Healthcare Reform in the US: The Humongous Opportunity to Improve Governance in the Developed World

healthcare

According to recent statistics, the total cost of the US healthcare system –taking into account public and private service providers– is in the neighborhood of USD $2.8 trillion a year, about 18% of its GDP.

By comparing on a per capita basis, the total cost of healthcare in the US is around:

  • 50% higher than France’s

  • 80% higher than Canada’s

  • 90% higher than Netherlands’

  • 100% higher than Germany’s, Britain’s, Norway’s, Sweden’s and Australia’s

  • 170% higher than Italy’s

  • 180% higher than Japan’s

  • 190% higher than New Zealand’s

 

Among other elements, life expectancy in the US is at the bottom of the average of the eleven nations previously mentioned. Generally speaking, the quality of healthcare in the US isn’t particularly different from any of the eleven nations mentioned yet, in a very dramatic contrast, the cost of healthcare in the US is remarkably higher than the rest of the developed world.

 How did the US get into such a big mess? There are plenty of reasons. A huge truth, however, lies at the bottom of such a horrific state of affairs: a deficiently designedsystem, with extremely poor public governance (more on this in my book GLOBALIZATION: Opportunities & Implications). When a system has reasonably effective checks and balances functioning, by definition it is harder for it to get out of hand. The US healthcare system evidently is highly ineffective and has insufficient (frequently non-existent) checks and balances.

The diagnostic of the combination of causes behind the massive dyssaray in the US healthcare system is widely known, mainly: structural deficiencies in the way insurance companies and drug companies operate, government bureaucracy and its inability to negotiate prices, malpractice and malpractice suits, among others.

A piecemeal approach to correct the US healthcare system is indispensable, yet insufficient by itself. The only way to grapple with it in a meaningful way is through a simultaneous dual approach:

health-care-reform

  1. A holistic, comprehensive focus on the whole healthcare system. Genuinely assigning top priority to make it competitive, according to the world best practices and benchmarks. Understandably, this initiative has to be favorably voted by the US Congress.

  1. In addition to 1), as previously mentioned, a series of very specific fixes in all areas that require it. Point 2), however, must be done in strict accordance, as indispensable specific tasks within the overall 1) framework. In other words, the master plan is contained in 1). The specific tasks of 2) must be subordinated to 1).

If point 1) is overlooked and/or insufficiently addressed to, as has been the case for several decades to date, more failures or, at best only symbolic progress will be attained. Great deviations require great measures.

Learning from other countries, from the best run systems in the world is compulsory. This is one of the finest advantages a global society truly offers. There are plenty of countries to learn from. Benchmarking with the rest of the world is imperative, particularly with the developed world, in the US’s case. Naturally, any decent benchmarking effort is dynamic, with permanent action implemented in an ongoing basis, to close the gap with the best managed countries.

The deplorable situation of the US healthcare system is not a new phenomenon. In fact, this unbearable status quo has been, on the average, increasingly deteriorating in recent decades. Given its crucial role in the US economy as a whole, it cannot continue in the present course for many more years. A profound and systematic remedy must be shortly implemented; otherwise, it will become unsustainable in the not so distant future.

If history is any guide, the turning point of the US healthcare system inevitably will come when the crisis hits superlative proportions, if previous deep and effective corrective action has not been taken.

The incurred costs for the US society to date of maintaining such a dysfunctional healthcare system already have been several tens of trillions dollars of wasted resources. There is no room for such a monumental mismanagement in any country on earth, not even in the wealthiest economy on the planet.

There is no debate about the humongous problem the US healthcare system represents. Most fortunately, however, the magnitude of the opportunity behind such dismal state of affairs is, at the very least, of the same caliber than the horrendous multi-mentioned cost of essentially maintaining the status quo.

The US healthcare system is a prime example of mismanagement and unresponsive leadership, a true case of very poor governance. Interestingly enough, the US did not get to be the wealthiest and the largest economy on earth by being a notable or frequent practitioner of poor governance, more so in such a monumental scale. To the contrary.

Our reading of this situation is that, in essence, contemporary political systems are experiencing severe fatigue; they are worn out. The US healthcare system is a textbook example of this.

The US healthcare system is thus a very illustrative grotesque example of the acute dysfunctionality of contemporary political systems in developed nations (see related post). The EU debt crisis and its impossibility to meaningfully advance in the direction of a true confederation of European states is another prime example. In fact, to a lesser or greater degree, this dysfunctionality afflicts virtually all developed nations. This otherwise terrifying conclusion should not be taken with discouragement. To the contrary. Therein lies one of the greatest well-being and wealth creation opportunities in the developed world. The US, as a leading nation, has the opportunity to take the leadership in this paramount task.

Effective, well-thought governance for every organization on earth is imperative. Excellent governance of state companies, systems or any other sort of governmental organization is more so, because in most cases the social and economic impact is significantly higher than in the private instances. In addition, high inefficiency in the private sector is most of the time heavily penalized (or rewarded, in the opposite situation) by society itself, by readdressing their patronage to more worthwhile service providers, and by the stock market, when dealing with listed companies. In contrast, given their usual monopoly status in the state sector that is not the case.

In short, given the multiple limitations the very nature of public service implies, it is of paramount importance very high-caliber governance, with highly effective checks and balances in place.

The US health care apparatus truly is a systemic problem/opportunity. An effective fix inevitably requires a profound transformation of policies, guidelines, rules, regulations and practices. The perverse incentives currently at work have to be repealed, and replaced by sensible ones. Otherwise, it will not work. Naturally, everybody is aware of the tremendous difficulty such a monumental task implies. This is the major reason why nobody (presidents and Congress) has been able to fix such a huge and pressing problem for the US society.

The recent episode of the partial federal government shutdown due to the lack of agreement between Democrats and Republicans on how to fund it reveals a worrisome self-destructive attitude of politics in the US. An additional testimonial about the severe dysfunctionality of that political system, remarkably similar to the rest of the world.

In the substantial improvement of highly dysfunctional systemic structures lies the greatest well-being and wealth creation potential of mankind. This is the major source of inspiration behind the rationale of our proposal to start to massively reduce world poverty in a systematic way, beginning with the failed nations (see TGP).

Aiming for substantial improvement of highly dysfunctional systemic structures makes all the social and economic sense in the world. Political obstacles have to be removed. Unfortunately, however sensible the route of genuine constructive structural reform truly is, society has not been, sufficiently aware of the astounding opportunity cost (missed opportunities) most worn-out practices represent. It is time to wake up.

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About Martin Marmolejo

Global Investment Manager | Founder & Managing Director at MMA Global Investment Management | Proud husband and father | Follow me @globalmarmolejo.

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