Friday, June 3, 2011

Make health care cheap - Karl Smith - The Washington Post

I'll dip my toe into the shark-infested health-care discussion.  Allow me to make a humble observation: All of our debate is on the demand side. All of our problems are on the supply side.

We spend a lot of time talking and, indeed, yelling at each other, over how we are going to pay for health care and who is going to buy what. What gets scant attention is the far more important question: What are we going to create and who is going to sell it?

Imagine for a moment that the price of health care suddenly dropped by 90 percent. Care that cost $1,000 could be had for $100. Not only that, but the cost curve began to bend the other way. The next year the care was $95. The year after that it was $90.

In that world, would it matter whether we had RyanCare or ObamaCare? Would it matter if most people had health insurance at all?

Such a world could only be achieved by changes on the supply side. Health care would have to become cheaper to produce.  Indeed, health care stands in stark contrast to a portion of our economy that displays that property: information and communication technology.

This is striking, because health care essentially is information and communication technology. To get a glimpse of this, imagine the Universal Health App  (UnHA) that comes with your next-, next-generation Android or iPhone. You point your phone at yourself and UnHA immediately tells you what diseases you have. If medication is available, she orders it. If a surgical procedure is needed, she schedules it. She knows your calendar perfectly and can interface seamlessly with the local hospital's scheduling computer and the surgeon's calendar.

When the drugs come, UnHA checks to make sure you have the right ones, reminds you when to take them, lets you know what to do if you miss a dose and monitors you for side effects. When you come home from your surgery, UnHA likewise monitors your recovery, making sure that everything is proceeding according to plan.

UnHA is personalized and travels with you everywhere you go. She carries all of your medical records and calculates your risk factors for every imaginable condition on a continuous basis. UnHA will even remind you of the expected increase in your individualized life expectancy from staying on the elliptical for 20 more minutes.

Perhaps most important is UnHA's back end.  UnHA's server strips away all identifying information and runs constant statistical analysis on incoming data from a billion patients worldwide. When a news story generates a spike in blood pressures, UnHA's server side can see the wave of tension traveling across the globe.

When more heart attacks come in within the next two hours, UnHA can trace them back to the exogenous event and calculate the effect stressors on the probability of a heart attack. In this way UnHA not only monitors patients but conducts continual scientific analysis. She picks up drug interactions and other effects that would have otherwise been too slight to notice.

Now, this isn't meant to suggest that UnHA is coming soon to a phone near you. It's to point out that health care is fundamentally an information and communication industry, yet it isn't following the trend of collapsing costs.

The key question is why?

My baseline answer is that the current health-care system is riddled with regulation, litigation and occupational and pharmaceutical licensing. We have levels heaped upon levels of protection against bad drugs, bad doctors and bad health-care consumers.  While all of these rules provide us with a sense of security, they most likely undermine the evolution of health care and make what care we do have outrageously expensive.

We've come to accept rising health-care costs as a fact of life. The CBO projects them going out to 2080. Yet, health care is an information and communication technology industry. It could be enjoying collapsing costs, if only we would set it free.

Karl Smith is an assistant professor of economics and government at the University of North Carolina School of Government and a blogger at