, the free market works because it is based upon self interest. But when you have been diagnosed with the big C, nothing you have is quite as valuable as your life. If you must, you will spend all of your assets on treatments to preserve your life. That would be after you have rang the phone of every insurance company and congressman that you think might be in your pocket. Self-interest says, “Surely the government is obligated to help me, since I can't afford it myself.” And congress-critters certainly do listen to those calls. That's why we're in the mess we're in.

More next week.