Thought Patterns
by Emanuel
Notice the question mark. I’m most definitely not the only person asking this question but I heard a very interesting viewpoint this week that I think merits more attention. Michael Porter of the Harvard Business School was a guest on the January 29th edition of one of my favorite shows, Bloomberg‘s ‘On the Economy’ podcasts, during which Tom Keene ‘taps the best minds in Economics’, and Porter, after discussing the Obama stimulus plan goes on to tackle the issue of health care in the United States.
The interesting premise of his opinion, beyond the discussion of universal coverage and insurance issues, is whether or not the health care system as it currently operates creates value. His answer is that it does not and you can see for yourself if you think about what health outcomes are generated by the important expenditure on health care. Does the system create value in the sense of better health or does it rather encourage more complex treatment by its financial incentives towards more intrusive interventions? The point is that the health care system is misaligned with our values and that the delivery of health care will pay a doctor less if he finds a way to solve a health issue in a less complicated, less invasive way. I find this point about incentives very interesting and topical given the current economic situation we’re in.
Remember that the current state of the economy initiated with a ‘credit crunch’, which was brought about by misaligned incentives and that the Department of the Treasury still doesn’t know how to price the assets on the insolvent banks’ balance sheets. Banks were making money out of thin air (finance still recently represented the largest portion of profits in GDP in the US, that is the movement of assets where no only monetary value is created out of ‘thin air’) and the responsibility that used to come with credit was no longer aligned with making solvent loans that one day would be paid back but rather making loans simply to repackage them into complex financial instruments to be sold at profit to other financial institutions, and so on. There is a lot of the responsibility of the current situation that falls back onto incentives being disconnected with our ‘values’, or specifically in this case our values of understanding and correctly pricing risk.
To conclude about health care, I found the real insightful point made by Porter to be that the customer (patient) is not the central focus of the system. It sounds really obvious but I believe that it offers a fresh way of framing the issue, although not necessarily easier to solve. The issue is not all about universal coverage but rather what do you do if universal coverage is achieved since the misaligned system would still be the infrastructure patients would have to deal with.
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Keeling
Yo dude. hope you are well. Your last paragraph is key, and I read a great article about that exact issue here:
http://www.newyorker.com/reporting/2009/01/26/090126fa_fact_gawande?currentPage=1
Emanuel
Great read, I love how he illustrates path-dependency with examples for other countries and how he gives an example of an American success story of dealing with a strong path-dependence system – the phone infrastructure.
Let us believe.