It is less than profound to say that rising health care costs are restricting access for the working poor and squeezing all of us. Cost shifting, payroll and income taxes to pay for entitlements, rising copays and deductibles all combine to make us realize we have hit the wall on this matter. That 80 million baby-boomers are racing down the water-pipe towards retirement, with unfunded liabilities estimated in the trilllions is enough to double our dose of Prozac. The strategy used by government since 1965, when Medicare was first enacted, has been to increase access to health care through tax and spend subsidies in incremental doses that the American public would tolerate. First, it was the elderly, then Medicaid for the poor and then large corporation workers with ERISA. The last remaining segment has been the uninsured. Step-by-step, as these programs were put into place, the costs of health care exploded and we now have about 16% of the population under-insured, yet health care consumes 16% of our GNP, more than any other nation. Like Houdini in a straight-jacket we are constrained in attempts to free ourself.
The debate over the past two decades divided itself between those who believe in nothing short of a complete government take-over versus a group who continue to believe that the solution is for government to stop meddling and allow market forces to operate. But, in such a confused situation any grand scheme seems like driving into the future looking out your rear view mirror. A train wreck is sure to ensue.
I perceive the health care situation differently.
The modern health care system that you and I know has really only been with us since the 1970s. Prior to WWII hospitals were sanatoriums for TB patients, children's hospitals for polio victims or places to go and die. Until medicine was armed with its recently acquired arsenal of drugs, computer-assisted surgery and MRI diagnostics it had little to offer. Back then health care was run by religious orders with nuns and a begging cup and was at best 2-3% of GNP. With the introduction of polio vaccines in 1957 that flat growth curve hit an inflection point and began to rise exponentially.
Around the time when modern health care was getting off the ground, we also witnessed immense changes in our industrial economy. Computers downsized and become so cheap that we have come to expect twice the power at half the cost every year. Our cars and appliances all have on-board computers, some of which speak and listen. Mass-produced industrial goods are becoming cheaper, whether it is tennis shoes or toaster ovens. The world and its landfills are awash in plenty due to better management and technology.
That health care has not been the beneficiary of these changes should be no big surprise. It normally takes about 20 to 30 years for an industry to be impacted by disruptive technology. During the early stages technology is employed to improve quality, not efficiency. It is only now that we are seriously considering the electronic health record and internet as tools to improve health care costs.
By way of analogy, Henry Ford released the Model T in 1908, after a decade of failed attempts, at a price of $825. It was not until 1927 that his production peaked at over 15 million vehicles allowing prices to be reduced to $360; a record that stood for 45 years. The same phenomena has existed for electricity, telephones, radios and most things in life. We employed 60% of our people in agriculture in 1890 and today get the job done with 4%. In the very long run everything is subject to Moore's Law.
In my mind, health care is now on the cusp of becoming a really big industry, the likes of which will eclipse everything we have done in agriculture or industrial goods to date. As a service, health care has infinite potential in a world of 8 billion people, but only if it is efficient and effective. Health care services, using genetics and computers as the underlying technologies promise to be the cornerstone in our 21st century economy. Whether the United States will be the leader is yet to be seen, because most European economies also have their sights set on this target.
Health care is like having a grossly obese child. You know that the child's success in life depends on junior losing weight. But, do you admit failure and submit the child to gastric bypass surgery? In the end, isn't it eating less food that causes the weight loss? Or do you try some other approach? What will work? Less fat in the diet; a high protein diet; more fiber? There are lots of ideas, but they all get back to consuming fewer calories and getting more exercise.
So it is with health care. We have indulged our health care youngster mightily with subsidies and tax privileges and he has grown into a strapping big lad. So much so that he splits the seams of his trousers every time he bends over to tie his shoes. We all know that if we take the easy way out and have government take-over health care as a single payor, the game is all but over. As a socialized system, health care will not be the innovative and entrepreneurial creator of new drugs, surgery and genetics that are necessary to increase longevity and improve quality of life. We might cap health care off at 16% of GNP, which is still a heavy overhead burden for an economy that must compete in a global world, but we could do it. But, any hope of Baby Huey being in the Olympics or winning American Idol will be gone.
Now that we have tried almost everything short of gastric bypass surgery, maybe it is time to go back to the fundamental economics that made America great. I'm not talking about unbridled, lassaize faire economics. And, I'm not talking about the blunt instruments of tax and spend subsidization. I'm suggesting surgical economic reform techniques to reshape the industry and turn it into an efficient economic engine for our 21st century US economy.
There are dozens of strategies and tactics such as allowing consumers to form health care cooperatives, health futures contracts to compete against traditional insurance, defined-contribution health plans, evidence-based medicine and internet-based health records, all of which would take a stab at reform. You could reform Medicare within ten years. Just put a new system in place for pre-retirees and let the existing cohort in Medicare die off.
Colorado's 208 Blue Ribbon Commission was another case of trying to do something by committee. Remember, every great endeavor is the lengthened shadow of a single man. We didn't make progress in Iraq until we had David Petraeus. We didn't get an affordable auto until we had Henry Ford. It took Steve Jobs to turn around Apple and produce the iPod and iPhone. It's a hard pill to swallow, but a group of attorneys, political scientists, journalists and historians writing laws and concocting public entitlement programs is always going to be a day late and dollar over budget.