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POLICY: Unrealistic, unfair mercatilism in health care.

I like Don Johnson’s blog Businessword but sadly when you really push him, as I’ve done in his comments over the last couple of years, he either won’t answer or his answers reveal a political philosophy that is downright mean. So in his criticism of Krugman’s analysis on his blog and in comments at THCB here, Don essentially says that if you’re poor or sick in America, well that’s just tough titties. And, as a by product, it’s OK for the insurance market to screw over those who really need individual insurance because, well, because it’s a "market". Same way it’s OK for Enron to defraud the California rate payer, or same way it’s OK for Healthsouth to defraud its shareholders. After all they’re operating in "markets" too.  But Don misses the wider point. Because of the way the US system is set up  — because we’re a richer country than any in Europe, and because the majority of people can afford to pay way too much for our health care —  we systematically overpay for things that no rational market would value. That does not help our economy, it hurts it as most health care spending is non-productive to the overall economy.

The other point that pro-unrestrained booty capitalists in health care, or those Krugman was criticizing, go on about is the huge waiting lists in Canada and the UK.  Well as I mentioned in the UK the wealthy can trade up with their own money while the less well-off get a decent standard of care. Meanwhile single payer advocate Don McCanne found this just excellent chart from Stats  Canada which shows that median waiting times for non-emergency surgeries in Canada  are just over 4 weeks! I’m more than prepared to wait 4 weeks for non-emergency surgery if it means that poor people wont be crushed by their medical bills and can get access to basic health care. (For far more details on this see my "Oh Canada" piece).  And anyone who doesn’t think that’s a fair equation is just mean in my viewpoint. Not to mention that such a system would cost me as a tax payer and a premium payer less money! Money I could spend on other, more productive things, like Frappuchinos.

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  1. //No one seems to demonize the neuroligst with 3 vacation homes?//
    You’re right – there needs to be a better way to talk about outrageous pay other than the cheap soundbyte “executive pay” or “CEO pay”. When critics talk about bureaucratic money-sinks, people envision the cost of supplies and red tape. The stereotype of the bureaucrat is middle class, if not egregiously underpaid. However, at Kaiser the Shareholder physicians make out like bandits, and a substantial mass of physicians feel underpaid (I would argue that this feeling is only relative to the income of the Shareholders. I don’t regard $200-$500k as low pay). The real money drain, however, is overpaid managers – especially in certain privileged pockets. Hundreds of managers making 200k+ and their thousands of employees making 100k+ are just as draining as a multi-million dollar CEO. The income of these managers is not part of the Shareholder report or subject to government reporting: the bureaucratic “budget planning” is hidden from the public.
    //Whether you agree with regulations or not, they add to the cost of doing business.//
    I agree that the world would be a much better place if regulations weren’t necessary. However, unscrupulous behavior makes it necessary. I know from my own experience that Kaiser has no qualms about lying, destroying documentation, and manipulating the evidence. While most people don’t have the resources to do anything about this, the fact that the regulations exist means that a strong individual or a coalition of people may be able to gather the resources to enforce honest conduct. And perhaps the possibility of such enforcement will encourage proper conduct in the first place.
    Right now HMOs (if Kaiser is typical – it’s the only HMO I have personal experience with), are spending enormous amounts of money (re: member fees, public grants) to escape the consequences of wrongdoing. Imagine the money that could be saved if HMOs just did the right thing in the first place instead of sinking all that money into cover ups and reputation management?
    //roundabout method of creating government programs without them being “government” programs.//
    This sounds like an entitlement objection. I agree that it’s a bad thing if government programs are being secretly created in order to avoid public protest against entitlements. On the other hand, perhaps such government programs are necessary to stabilize the economy, and it’s a case of public reaction working against its own best interest. In our modern state of civilization, people can no longer fall back on their own plot of land and farm for food. Most of the population is dependent: they live at the sufference of their employers, and lacking that, state programs. Failing that, people become inconveniences rather than fellow human beings.
    When society comes up with an alternative way of acknowledging the right of people to be able to support themselves once they have been brought into this world, then it will be a lot easier to get rid of entitlements that just line the pockets of non-needy parasites.

  2. I agree with you gadfly, that a HUGE amount of health care dollars (not just premiums) are wasted on bureaucracy and poor technology. But your point about fat cats executives, or shareholders being the cause for high health care premiums is exaggerated. The argument about overpaid executives has been going on for decades in almost every industry. The correlation does not exist. In the very late 90’s and early 00’s HMOs (and Insurers) were hurting or losing money. It had nothing to do with executive pay, but more to do with poor projections on health care trends (and increased regulation). No one seems to demonize the neuroligst with 3 vacation homes? How do you think he/she pays for those home?
    Dergulation does not usher in a “wild west” mentality. Nor am I proposing “no” regulation. Whether you agree with regulations or not, they add to the cost of doing business. Where do you think the bureaucracy we both agree is a problem, comes from?
    Markets need regulations to protect consumers, but understanding that the political
    My point is that regulation in many industries often has more to do with special interest than the proper role of government. Often regulations imposed on industry (like mandated benefits) is a roundabout method of creating government programs without them being “government” programs. I believe

  3. //Where do you think those premiums are going to?//
    I think they are going into a lot of bureaucratic fat, overpaid executives, and poor technology investment decisions. In the case of HMOs, the money goes into profit for the Shareholders (even in non-profits, the physicians who are shareholders are compensated like partners in a lawfirm.). Deregulation will just add a dash of Anything Goes to an already unsavory mix.

  4. If you believe that the problem with our health care system is that insurance premiums are too high, you don’t understand the dynamics of the system. Where do you think those premiums are going to? Some slush fund? HCA is posting its best year decades (look at D. Johnson’s website). Hospital profits are on the rise. I am not saying insurers are not making money, at least in FL, it less than some Hospital systems.
    The problem with the insurance market for healthcare is that it is TOO regulated. Car insurance companies do not have the level of mandated benefits they must include in their policies. In Florida, health insurers must provide coverage for 51 mandated (and growing) benefit areas. Some are good, but others are the results of special interest (provider groups).
    States do regulate insurance premiums as much as they do Homeowner’s policy. The problem is financial realities require the costs you are paying. Just look at the problems most states face in financing Medicaid. The costs are eating up their general budget. Medicaid is a single payer system for the poor with price controls and it STILL bleeding money!
    You can not compare Car Insurance and Homeowner’s policy benefits and premiums to health care. The frequency and cost of claims per insured is substantially greater than any of those policies. Also, you may think those policies are affordable but just anyone in a major metropolitan area if they think car insurance is affordable (especially with kids). As far as homeowner’s policy…come down to South Florida. You will pay at least 2x what you pay now for equivalent coverage if not 3x. And there is no market for private insurers because they all left town and did not comeback (those that are here will not write new policies). The only insurer is the State’s risk pool. In fact, it is has become the largest insurer in the State because no one wants to come back in.
    I do not buy you argument that insurers are “churning” health policies. In fact, churning is illegal (at least in FL) but it is usually associated with Life policies having cash/surrender values. It is an old practice used mostly by aggressive sales agents to sell new policies. They would sell new policies to earn commissions and the insured loses the asset value of their previous policy, and they get rate up because of the mortality tables. You don’t have an equivalent with health. Policies are usually issued for 1 year. After that year insurers can discontinue that product, like any company can discontinue any product (try buying a new Oldsmobile).
    You are paying the premiums you are (and I agree they are high) is because even though you don’t use the benefits… others do. You are subsidizing someone else’s medical claims. The problem with the small business health insurance has more to do with adverse selection than it does with churning, gouging, profits, or health care system failures. The increases for large employers and inviduals is considerably less than small employers. It’s an insurance pool problem caused mostly by increased regulation, not lax oversight.

  5. I want to refer everyone back to an earlier post on this blog: http://matthewholt.typepad.com/the_health_care_blog/2003/12/health_planspol_1.html. Under the entry relating to Georgia health care plans, it discusses the concept of churning. This is a health insurance policy designed to “milk” a consumer with a combination of high deductibles and high premiums until they cancel the policy without taking benefits. I’m in one of those policies right now. I pay $6500 a year with a $5000 deductible and it goes up $1000 a year. It was the only group plan I could get and I’m relatively healthy–just middle-aged.
    Our health care model was created on the assumption that business would provide health insurance coverage for the majority of the workforce and it worked for a lot of years. But now out-of-control insurance premiums are creating a lot of uninsured and underinsured people. If you don’t believe that health care costs aren’t influencing companies in offshore outsourcing decisions, think again (the auto companies in Detroit have been fairly vocal on this lately). Not only is labor cheaper in China, the hidden employee costs like health care and other benefits are extremely low. The bottom line of out of control insurance premiums is less incentive for companies to create U.S. jobs and this job/benefit erosion will lower our standard of living. The longer term issue will be more bad debt in ERs.
    I pay about $1200 a year to insure two vehicles (worth a total of $40K) that drive at high speeds against loss and liability. I pay $1100 a year to insure a $300,000 house against loss and liability. In both those cases my deductible is about $500 and probability of some claim is significant. Conversely, I have to spend $5000 in health care before my health insurance pays a dime. In 46 years, I’ve never spent $5000 in a single year on health care (in fact I’ve rarely made the $250 deductible most of my corporate policies had). The likelihood of a claim is very small and my health insurance is 6 times the annual cost of either my home or car insurance. Why? Because home and car insurance premiums are better regulated at the state level. A couple of years ago some Texas home insurance companies started raising rates after the hurricanes and mold damage claims started to rise and the governor clamped down. They left the state and when he didn’t renege they came back at the mandated rates. My home insurance premium dropped this year because Texas continues to take a hard line in that area. Property insurance companies are forced to develop plans that allow people to insure their cars and homes affordably. My car and home insurance company isn’t trying to milk me for money and have me drop my policy before making a claim–they incentivize me to adopt safe practices that reduce their risk through discounts for lack of claims. Until health insurance companies are forced to develop plans which really try to meet consumer needs, we are going to see an erosion of the system Donald Johnson is proud of because the system of a wide range of good benefit jobs is going away as the costs of employing people go up the options for cheaper labor expand. I’m a contributing member of the middle class with substantial financial reserves and the last couple of years, I’ve been shocked by what I’m seeing in terms of how our economy is shifting. It is only going to get worse. We need affordable health insurance and visibility into health care costs so we can shop for good medical treatment pricing. I’d consider a plan that charged $3600/year for an individual and had a $3K deductible affordable insurance. If you are middle-aged and in the individual or small business, access to that type of plan is a pipe dream and that’s not right. Trust me I’ve been shopping for three years for an affordable plan. Examples like the blog description of “churning” show that this premium inflation isn’t simply driven by things like malpractice suits, rising use of health care or medical conditions. It is simply greed and the end result of that greed will be a society in crisis as uninsured middle class people lose homes and retirement savings when trying to pay large medical bills. The insurance execs laughing their way to the bank right now aren’t considering the implications of that outcome. Three years ago I thought exactly the way Donald Johnson did–that people who complained about the cost of health care insurance were too lazy to shop, or had chronic conditions or simply too cheap to pay for reasonable coverage. As I’ve started my own business and shopped the insurance market, I’ve gotten re-educated and I keep meeting other small business people in the same boat. It isn’t a free market and insurance companies will not be interested in creating a competitive arena without government regulation (or at least the threat of it) and if we don’t change things a lot of us won’t have access to health care. The fact that “churning” is perfectly legal demonstrates how out of control our system is becoming.

  6. I guess it’s “mean” to advocate regulated free markets that:
    1. Help us have the lowest unemployment levels and lowest income taxes.
    2. Give people who take the time to become educated, find rewarding jobs and seek out health care providers they like the freedom to spend their money on health care, if they think that’s important.
    3. Try to minimize the role of centralized governmental planners who’ve never successfully created a health care system that cares for everyone in the country and makes everyone happy.
    4. Give everyone incentives to earn the money needed to buy the best health care they can afford.
    5. Not force wage earners to pay for the health care of strangers who could buy their own insurance if the politicians weren’t so good at giving everyone else’s money away in exchange for votes of the unthinking left.
    Krugman published another silly column today, and I have published another mean reply at http://www.businessword.com. And I respond to comments.

  7. / We manage to make the car and home insurance market work /
    I think it’s misleading to compare health insurance to car and home insurance. My income has always been spotty (grad student for 7 years, and rocky work history since then). As a result, I don’t own a home: hence no home insurance. I don’t even purchase renters insurance: I’ve lost everything in a burglary before, but I don’t purchase renter’s insurance because it’s cheaper to just replace everything. So – the experience of loss doesn’t necessarily lead to a rush for insurance: it leads to calculation of whether insurance will be worth it. I have never owned a car: the ongoing cost of insurance is one of the reasons I’ve never even considered it. The lack of a car limits where I can work and makes it difficult for me to visit people or move. I have to handwash my clothes because there’s no laundreymat in easy walking distance. My quality of life would improve if I had a car, but quality of life is optional, and I’m in the class that does without.
    A better comparison in terms of consumer responsibility/prudence is retirement savings. Despite having a low income, I took responsibility for saving for my retirement, and I put away money in my IRA every month. This is the money that I’ve lived off of since I lost my job in 2003 – so despite my “prudence”, I won’t have that money for my retirement. Should I ever work again, I will probably not think in terms of taking responsibility for my retirement anymore because the efforts I previously made were futile.
    I think a similar psychology comes in to play in health care. Health insurance costs a lot, so it requires a certain amount of self-abnegation. If people dutifully do without to “prudently” provide health care for their families, and then find themselves financially destroyed by a health crisis, anyway – then where’s the reward for the prudence? Or, more likely, a person gives up part of his/her income for health insurance while employed. But then the health crisis strikes when they are unemployed: it will feel like all that money previously put into insurance was thrown away. Politicians can blare “personal responsibility” messages all day every day, and people will still calculate whether taking personal responsibility *works*. If it doesn’t work in one area, people will choose to invest their personal responsibility efforts in other areas. To the average person it makes more sense to invest in short term goals, such as education or buying property, because that lessens the likelihood that the time, effort, and money won’t be thrown away.
    People do get old and do retire: that’s why from the political point of view it seems crazy not to save for retirement. People also get sick and will turn up in the ER whether or not they have insurance. Both of these situations make politicians get twirly-eyed because they don’t want people to expect “society” to pick up the tab. They don’t want people to feel “entitled” to get their needs met. However, in a free society where people calculate wise investments for themselves, it’s ridiculous to even hope people will keep making voluntary payments once they have been burned. People are rational in terms of their own lives first, not rational from a government population management point of view. Railing about people for their character flaws and “bad” decisions will just make them cynical, resentful, and angry.
    Personal and family income is not really based on a market: people often do not get what their skills are worth because the jobs aren’t available and the difficulties job-seeking process allows employers to lowball. As long as people aren’t paid in rational ways and expenses are highly variable, the government can’t predict what people can “afford”. It seems to me the only fair approach is single-payer based on income tax returns, with corporate subsidies to balance out the social cost of on-the-job injuries (and penalties for industries/sectors with a high rate of injury, including stress-related illness such as heart attacks…?). Also in income-based single payer, if the burden seems to be shifting to fewer people, that’s incentive for the public to address employment problems. If we want more people to pay income taxes, then more people have to have adequate incomes. 🙂

  8. I think the best way to put into perspective what is happening in the insurance market is to compare it to the S&L crisis in the 80s. S&Ls ran were run loosely and started making a lot of very risky loans. You could argue that the end result of S&L failures was simply a market correction, except that the government ended up making good on the money lost by depositors. In short, we taxpayers ended up bailing out bad business practices. Insurance pricing and the failure of businesses related to health care to appropriately manage internal costs is causing the same type of crisis. Our economy is shifting and many people who had jobs with health insurance are losing their access to health insurance either because they won’t pay individual premiums or their smaller employers are dropping health insurance. The cost of that is relatively small as long as a person stays healthy. But as the uninsured start having health problems, once again taxpayers will be called on to fix things either through higher taxes to support public hospitals facing more non-paying customers or through higher taxes to support the cost of expanded government-sponsored healthcare. Better regulating the current system now would be a better solution. So far the government response to this impending crisis is to tighten bankruptcy laws and limit malpractice suits. If the capitalists in health care can’t make good business decisions, it’s time for government regulators to help them. We manage to make the car and home insurance market work well enough that most people can afford premiums–why can’t we better regulate health insurance?

  9. //problem is spending IT dollars on irrational things//
    That’s true. I confess to having no knowledge of how health care IT spending stacks up to other industries, and I’m also unable to make industry comparisons in terms of prudent money management. As for my personal experience, I can only draw from working in similar areas in the banking industry. I do know that at Kaiser the IT fish was rotting from the head. The business side of IT project management was tremendously wasteful and made no sense at all. I think a lot of the blame can be laid at the door of the HR philosophy: “friends of highly placed people are good, people who know too much about IT are bad. Upper class networking amounts to loyalty, while knowledge amounts to disloyalty since people might use facts to make the privileged denizens of the ‘business side’ look bad.” At the risk of soundling like a broken record, this philosophy is stupid.
    //IT spending has been focused on the things that make money for a healthcare organization and its physicians//
    The sad thing is that even this isn’t being done in a remotely rational way (at least not at N. Cal. Kaiser). Technology spending was not entrepreneurial: it was bureaucratic. Managers based their budgets on what they were (over)paying rather than negotiating to do things in the most cost-effective way. The bulk of the money was being thrown at vendors, including real IT management services, because the managers didn’t know what they were doing. Higher salaries were going to project management than actual IT skills, but there was no real look at the skills these managers were using – which were largely clerical (tracking, sorting and resorting Excel lists with the occasional statistical summary, facilitating email communications, creating PowerPoints, etc.). A lot of HR “experts” have been saying that major organizational problems are being caused by hiring people who don’t have “people skills”. I think a closer look should be taken at people who are being hired for their “people skills” (their connections? their ability to talk a good game? their ability to look good in a Chanel suit?): I think it’s more productive to foster people skills (or, better, a situation that reduces the conflict and favors good interpersonal relations) in people who can actually dothe job. And don’t forget the added bonus that qualified people will be less likely to be insecure about and hostile to other people with appropriate skills. The situation right now operates to actively rid the whole workplace of competence!
    Some managerial foibles I saw:
    1. Lack of understanding of basic web technology that allowed vendors to overcharge for basic services such as one page of html or provision of a stock image. Managers thought that images of a web design were being created with some magical technology that could not be edited, and they believed vendors who asserted this in the interests of being paid large amounts of money for minor edits. In some cases, there was no formal contract with vendors to specify ownership of web assets, which could ultimately lead to legal disputes.
    2. No understanding of IBM mainframe and midrange systems, which constitute the core of many health care systems. No one had training in either programming or operations. This allowed vendors and IT people to say anything they want. In regard to vendors, experience in one kind of programming was taken as experience in all types of programming. For example, managers sought web advice from a vendor with, say, Cobol training before a person without a technical title who actually did web programming.
    3. Programmers were being used for routine operational tasks. Programmers were encouraging the mystification of these tasks as part of “the technical”, when anyone with a day of training could have done them. Highly over-priced consultants were doing routine tasks. Huge waste of high salaries.
    4. Physicians were being encouraged to create their own web sites without giving them any training in legal issues – such as the problem with stealing animated gifs and using them on sites that come under Kaiser’s corporate responsibility. Obvious issues, such as what could be accessed by search engines, were not addressed up front.
    5. Utter lack of understanding of design and human-computer interface principles led to wasteful project plans and a lot of rework. Design decisions were being made from user group comments and offhand remarks from highly placed executives. It’s important to understand your stakeholders, but it’s important to keep in mind that they can only suggest what’s already in their minds – and someone with some design training might be able to offer something they’d like better.
    6. Emphasis on time estimates, deadlines, and “speed” over quality without a basis for understanding whether the time estimates were accurate. Half the time managers were letting consultants get away with murder, and the other half the time they were issuing unreasonable demands based on their suspicion they would be taken advantage of otherwise. No understanding of the difference between reusing code from an existing library and writing code from scratch. Susceptibility to trendy terminology like “Rapid Application Development” with no understanding of the meaning of such terms.
    7. Tendency to blame IT for things the business side should have been responsible for, such as rational project breakdown and tracking.
    I could go on and on, but hopefully you’re starting to get the picture.
    As for the EMR/interoperability issue, I’d like to point out that “business decisions” do not lead to interoperability that will promote patient health or individual rights. The first thing Kaiser did with it’s EMR was improve their billing systems, including modules for Point of Service payment (patient has to pay at one step to proceed to the next). I was also in the room when the bigwigs were discussing how to package the vendor EMR (Epic) with Kaiser’s own proprietary population management data to sell to other Health Providers and the government. Notice the double dip: member fees pay for the EMR, and then Kaiser shareholders get to keep the profits from reselling it. Anyway, the decisions on how to develop the EMR were not being made from a best health care perspective.
    Under these circumstances it’s almost funny that bad business-side IT management is soaking up a lot of this shareholder profit. But then you have to remember the costs have been passed on by raising membership fees (and Kaiser has used technology costs to justify rising fees), and then it’s not so funny.

  10. “I can vouch for the colossal waste in the IT area – but the place to look for the cause is on the business management side rather than the technical workers.”
    While healthcare organization IT management might well be generally inept, healthcare has traditionally spent much less on IT than other industries. The problem is spending IT dollars on irrational things (from a system perspective) vs. those that provide the greatest (system) benefit per cost.
    IT spending has been focused on the things that make money for a healthcare organization and its physicians (at the expense / detriment of the system as a whole). That’s why there are many, many more MRI machines per capita in the US than in Canada and other nations, while most health systems and physician offices don’t have EMRs / CPOE and none of it is in interoperable (leading to tens of thousands of preventable medical error deaths / disfigurements per year).

  11. Oooh, he said “titties” :0 (I couldn’t resist)
    I don’t believe Don Johnson (aka Sonny Crocket) was too extreme in his comments. He may have been a little blunt, but that’s for him to explain.
    I think there is value in learning from other countries, but whatever is learned must be applied to the unique cultural context of America. In America (the land of freedom), we don’t like being told what we can and can not have. A socialized healthcare system like Canada (which denies any private endeavors) with its restrictions and rationing would last about as long as the next election cycle.
    There are two problems, as I see it, that need addressing in order to “fix” the American health care system. First, addressing the needs of the uninsured. Second, making some level insurance affordable. The barriers to both are purely economic. No one wants to foot the bill.
    The problem is We have a single payer system, Medicare and Medicaid. In Florida, the Medicaid program consumes roughly 25% of the general budget, and its growing and still does not cover everyone it should (and that is with price controls). And Medicare, count the all of the 0’s it will cost to fund the expansion. And if there is any doubt about the acceptance for a single-payer system…ask any doctor/hospital if they can survive on Medicaid payments alone.
    I don’t believe the perfect system exist but adopting rationed system to a culture that has enjoyed personal choice is naive. HMOs tried it and look what happened to them.

  12. I can vouch for the colossal waste in the IT area – but the place to look for the cause is on the business management side rather than the technical workers. Managing IT projects pays like technology, while access to these jobs is largely social. In fact technical knowledge is actively discouraged on the basis that people with too much technical knowledge won’t “side” with business interests. Access to the jobs is largely social, and the candidates are drawn from people who have had the right opportunities. I was stunned by the serious deficiency of technical knowledge in Kaiser’s N. Cal. CTO’s office. There were recent college grads serving coffee for minimum wage who could have developed a stronger working relationship with the “technical” side.
    The problem isn’t just one of class privilege in access to these jobs: bad decisions multiply costs, and those costs eventually drip down to Kaiser membership fees. The budget for the CTO’s office was over 9 million dollars: this was for an office of about 25 managers and consultants for proof of concept projects. I’ve pointed out elsewhere that the consultants were especially pricey in relation to the skills they were practicing. From the business manager point of view, however, once people are “technical”, they know all technology and should charge $150/hr. for finding some free javascripts on the Internet. The whole situation is just disgusting.
    It’s impossible to offer most of these managers free advice, too, because that’s the tip off that you are on the “technical” side, and you don’t understand the “business” side. This is ridiculous when the business side just means documenting how fast you are doing things and frakking up costly technical projects in the process.
    If I had one piece of advice for Health Care CEOs, it would be to review the way business managers for IT projects are recruited. Technical knowledge is not a drawback: it’s essential for communications and prudent budget management. Putting business managers who basically networked their way to the top in charge of highly specialized areas is *costing the organization a lot of money*. When you put know-nothings in charge, they hire other know-nothings just like them, and before you know it, your senior staff is riddled with idiots. This is in turn costing the people who are obliged to purchase your health care services a lot of money.
    Sorry for putting that in such harsh terms, but I feel like a voice in the wilderness here. People aren’t getting it.

  13. I can vouch for the colossal waste in the IT area – but the place to look for the cause is on the business management side rather than the technical workers. Managing IT projects pays like technology, while access to these jobs is largely social. In fact technical knowledge is actively discouraged on the basis that people with too much technical knowledge won’t “side” with business interests. Access to the jobs is largely social, and the candidates are drawn from people who have had the right opportunities. I was stunned by the serious deficiency of technical knowledge in Kaiser’s N. Cal. CTO’s office. There were recent college grads serving coffee for minimum wage who could have developed a stronger working relationship with the “technical” side.
    The problem isn’t just one of class privilege in access to these jobs: bad decisions multiply costs, and those costs eventually drip down to Kaiser membership fees. The budget for the CTO’s office was over 9 million dollars: this was for an office of about 25 managers and consultants for proof of concept projects. I’ve pointed out elsewhere that the consultants were especially pricey in relation to the skills they were practicing. From the business manager point of view, however, once people are “technical”, they know all technology and should charge $150/hr. for finding some free javascripts on the Internet. The whole situation is just disgusting.
    It’s impossible to offer most of these managers free advice, too, because that’s the tip off that you are on the “technical” side, and you don’t understand the “business” side. This is ridiculous when the business side just means documenting how fast you are doing things and frakking up costly technical projects in the process.
    If I had one piece of advice for Health Care CEOs, it would be to review the way business managers for IT projects are recruited. Technical knowledge is not a drawback: it’s essential for communications and prudent budget management. Putting business managers who basically networked their way to the top in charge of highly specialized areas is *costing the organization a lot of money*. When you put know-nothings in charge, they hire other know-nothings just like them, and before you know it, your senior staff is riddled with idiots. This is in turn costing the people who are obliged to purchase your health care services a lot of money.
    Sorry for putting that in such harsh terms, but I feel like a voice in the wilderness here. People aren’t getting it.

  14. Don Johnson has really been busy since Miami Vice and that show with Cheech ended… Sorry couldn’t help myself.
    As for ” . . .we systematically overpay for things that no rational market would value,” I would assume that Matthew is referring to the fact that there is no systematic mechanism (as there are in other health systems) for “rational rationing.” That’s why we – collectively – spend billions a year, for example, for allergy drugs for people who don’t actually have allergies. Or for new technology that costs a lot more with marginally better (or unmeasured) outcomes: stents anyone?

  15. Matt,
    I like what you have to say here, and while Mr. Krugman is often too shrill and repeats some known overstatements, he usually has more hits than misses. But I wonder what things you mean specifically when you say, ” . . .we systematically overpay for things that no rational market would value.”

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