qotd: Fareed Zakaria on single payer, using lesson from Kenneth Arrow

Healthcare IT News
October 21, 2015
Fareed Zakaria: Health IT is no magic bullet
By Bernie Monegain

As Fareed Zakaria sees it, the remedy for America's ailing and expensive
health system is clear.

It might be hard for some to swallow, but, in his view, it is sure and
proven.

"There's absolutely no question that when we look at the ability to
provide good healthcare at an affordable price, lower levels of massive
inequality in healthcare outcomes or provision, a single government
payer and multiple private providers is the answer. It's absolutely
clear that is the only way you can achieve that goal," Zakaria said.
"The revolution that's needed here is not an information revolution,
it's a political revolution."

Zakaria is a journalist, author and host of Fareed Zakaria GPS, a Sunday
morning staple on CNN that delves into global issues and ways to solve
them. For purposes of his broadcast "GPS" stands for Global Public Square.

Zakaria spoke to a crowd of more than 600 healthcare CIOs at the annual
CHIME Fall Forum, October. 16 in Orlando, Fla.

"The fundamental point, I think, that you have to understand about
healthcare is information technology, globalization are not magical
solutions," Zakaria told the audience.

This is especially so, because the fundamental structure of healthcare
"makes it very difficult to achieve certain economies of scale."

"What I'm always struck by when I look at healthcare," Zakaria said,
"is the fundamental accuracy, impressions of the 1961 or 1962 article
written by Kenneth Arrow, a Nobel Prize winning economist, who said
healthcare is not going to operate like any other market."

Indeed, noted economist, New York Times columnist and author Paul
Krugman also references Arrow's work.

"One of the most influential economic papers of the postwar era was
Kenneth Arrow's Uncertainty and the welfare economics of health care,
which demonstrated – decisively, I and many others believe – that health
care can't be marketed like bread or TVs," Krugman wrote in a 2009 column.

Exactly Zakaria's point.

Healthcare "is all non-tradable work," he explained. Yet, "people look
at healthcare and they ask themselves, 'Why aren't you getting more and
more productivity?'"

That approach works in most industries.

"We have wrung inflation out of literally every industry," Zakaria
noted. "In most cases you've seen enormous price deflation. Think about
computers; think about technology."

Higher education and healthcare have been elusive when it comes to
controlling spiraling costs. In fact inflation rates have been two to
three times higher than the national average, he said.

"In both cases, you have the consumer not paying, very complicated
government regulation that involves lots of third parties that pay and
reimburse on very complicated schedules," Zakaria said. "So all the
normal price mechanisms that are at work that allow supply and demand to
find equilibrium do not exist. "

As Zakaria sees it, the answer does not lie in technology – at least not
in technology alone, but rather in the structure of the health system
itself and leaders should be prepared to unravel the structure.

"I don't mean to be the bearer of bad news. What I mean is you have a
very complicated job ahead of you, which is the structure. In addition
to that you have a Democratic system, which makes it very hard to change
the structure."

http://www.healthcareitnews.com/news/zakaria-health-it-no-magic-bullet

Kenneth J. Arrow, "Uncertainty and the Welfare Economics of Medical
Care," The American Economic Review, December 1963:

https://www.aeaweb.org/aer/top20/53.5.941-973.pdf

***


Comment by Don McCanne

Although Fareed Zakaria has wavered in the past on what we need to do to
improve the health care system in the United States, he has now come to
the firm conclusion that we need single payer.

As he states, "There's absolutely no question that when we look at the
ability to provide good healthcare at an affordable price, lower levels
of massive inequality in healthcare outcomes or provision, a single
government payer and multiple private providers is the answer. It's
absolutely clear that is the only way you can achieve that goal."

He cites the 1963 landmark article by Nobel laureate Kenneth Arrow,
"Uncertainty and the Welfare Economics of Medical Care," (link above)
explaining why health care cannot achieve a competitive equilibrium in
the marketplace. In today's terms, Arrow's work explains why it is
foolish to continue to rely on a marketplace of private health plans
plus various public programs to try to manage spending in our $3
trillion health care industry.

As Nobel laureate Paul Krugman states, "health care can't be marketed
like bread or TVs."

Imagine marketing fire or police or disaster relief services like bread
or TVs. Those services should be there, ready for any of us whenever we
need them. The same is true for health care. That would work just fine
if we made our government the single payer.