Bigger Healthcare Company – Smaller Health Care.

Huge Healthcare Complex with all the Bells and Whistles

Big companies are generally thought to be more efficient than small ones. This lets them offer customers products and services at a lower price – which raises demand, so they increase supplies to meet that demand, and so forth …, always growing bigger seemingly without end. This process – called ‘economy of scale’ or ‘scale’ – is a given in classical economic theories. But it ignores many facts. I emphasize  ‘theories’ because a lot of current economic claims are false in the ‘real world’, and the general public is easily bamboozled.

An example of a false idea is the call for Austerity by politicians, when the economy turns down. A household should cut back expenses when its income drops, but a country is NOT LIKE a household. In a recession, most businesses and employees are in trouble, so governments should spend more, not less, to keep the economic wheels turning. E.g., they can run programs to train  people with employable skills, to improve infrastructure, to cover unemployment losses, etc. However, they should not compete with the  private sector; and when the latter improves sufficiently, these public sector activities need to lessen proportionately.

Michael Hudson shows effectively how easily the public is disinformed. I recommend his discussion of the Great Financial Crisis (2018), the “Slow Crash” (2016) and Inflation (2019), reposted on Naked Capitalism. He wrote a long, complicated dictionary of economics that well supports his skeptical perspective. He titled it J is for Junk, for readers who have the time. Hudson writes well, and advises governments around the world.

According to a Naked Capitalism (02/2022) article, debt is increasing enormously around the world, and financialization is the major reason. Some ‘American Exceptionalists’ claim debt isn’t growing in America, and give loan statistics to prove it. But that’s the wrong measure, Hudson explains. He says it’s because younger adults don’t borrow to spend; they simple “use” what they need, rather than “own” it, which is very risky. It’s a very strong, counter intuitive argument.

Another major misunderstanding is the worry over deficit spending, or National Debt – a  popular theme among both liberals and conservatives. But a country with a “sovereign currency” (and most nations in the world are such) cannot ‘go broke’. Their treasury can always pay the value of a unit of currency a person holds (e.g. US Dollars, Russian Roubles, Indian Rupees). The provisos are, 1st, that government approves the expenditure (hopefully with Democratic procedures – i.e., input from the people and their representatives); and 2nd, the means are available in terms of labor, materials, land, etc. The deficit issue is explained by Stephanie Kelton, who is a leading proponent of Modern Money Theory (MMT), which has received (pro and con) attention in the mainstream press. See especially the section on Deficit. As she puts it, she’s neither a Deficit Hawk, nor a Deficit Dove, but a Deficit Owl. Her position is to be watchful of real conditions, not theories, and to adjust money policies accordingly. In a 2017 LA Times article she said, “Congress can give every American a pony (if it breeds enough ponies)”. Ms Kelton was an advisor to the Bernie Sanders 2016 campaign. But she’s more interested in facts than political perspectives, which are personal.

As mentioned above, the common notion of scale assumes that bigger is more efficient. The extreme right wing advocates that the least government interference is always the best way to achieve scale efficiency. The latter accept that idea as gospel, and preach ‘Free Markets’ of the kind favored by Adam Smith, like the Chicago School and the Austrian School. They believe that natural laws of ‘supply and demand’ balance out the system, like an “Invisible Hand” (without interference from God, thank you!). BTW, Smith was not the first to propose these laws. It’s believed that such laws will award the most efficient producers, and benefit consumers.

But these beliefs fail in several ways. E.g., current notions of efficiency and scale don’t count how much influence monopolies still have. The old Anti-Trust laws have faded away. There were reform efforts being discussed when Saule Omarova was nominated by Pres. Biden for Comptroller of Currency, which had some bipartisan support. But she withdrew her nomination as a result of nasty objections from hard right press, claiming it was a big step on The Road to Serfdom – Friedrich Hayek’s 1944 iconic book for ultra-conservatives.

Another problem with these beliefs is that consumer protection laws have been made ineffective, largely through ‘self-regulation’ (which favors the industry over the public), and lack of funding. An example of the latter is the 1996 Dickey Ammendment. The NRA convinced Congress to pass legislation to forbid funding research on the health consequences of gun ownership!

But beyond all the efforts to persuade, influence or disinform the public about the long term benefits of Capitalism, I believe ‘the system’ ignores a basic principle of morality. Certain institutions (e.g., just government and laws); services (e.g., education and health care); and products (e.g., food, clothing, shelter) are public goods, and should be provided by any civilized society.

Returning the the topic of this post, what are the problems with our broken health care system? Missouri State Medical Association points out how mergers increase costs but don’t improve care. UC Berkeley gives the same conclusion, in a more recent national survey. According to this July 2021 publication by Robert Schmerling, from the Harvard Medical School, there are lots of complex issues . And last, here’s an article listing 7 reasons for rising health care costs, from the People Keep blog, March 2021. These studies confirm the theme of this post. Some issues are: Big health companies don’t have to be efficient when they can dominate an area. Helpful information is hard to find, hidden by opaque reports, and confusing jargon. The underclass is underserved. People in farm country are far from health care providers. Insurance companies will always pay a bigger bill, because their growth depends on it. And financialized health care ignores the Public Good.

In our business culture of quick-as-possible profits, the use of ‘labor-saving’ hi-tech tends to replace much of the personal face-to-face or voice-to-voice contact. So ‘customer satisfaction’ must be generated in dozens of robotic artificial ways, e.g., in-your-face requests to ‘Give your feed-back’; ‘Rate your experience 1 to 10’; ‘Like us on Facebook’, etc. Popular as robots may be for some people, all this seems rather dehumanizing to me. It helps explain, as said before, why many people are questioning Capitalism, and thinking it doesn’t fit well with Democracy. Immeasurably more significant, though, as shown in this The Conversation article, many people around the world are losing faith in Democracy as well.