I listen to a lot of conservative and liberal talk radio. Almost universally the conservatives are against the current health care reform and the liberals are for it. The one liberal complaint is that it doesn't go far enough. They want a single payer system.
But the bill that has passed the house and is going through the senate should scare the bejesus out of liberals. Why? Because as much as you may not want to admit it, democrats will not always be in control of the government. Imagine if there was a single payer system where the government was in complete control. Now imagine that President Bush was back in office or that, may heaven help us, Sarah Palin were to get elected president of the United States.
Pretty scary thought, isn't it? What do you think uber-conservatives would do if they were in control of the nations health care? Not only would payments for abortions be completely banned but any stem cell treatments would probably be banned too. You can completely forget about medical marijuana being funded. I'm pretty sure they'd put strict restrictions on pain medication...
You get the idea. Everyone screaming for the federal government to take over our health care system, ask yourself this question: Would you still want this system if the other party was in control of it? I assure you that one day they will be.
Tuesday, November 10, 2009
No Incentive, Lousy Employees
Running my own company has me thinking more often about business and economics. Lately, I've been considering the effects on an organizations of having an effective incentive program. After walking into the post office today, I have no more doubts: The inability to fire someone has seriously negative impact on performance. The same can be said for fixed pay structures (think teachers union).
So what happened to me today? I had to run to the post office "quick" to drop off a package. It was about 1:00 when I walked in and there were about 5 or 6 people in line in front of me. A pretty decent sized line for my small post office down the street. Now you would think that, being right around lunch, a popular time to run errands like going to the post office, that there would be 2 or 3 people working behind the counter.
You would be wrong. There was just 1 person.
You would think that if 5 or 6 people were standing in line and waiting, on average, 15-20 minutes to get service (which is how long it took for me), that someone else would be called out to work one of the 3 empty counter spots.
You would be wrong again. Instead, the one person behind the counter just kept plugging away, methodically and slowly, servicing each customer in line. I know they have more employees because I've been in there before and seen 2 of them working, albeit very slowly, while a third person putzed around doing nothing as a long line of people was gathered.
So with 20 minutes to kill while standing in line, I started thinking about economics. A common theory in economics, and most private businesses, is that to get someone to do something, there must be an incentive.
Consider the following examples:
A similar position holds for those in the teachers union, the UAW (auto workers), and airline unions. Is it any wonder that our government, schools, auto industry, and airline industry are all in trouble? It's not a coincidence, it's a lack of motivation. Make it clear to all of them that they can get fired for not performing and you'll watch productivity skyrocket.
So what happened to me today? I had to run to the post office "quick" to drop off a package. It was about 1:00 when I walked in and there were about 5 or 6 people in line in front of me. A pretty decent sized line for my small post office down the street. Now you would think that, being right around lunch, a popular time to run errands like going to the post office, that there would be 2 or 3 people working behind the counter.
You would be wrong. There was just 1 person.
You would think that if 5 or 6 people were standing in line and waiting, on average, 15-20 minutes to get service (which is how long it took for me), that someone else would be called out to work one of the 3 empty counter spots.
You would be wrong again. Instead, the one person behind the counter just kept plugging away, methodically and slowly, servicing each customer in line. I know they have more employees because I've been in there before and seen 2 of them working, albeit very slowly, while a third person putzed around doing nothing as a long line of people was gathered.
So with 20 minutes to kill while standing in line, I started thinking about economics. A common theory in economics, and most private businesses, is that to get someone to do something, there must be an incentive.
Consider the following examples:
- I ask you to dig a small ditch for me but tell you I'm not going to pay you anything. You'd probably refuse.
- I offer you a $1000 to dig the same ditch. You'd probably do it.
- I tell you I'll pay a $1000 whether or not you dig the ditch for me. Almost everyone would take the $1000 and a lot of people wouldn't dig the ditch. Those motivated by guilt might do it but even they would probably do a lousy job of it.
A similar position holds for those in the teachers union, the UAW (auto workers), and airline unions. Is it any wonder that our government, schools, auto industry, and airline industry are all in trouble? It's not a coincidence, it's a lack of motivation. Make it clear to all of them that they can get fired for not performing and you'll watch productivity skyrocket.
Thursday, October 29, 2009
The Health Care Article Everyone Should Read
This is an article that everyone interested in the health care debate should read (and if you're not interested in it, you're a fool - it's one of the most important issues of our time):
http://www.theatlantic.com/doc/200909/health-care
Before I even begin, there's one major point: Employer paid health insurance is a big, big problem, and the bill in front of congress right now is set to entrench that system for a long, long time. Penalizing businesses for not providing health care? That's not going to fix our system, that's going to truly and completely destroy it.
Here's the Cliff Notes as I see them:
http://www.theatlantic.com/doc/200909/health-care
Before I even begin, there's one major point: Employer paid health insurance is a big, big problem, and the bill in front of congress right now is set to entrench that system for a long, long time. Penalizing businesses for not providing health care? That's not going to fix our system, that's going to truly and completely destroy it.
Here's the Cliff Notes as I see them:
- Employer provided health care is a major problem. Because our providers are "paying" for our health care, we don't see the real costs and therefore abuse the system. I put "paying" in quotes because the fact is that you, as an employee, are actually paying the cost and you just don't know it. Why do you think wages have stagnated over the past decade? Because of evil and greedy employers? Wrong! Because they are shelling out 20%-30% more money for your health care. That's wages that you don't make.
- Employer provided health care is a major problem. Did I mention that already? Well it's one of the biggest problems so it deserves to be the top two items. This time I'm going to point out that because employers provide health care, insurers have no incentive to go after individual policies. Why waste your time trying to lower prices so that Joe Taxpayer can afford them when Company X, with a lot more capital and a government subsidized tax writeoff, is out there. You sign up Company X, you get a whole bunch of people into your system. You spend the effort signing up Joe Taxpayer, you get one person.
- Joe Taxpayer isn't the one paying the bills at the hospital, the insurance company or government is. This means hospitals have about a dozen different pay schedules depending on who's paying. Try calling up your local hospital and ask them how much a simple physical is going to cost. Some of them will probably tell you, "We'll tell you after you come in and get the physical." I'm not kidding, that's probably what most of them will tell you.
- This entire debate is about the wrong subject. We're debating insurance costs and not health care costs. Health insurance isn't the real problem. Health care costs are.
- Doctor's and hospitals aren't evil, but they have to make a living. This means that they frequently order more profitable procedures. Remember, in most cases, you are not the customer - your insurance company (or Medicare) is the customer and that's who they are out to please and who they are out to bill.
- The government is really bad at running most businesses. There's no incentive for employees to be efficient (just go to your local post office to experience this).
Friday, October 9, 2009
An SAT for Politics
I was thinking the other day about how little most of our politicians seem to know about economics and I had an idea. How about a new rule: In order to run for office, a person must take an SAT style exam on all the things related to their job. This would include economics 101, constitutional law, business, US & world history, a few questions on current events, and maybe even an ethics section.
A person would not have to pass this exam in order to run for office. In fact, there would be no "passing" score. Instead, the results of each section as well as their overall score would be posted for everyone to see. This would help their constituents make a much more informed decision about what their candidates actually know.
A person would not have to pass this exam in order to run for office. In fact, there would be no "passing" score. Instead, the results of each section as well as their overall score would be posted for everyone to see. This would help their constituents make a much more informed decision about what their candidates actually know.
Tuesday, September 1, 2009
Fixing Health Care
Abstract: Fixing America's health care system requires the Federal government to establish one set of rules for all states and health care related industries. This includes standardizing rules for insurance companies, hospitals, and doctors. Doing this will create an atmosphere of true competition among providers and help turn health care into a commodity. Once that happens, performance will improve and prices will drop.
Discussion
For my first blog post I'm going to aim high: Fixing health care! I'm not going to waste your time talking about the urgency of this issue. Volumes have been written on that. For a good read and some staggering statistics, take a look at the following article from the National Coalition on Health Care (NCHC): http://www.nchc.org/facts/cost.shtml.
The question now is what can we do to fix the system? A common theory is to nationalize the system. A major problem with this is it simply changes the payment structure, not the costs themselves. You may no longer have to pay when you go to the doctor, but that's because 20% (or more) of your paycheck will be going to the government's health care plan.
The next idea is to combine a nationalized health care system with cost restrictions on health care providers. Limit how much those nasty hospitals and doctors can charge. I'm not sure that's a good idea either. The medical profession is already losing doctors at a staggering rate due to malpractice and other legal concerns and expenses. Start capping their salaries and you will discover that few talented people are going to be willing to sacrifice their 20's to get into the profession.
"But it works for Canada," you protest. You're right, the Canadian system does seem to work. It has its problems but in general every Canadian I've talked to much prefers their system to America's. Before you start patting yourself too hard on the back for this counter argument, ask yourself this: Which country provides the majority of the world's medical breakthroughs? The answer is the United States where the profit incentive motivates the best and brightest minds to enter the medical field. Remove that force and Canada (along with every other country) will soon find medical breakthroughs slowing to a crawl.
So there are your options with a nationalized health care system: Pay a significant amount of every paycheck to the government to cover costs or reduce the payouts and, hence, the quality of care that people receive.
Like most of our politicians and political analysts, all I've done so far is point out what won't work. I promised at the start to give you something that will work. So here it is: A standardization of health care regulations nationwide.
Consider this example:
Company ABC decides to get into the widget business in the state of Illinois. They spend years developing a great product. They also invest in creating industry leading software and processes for managing customers and vendors. In short, they become a lean, mean machine that produces the best widget in Illinois. Within 5 years they are dominating the Illinois widget business because they're providing the best product at the lowest price.
Then Company ABC decides to go after Wisconsin's widget business. After all, they've got all the infrastructure in place already - great product, procedures for dealing with customers and vendors, and a management team that knows how to succeed because they've already done it in Illinois. So company ABC moves into Wisconsin...then Iowa....Indiana...and so on.
At each step of the way, Company ABC encounters new competition. This forces both ABC and their competitors to work harder and harder to provide a better product at a lower price. If they don't, they'll start to lose customers. To see this in action, just change Company ABC to be Dell Computers or Crest Toothpaste or Suave shampoo. All of these companies work in a truly competitive environment and provide good products at a low price because that's what competition does.
Now let's change the rules. Let's say that when Company ABC decides to sell in Wisconsin, the state legislature tells them they can only produce their widget in Red and White, they must use paint manufactured in Wisconsin, have to register every purchaser with the state commerce department, must offer 3 different kinds of insurance to customers at purchase time, widgets must come with a 5 year warranty, the product must be sold through stores only (no online sales), 4 different warning stickers have to be placed on each widget, and the packaging can only be made from recycled news paper.
What do you think happens to the price of the widget in Wisconsin? It goes way up because ABC has to hire a bunch of new staff to deal with the new laws and regulations, they have to redesign the product, and they have to rewrite a bunch of their software and procedures to deal with the new rules. Now what if every state had a completely different set of regulations for selling widgets? The answer is that ABC would either not try to branch out or it would take them years to expand. It would also make their internal processes and structures much more bloated and harder to manage. This would mean a significantly more expensive widget for everyone.
This is exactly how the health care system in our country works. If you're an insurance company, you have to rewrite a whole new set of rules every time you try to go into a new state. That's expensive. It also means that all the efficiencies realized so far by a company are pretty much useless. And insurance companies aren't the only ones. What if a hospital really mastered great care in their state. Shouldn't they be able to branch out? Just like Wallgreens or Target? But this won't happen because the rules governing each state are so different and complex. It's not worth the cost for companies to do this and those that do must charge much higher prices to recover their investments.
The other side effect of all these different regulations is a significant reduction in competition. If Company XYZ know it's very expensive for ABC to move into their territory, they're going to charge rates that are just barely low enough to discourage ABC from investing in coming to their territory. While low enough to keep ABC out, those rates are going to be much higher than they would be if Company ABC was actually in town.
Conclusion
If people really want to see a reduction in health care costs, then start petitioning your politicians to nationalize health care regulations - not the health care system itself - so that we can see legitimate, nationwide competition amongst all health care providers. This will drive quality service up and costs down.
Discussion
For my first blog post I'm going to aim high: Fixing health care! I'm not going to waste your time talking about the urgency of this issue. Volumes have been written on that. For a good read and some staggering statistics, take a look at the following article from the National Coalition on Health Care (NCHC): http://www.nchc.org/facts/cost.shtml.
The question now is what can we do to fix the system? A common theory is to nationalize the system. A major problem with this is it simply changes the payment structure, not the costs themselves. You may no longer have to pay when you go to the doctor, but that's because 20% (or more) of your paycheck will be going to the government's health care plan.
The next idea is to combine a nationalized health care system with cost restrictions on health care providers. Limit how much those nasty hospitals and doctors can charge. I'm not sure that's a good idea either. The medical profession is already losing doctors at a staggering rate due to malpractice and other legal concerns and expenses. Start capping their salaries and you will discover that few talented people are going to be willing to sacrifice their 20's to get into the profession.
"But it works for Canada," you protest. You're right, the Canadian system does seem to work. It has its problems but in general every Canadian I've talked to much prefers their system to America's. Before you start patting yourself too hard on the back for this counter argument, ask yourself this: Which country provides the majority of the world's medical breakthroughs? The answer is the United States where the profit incentive motivates the best and brightest minds to enter the medical field. Remove that force and Canada (along with every other country) will soon find medical breakthroughs slowing to a crawl.
So there are your options with a nationalized health care system: Pay a significant amount of every paycheck to the government to cover costs or reduce the payouts and, hence, the quality of care that people receive.
Like most of our politicians and political analysts, all I've done so far is point out what won't work. I promised at the start to give you something that will work. So here it is: A standardization of health care regulations nationwide.
Consider this example:
Company ABC decides to get into the widget business in the state of Illinois. They spend years developing a great product. They also invest in creating industry leading software and processes for managing customers and vendors. In short, they become a lean, mean machine that produces the best widget in Illinois. Within 5 years they are dominating the Illinois widget business because they're providing the best product at the lowest price.
Then Company ABC decides to go after Wisconsin's widget business. After all, they've got all the infrastructure in place already - great product, procedures for dealing with customers and vendors, and a management team that knows how to succeed because they've already done it in Illinois. So company ABC moves into Wisconsin...then Iowa....Indiana...and so on.
At each step of the way, Company ABC encounters new competition. This forces both ABC and their competitors to work harder and harder to provide a better product at a lower price. If they don't, they'll start to lose customers. To see this in action, just change Company ABC to be Dell Computers or Crest Toothpaste or Suave shampoo. All of these companies work in a truly competitive environment and provide good products at a low price because that's what competition does.
Now let's change the rules. Let's say that when Company ABC decides to sell in Wisconsin, the state legislature tells them they can only produce their widget in Red and White, they must use paint manufactured in Wisconsin, have to register every purchaser with the state commerce department, must offer 3 different kinds of insurance to customers at purchase time, widgets must come with a 5 year warranty, the product must be sold through stores only (no online sales), 4 different warning stickers have to be placed on each widget, and the packaging can only be made from recycled news paper.
What do you think happens to the price of the widget in Wisconsin? It goes way up because ABC has to hire a bunch of new staff to deal with the new laws and regulations, they have to redesign the product, and they have to rewrite a bunch of their software and procedures to deal with the new rules. Now what if every state had a completely different set of regulations for selling widgets? The answer is that ABC would either not try to branch out or it would take them years to expand. It would also make their internal processes and structures much more bloated and harder to manage. This would mean a significantly more expensive widget for everyone.
This is exactly how the health care system in our country works. If you're an insurance company, you have to rewrite a whole new set of rules every time you try to go into a new state. That's expensive. It also means that all the efficiencies realized so far by a company are pretty much useless. And insurance companies aren't the only ones. What if a hospital really mastered great care in their state. Shouldn't they be able to branch out? Just like Wallgreens or Target? But this won't happen because the rules governing each state are so different and complex. It's not worth the cost for companies to do this and those that do must charge much higher prices to recover their investments.
The other side effect of all these different regulations is a significant reduction in competition. If Company XYZ know it's very expensive for ABC to move into their territory, they're going to charge rates that are just barely low enough to discourage ABC from investing in coming to their territory. While low enough to keep ABC out, those rates are going to be much higher than they would be if Company ABC was actually in town.
Conclusion
If people really want to see a reduction in health care costs, then start petitioning your politicians to nationalize health care regulations - not the health care system itself - so that we can see legitimate, nationwide competition amongst all health care providers. This will drive quality service up and costs down.
Monday, February 23, 2009
Lies, Lies, Lies
I register for news feeds from NPR and, in general, I find them to be a great source of news. However, this morning I saw the following snippet:
First let me say that I do believe the globe is warming. I'm not convinced that humans are the primary cause but, even so, I think we should pursue policies related to reducing carbon dioxide emissions because it has so many other benefits. For example, not burning fossil fuels means cleaner air, cleaner water, less dependence on oil from foreign despots, and, if America comes up with the fossil fuel alternative, a massive boom to our economy. That's all a subject for a future post though.
For now, let's get back to the flat out lie being told by NPR and other people who so badly want their agenda paid attention to that they will resort to misinformation if necessary. Again, carbon dioxide is not even close to the predominant green house gas!
This line is taken right from the National Climatic Data Center (note this is a government agency and not some conservative think tank):
That last one is a rhetorical question. They do it because it makes their data look a lot more impressive. CO2 has a much bigger impact on global warming if you remove H2O from the equation.
Again, I am all for measures to reduce our country's CO2 emissions because it has so many great side effects. However, let's stick to using real data and not just that which makes the cause look right?
"Carbon dioxide is the single most important gas involved in global warming..."That is a flat out lie!
First let me say that I do believe the globe is warming. I'm not convinced that humans are the primary cause but, even so, I think we should pursue policies related to reducing carbon dioxide emissions because it has so many other benefits. For example, not burning fossil fuels means cleaner air, cleaner water, less dependence on oil from foreign despots, and, if America comes up with the fossil fuel alternative, a massive boom to our economy. That's all a subject for a future post though.
For now, let's get back to the flat out lie being told by NPR and other people who so badly want their agenda paid attention to that they will resort to misinformation if necessary. Again, carbon dioxide is not even close to the predominant green house gas!
This line is taken right from the National Climatic Data Center (note this is a government agency and not some conservative think tank):
"Water Vapor is the most abundant greenhouse gas in the atmosphere, which is why it is addressed here first."What is even more disturbing is that in trying to gather some more information on this topic, almost every organization out there talking about global warming, the vast majority of which are pro-anthropogenic global warming (human caused), don't even mention water vapor as a greenhouse gas! That is amazing to me. How can all of these agencies exclude the main component of green house gases when publishing all of their data?
That last one is a rhetorical question. They do it because it makes their data look a lot more impressive. CO2 has a much bigger impact on global warming if you remove H2O from the equation.
Again, I am all for measures to reduce our country's CO2 emissions because it has so many great side effects. However, let's stick to using real data and not just that which makes the cause look right?
Subscribe to:
Posts (Atom)
