That’s the message of Gina Kolata’s story in the 8/22/06 Science Times (sub required). The Nobel-prize winning economist, Robert Fogel, predicts that by 2030, about a quarter of economic ouput will be spent on health care, making it “the driving force in the economy,” like railraods in the early 20th century. Fogel is the author of the fantastic book, The Fourth Great Awakening.
The article caused me to recall something the visionary venture capitalist, David Morgenthaler said to me several years ago. When he was a young man, Morganthaler said, he invested heavily in technology: figuring it took a large share of income to buy more computing power.
Now he invests in health care and entertainment, which he saw as driving sectors in our economic future. Largely, he said, because the technology revolution has brought very cheap computing power. Now when he spends his money he wants to buy additional years of life, or more quality years of life, or enhanced experiences. This is where demand is. The economy is no longer powered by the key engines of the industrial era, as our current growth in the face of soaring commodity prices can attest to.
Yes, certainly, one of the new economic drivers is health care, but so is entertainment and the production and puchase of experiences. And on that score, another leading sector is destined to be education — I mean education not as elementary, high school and college — but education broadly defined as life-long development across all spheres, including work, life and leisure. And technology, especially in the form of software, will remain important as an undergirding infrastructure in this emerging economic system. Health care, education, entertainment, and technology — the core fields of the creative economy!
(posted by Richard)
August 23rd, 2006 at 1:44 pm
Health Care is on of the most unequal industries in the economy. You have surgeons, who are gods and medical assistants, who may not even speak English.
If our goal is to make everyone creative, then decreasing educational bariers in this industry is crucial. This is another area where the employee-owned conglomerates I hint at in my books can come in handy. Currently, large employers contract out health care to HMOs, which is a step from simply giving employees money (or insurance) and letting them be free agents. The next logical step is for companies to hire their own medical staffs and buy their own facilities for their employees. It might also take a hand in training or in having an interest in a medical school or nursing school so that it can internalize costs now borne by students for their educations.
Think about it this way, if you take the burden of providing for their own medical educations off of doctors and have the group assume it, you can employ them for less money (especially if you also indemnify them for malpractice in exchange for making it a matter of corporate discipline). The military services do medicine something like that. It is a model worth emulating in industry.
August 23rd, 2006 at 3:45 pm
I think there are two fundamental points that distinguish American healthcare from other growth inspiring industries:
1.Healthcare follows a perverse business model. Insurance companies make more money by withholding service rather than providing service. This isn’t necessarily a problem in say auto or home insurance, where insurance is a “just in case” measure. In this case you really are buying peace of mind. Indeed neither you nor the insurer wants to make a claim, and there is a good chance you never will.
In healthcare however you absolutely and necessarily will make claims, many claims, regular claims, and you will make more claims as time goes on. Health insurance must be and will be used, yet the business model remains one based on withholding service, and denying use.
2.While healthcare feeds countless suppliers, its does not enable the birth of new, unforeseen industries. In healthcare everything starts and stops with healthcare. It’s a onanistic industry. It does not strive to create things that could potentially give birth to new possibilities beyond itself because it simply doesn’t need.
Our physiology and need to be healthy is a constant. It is furthermore relatively isolated from economic influence. Nothing in the economy has changed our physiology. Nothing in the economy has changed our general desire to be healthy. And so while the means of healthcare have changed, the motivations on both supply and demand have not. So healthcare isn’t a part of out economic fabric the same way other industries are, because while it can affect that fabric, but isn’t affected by (beyond ways and means).
Compare healthcare with telecom. In telecom old business decays, markets erode, people’s needs and desires evolve, growth means having to find ever larger sources or ever larger growth. To remain viable telecos have had to continually reinvent their value.
So the telecom networks grew to provide platforms for growth beyond telecom. They became the platforms for the internet, for example, which provided a platform for electronic commerce, which provided at platform for disrupting financial service providers (who have nothing to do with telecom). As long we have bodies, healthcare needn’t reinvent its value, it only needs to keep the means of delivering that value current and relevant.
So this is a really long way of saying that I think while we will certainly have a lot of economic activity in healthcare, it won’t provide the same financial, social, cultural, technological, capital returns as was have seen from other high activity industries because healthcare does not have to interact with economics in the same way.
Jeez! Sorry that was so long
August 24th, 2006 at 8:24 am
Really interesting comments. Thanks. There is a huge amount to say surrounding this issue, but as the husband of an md, I have seen many sides to health care. Two observations — the consumers are their own worst enemies — food, smoking, lack of exercise and sleep, etc.. People in the US treat themselves worse than rental cars. Second, there are great returns and opportunities in health care right now and many of the benefits do accrue to patients. In just the past five years tech and process in the ER has radically changed. It has not yet dispersed throughout the country/world, but in major cities in the US, emergency medicine has much improvement (patient flow, tech available in ER, etc.) that has benefited patients with heart disease, workplace injuries, and kids with asthma. And btw, I don’t believe doctors are not treated like gods anymore — not by patients, administrators, the media, or insurance companies.
August 24th, 2006 at 10:33 pm
David,
You said, “there are great returns and opportunities in health care right now and many of the benefits do accrue to patients.”
I can’t argue that. But that wasn’t really my point.
My assumption is that things like telecom and like the interstate highway system provide platforms that start chain-reactions of new industry generation, and that this creates vastly more value than that generated within the single origianl industry itself no matter how big it is.
So while healthcare may generate enormous economic activity, it does so largey within itslef, providing a poor platform for such chain reactions.
Let’s take your example of the ER. In the past 5 years what new non-healthcare related industries have grown out of these advances?
Let’s compare to telecom. Over a 5 year span beginning in say 1995 telecom data services gave rise to a short lived independent ISP industry, web development and to electronic commerce. eCommerce in turn brought profound structural changes to the travel, financial and courier industries. And together eCommerce and courriers have given rise to a sizable cottage industry of eBay resellers and physical eBay drop off locations.
Each of these offspring industries have entirely different goals from thier parent’s. Yet nearly everything that comes from healthcare remains focused on healthcare–healthcare begets itslef.
My point wasn’t about healthcare’s value or capabilities. It was that healthcare does not start these chain-reactions of industry creation the way other industries do and must to survive.
August 29th, 2006 at 10:17 pm
Health care has secondary benefits in real estate (like Starbucks), education, organized labor and technology equipment.
It also allows for the most creative generation ever to live longer and keep innovating.