Monday, August 17, 2009

Health Care as Big Screen TV's

In the great debate that we are having about health-care in this country right now, I figured it was time to take a look again in my "free-market method" at a contentious issue and break it down into easier terms. It's what I do.

Any-who, as we can see from this study by the Kaiser Family Foundation

In the United States, which has had both a high level of health spending per capita and a relatively high rate of real growth in that spending, the share of GDP devoted to health grew from 8.8% of GDP in 1980 to 15.2% of GDP in 2003 (Exhibit 5). This almost 7 percentage-point increase in the health share of GDP is larger than increases seen in other high-income countries.

What we have seen, at least through 2003, is a huge jump in the increase of the health care sector's share of our GDP upon a cursory statistical analysis. Now over the course of roughly 23 years, this is a fart in the wind considering some of the life saving and prolonging medicines and technologies that we have developed. On an average evening at home, think of all of the ads that you see for either some heart drug, cholesterol inhibitor or other TV ad that you see for drugs for asthmatics. (Then again, if you are home reading Golf Digest it is a steady diet of Viagra and Cialis ads. Gives me a stiff neck, reading at home.) As the quality of care that we have received has increased so has the cost. Now, to be contrarian, why can't we have both, increased efficiency as well as lower costs. I believe that we can do both within the health-care market.

As we can see in this post from Consumer Reports,

a 32-inch 720p set will sell for $647, down 7 percent from December 2007
• a 37-inch 720p LCD TV will cost $782, down 5 percent
• a 40- or 42-inch 720p LCD TV will sell for $944, down 5 percent
• a 40- or 42-inch 1080p set will sell for $1,123, down 19 percent
• a 46- or 47-inch 1080p set will sell for $1,528, down 17 percent
• a 52-inch 1080p LCD TV will sell for $2,243, down 19 percent

High end expensive items are dropping based on the demand for these products. The supply of these items are meeting the demand. What you have is a fairly fluid market, essentially that there is not so much overhead and regulation that it is difficult for upstarts to get into the business of making a product and supplying a service that people want. How many TV making companies are there, I can think of several; Sony, Samsung, Pioneer, Westinghouse, Vizio etc. A good amount of them. What we have within the market for HDTV's is true competition. Lets' say that Samsung and Sony are servicing the "super prime" market, Pioneer and Westinghouse are serving the "prime" market and Vizio is the upstart, serving the rest of the general public. Sony and Samsung are competing with one another to make a product that the "super prime" consumer wants to purchase. At the same time, we have upstarts like Vizio who are trying to break into the market and make a profit by providing a similar, not better or discernibly worse product, by targeting a certain type of consumer who wants to have the HD technology but doesn't want to pay for the pomposity of the Sony or Samsung name brand. This is good for you and me, the average consumer, even though Samsung and Sony are not in a direct competition with Vizio as they will adjust their prices to try and pull from Pioneer and Westinghouse who are serving people in the "prime" part of the market. These forces drive the prices down for all consumers.

Now, this is a pretty crude picture that I've painted here, but the lesson to take away is that general competition between actors on an even stage will lead to lower prices for all consumers as each company is competing from a pool of consumers who wants to purchase their product.

On the other hand, what we don't have is a Czar of TV Pixelation who is dictating what each company needs to include within each television and how many pixels per inch that each TV should provide the viewer. The consumer is left to make that decision for themselves. Do they want the high end product, with the special gadgets and the mini robot which makes deviled eggs during half time, or the less expensive product which will only boil the eggs for you.

The "problem" with our health care system is that it is over regulated, overtaxed and overburdened with tort cases which have driven up the cost of providing medicine. Now, do I want just any Tom, Dick or Harry to set up a practice and begin to sell snake oil to the masses, of course not. The current health care debate isn't about "bending the cost curve" or insuring the uninsured. If it was, we would have broken down the barriers between purchasing health insurance across state lines and allowing in all states the kinds of plans that the uninsured would more than likely purchase, high deductible insurance to cover catastrophic accidents, not normal doctors visits. Or, we would have reformed tort law to cap the monies that could be won when Aunt Flo got a bad boob job and they came out lumpy. This is not the idea, the idea is control.

When the government is in charge of health care, they, the government underneath of the idea of cost cutting and trying to service the masses will have alot of say over what we can and cannot do with our lives. Hey, sorry Mr. Carlton, put that cigarette out as it will drive up costs. There is no greater control than the control over ones on day to day health.

Now, I would like to leave you with a thought, and hopefully if anyone reads this, a point we can debate. Since 1980 we have seen an increase in the cost of health care as a percentage of GDP grow by 7% points. Could it be from the government involvement and the slow creep of a socialized health care system? The health care markets have only become less free and the consumer has only lost choice. Where do we go from here?


This story pertains pretty well to cost. Here