Over the holiday I spent some time with a close friend of mine, an amazing pediatrician, exploring the trouble with the U.S. health care system. He is a huge advocate of prevention, investing in wellness, education concerning diet and exercise and non-traditional (e.g., Eastern herbal remedies, resulting in fewer drugs, fewer procedures) protocols. We then discussed how little money is going into prevention and how much money is going into acute care. Sure, we have state-of-the-art trauma centers in every metro area, sometimes many of them, yet reimbursement for preventive medicine and wellness care is atrocious. To be a pediatrician today who values patient time and accepts insurance is to accept a mind-bogglingly low return on investment. Who makes the big money? Acute care professionals. Think transplants. Yet acute care is the highest cost way to deliver health care, just like when the uninsured walk into an emergency room for a basic medical procedure. Our society has it all backwards. We should be investing in prevention and wellness to sharply reduce the need for acute care. Yet the financial incentives are for the hospitals and the pharmaceutical companies to push their most high-margin products.
This line of thinking is not strictly the province of health care. Consider the financial sector. Here we are, playing a massive game of catch-up. Yes, the patient, the U.S. financial sector, is in need of acute care. We are plying it with expensive drugs (TARP), and in the meantime are on the waiting list for a transplant (excising the bad assets). All this treatment is very, very expensive. A few trillion and counting. Now consider how a little prevention might have altered the picture:
- Basic conflict-of-interest guidelines addressing the rating agencies;
- Stricter application of FAS 157 and tightening of rules governing special purpose vehicles;
- Standardization of CDS contracts to move them towards exchanges;
- Tighter monetary policy sooner after recovery from the tech bubble; and
- Damping down the lending targets of the GSEs in order that they originate good loans, not just loans.
These points are neither earth-shattering nor revolutionary. For each one of these issues there was a lot of debate at the time, yet politics, lobbying and short-termism dominated the discussion. And now we have what we have today. Taking a little more time and getting things right upfront; pretty basic stuff. Yet we as a society consistently fail at this. We always seem to be in a rush. We love complexity. We are impressed by extremes. So much so, it turns out, that it is to our peril. Maybe if we’d slow down just a little, try and get the big things right and weren’t so impressed by fancy degrees and high IQs we’d be a lot better off. Innovation is great. It is the application of innovation that can either make you or break you. And at the moment, we’re kind of broken.
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