Healthcare

I still remember it well...on September 4, 2009, I woke up at 4am with horrible lower abdomen pain.  I crawled out of bed and went downstairs wondering what could be the problem.  I suspected appendicitis and knew that if it was, I would need to get to the hospital soon or a rupture could mean death.  Unfortunately, my affordable health insurance was only affordable due to a high deductible.  As I was between consulting projects, I was living on savings and knew that a trip to the emergency room and appendix removal would obliterate the savings that I needed for the coming weeks.  I decided to pray that it wasn't appendicitis and got on the computer to research other possible causes of the symptoms.  Before completing my self-diagnosis, I literally had to stop due to the pain.  I found myself on the floor in fetal position trying to deal with the pain that was nauseatingly intense.  Though I was getting more concerned and anxious, I wasn't going to dissapate the family savings for a non-critical emergency.  After 30 minutes I identified a more probable cause of the pain: kidney stones.  I drank about a half gallon of water and lucked out that the pain subsided fairly quickly and I passed the stone shortly thereafter.

I made up my mind to do 2 things that morning:  1) Either contribute to and promote a charitable organization that helps people deal with unexpected medical expenses OR found one that does.  I didn't want anyone to have to make a decision between death and bankruptcy.  2) Determine why in nearly every industry except healthcare, the quality and price of products and services has gone down with innovation (eg computers, automobiles, travel).  Once I discovered the reason, I would make a meaningful attempt at promoting the necessary changes so that the healthcare industry can provide better healthcare at a cheaper price.

Luckily, I found out an old acquaintance had already undertaken a decade long project to determine the answer to the fundamental question of my second pledge, how can we make healthcare affordable?  Clayton Christensen was doing research at Harvard on the hard disk market while I was at MIT.  He discovered a remarkable phenonema that explained how the capabilities of many products increased so dramatically while their costs simultaneously went down.  It also explained why many existing businesses failed to adopt the changes that innovative companies in the same space used to create the value.  It wasn't an isolated occurance either!  It happened in many industries- computers, telecommunications and even earth moving equipment.  As he explained this discovery to me one day in a one-on-one meeting, I thought it was an interesting bit of research, but didn't appreciate it for the monumental discovery that it was.  18 months later he published the final results in a book The Innovators Dilemma.  The concepts were recongnized as brilliant by those with more foresight than me and Dr. Christensen became a recognized guru on innovation. 

His recent book, The Innovators Prescription suggests some innovative restructuring that can make healthcare more affordable.  The book identifies the real issues and suggests how they can be addressed.  I appreciate his approach that makes few assumptions about what the solution should look like before the root cause is even identified.  Researched cooperatively with over a hundred healthcare industry experts and stress tested with them, I am a believer in its conclusions.

I have been dismayed in recently months by the bickering over healthcare.  The political scene has focused on WHO should PAY for healthcare and HOW the money should move from patients to providers.  Shouldn't the real question be, "How do we make healthcare more affordable?"  Without any changes to the current system, Medicaid and Medicare will consume 80% of the Federal budget in 20 years.  If proposed health care plans are enacted, that day will come much sooner.  Creating a beaucracy unaccountable to market forces, fewer incentives to health care professionals to provide quality care, and little motive for citizens to limit unnecessary services, the problem will accelerate.  I see a classic economics problem on the horizon- increasing demand with new regulations and government subsidies while simultaneously decreasing the supply by limiting the financial incentives available to providers.  Expect acute shortages in short order.

So how do you USE regulation and market forces to create affordable healthcare?  You've got to read the book, but I'll post his prescription in the next posts.