I mentioned on our last show that the hyperbole surrounding the budget doesn’t correlate to the real issue in the budget that nobody is talking about: the single biggest driver in the budget that effects our debt, deficit and ability to meet the promise of the social programs I want to see funded are cost-laden entitlement programs: medicare, medicaid and social security. With an aging population and skyrocketing costs, we will never get our budget under control until we do the politically unpopular thing of tackling entitlements.
In that vein, we will never cure the problems that most of us face in health care until we have real, comprehensive health care reform. But the real purpose of this post is to say that we can’t have real health care reform until we listen to the advice offered by William J. Baumol, the most important person in health care you never heard about. Supportive of health care reform and Progressive ideas like the Public Option, he nonetheless warns us all that the underlying sickness in the health care system is out of control costs. And there really isn’t a cure.
As described in his 1966 book on the economics of the performing arts, the cost of labor continues to rise because its an industry that doesn’t benefit from increased efficiencies. For example, you still need the same number of people to play a Mozart string quartet today that you did a hundred years ago, or in baseball, you still need 9 players on the field — efficiencies like new bats, new balls, bigger gloves, haven’t changed the cost of labor (that’s one reason why we pay baseball players so much).
While productivity can be increased due to technologies in some other areas, like the auto industry, labor costs in health care continue to rise, and demand never lets up — in fact it increases. So when politicians argue that we can bring costs down through increased efficiencies, new technologies, electronic billing, using nurses more than doctors for primary care, etc., — the bottom line is that we still need the same number of people (if not more) when we are sick. It’s great politics to talk about getting health care costs under control, but it’s enormously complicated policy.
If we do nothing, as Republicans would have it, costs will indeed continue to skyrocket, not just because labor costs will rise with inflation, but also because the insurance companies they defend want to increase their profits. But if we are realistic about how costs will grow and why, then maybe we can slow the growth…by incorporating ideas like the public option, ending anti-trust provisions for insurance companies…or getting rid of insurance companies by introducing a single payer system.
— Jeff Kimball