Sunday, December 16, 2012

After the Affordable Care Act? After Obamacare? Part One: Moore's law

John Cochrane professor of finance at the University of Chicago Booth School of Business wrote a recent essay entitled After ACA: Freeing the market for health care. The essay is very interesting as it makes the case of the need for decoupling health care from health insurance when discussing the demand and supply for health care and insurance merely being a mechanism to address catastrophic losses. Others have also pointed out the need to decouple the two concepts, however Cochrane does so in such a way that points out that the supposed market failure in health care is directly related to government failure in the realm of health care due to government lead market distortions on both the demand and supply side of health care.

The essay uses the term “after” in its title as it become very apparent after reading Cochrane’s essay that coupling health insurance to health care through massive government intervention becomes a situation of government failure supposedly corrected through additional government failure. That mandating insurance does nothing more than perpetuate the underlying health care demand and supply distortions and the inherent failure of the system. Hence “after” is a term used to point out that “after” more government failure in the form of the Affordable Care Act aka Obamacare a point will come when health care will actually be repaired by the withdrawal of market distortion produced by government failure.

One of the first points in the essay, as mentioned above, is to examine health care separate from health insurance. One of the first observations in the essay is very worthy of note and one would be well advised to reflect upon the observation: why does technological innovation in other sectors either drive costs down or produce significant additional benefits at the same cost yet technological innovation in the health care sector drives cost down at a snales pace in comparison to other sectors, produces additional benefits at a much higher cost or even drives up cost ?

"Why does Moore’s law not apply to medical devices? Why has the price of cell phones, GPS, and computers come down so fast relative to the prices of medical technology? Where is the home MRI? There is nothing deeply different about medical and other technology. The answer is that supply and demand – in the current highly regulated system – is not producing the Moore’s law incentives.” (1) (2)

To be continued.


(1) After ACA: Freeing the market for health care.

(2) Moore’s law:

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