Tuesday, May 12, 2009

A Few Thoughts...

In an effort to provide insurance for the uninsured, President Obama appears to favor a “Federal Option” aimed to compete with private carriers. Such a plan would spell the end to competition in healthcare as we know it. I am not suggesting employers and employees don’t want change. The change most want is for the prices to come down or at least flatten out. However, the cost will not come down without rationing -- either by reducing services (rationing of care), reducing payments to providers (rationing of dollars), reallocation of services (taking from the older with coverage and giving something to those without), or reducing demand (people behaving differently and needing less service).

Presently, there is a limit on resources. If the supply is fixed (limited number of hospitals and physicians) and the demand increases, costs tend to rise. If the supply of providers increases and the demand stays the same or reduces, costs will tend to fall. To have any chance of cost stabilization as a nation (no increase to the current % healthcare represents in the GDP), we need to use the same or less service in the aggregate.

New and improved technology may reduce administrative cost but offsetting that will be new technologies which cost more money. People tend seek out treatments which save, improve and offer convenience – even if they cost money.

I live to the east of Cleveland – just the other side of 271. I have noticed that both the Cleveland Clinic and University Hospitals are increasing the supply of their services to Cleveland residents who live east. With the increase of supply, will our costs go down? I don’t think so, but I do appreciate how convenient these services are for my wife and me. I am just hoping I don’t have to use them.

Remember, eat less and exercise more – and try to eat an apple a day.

- Mark Alder, President, Herbruck Alder - malder@herbruckalder.com