A Perfect Storm - US Health Care

Eugen G Tarnow  April 10 2017 12:02:11 PM

By Eugen Tarnow, Ph.D.
Avalon Business Systems, Inc.
http://AvalonAnalytics.com

Vanguard just sent out a newsletter that identifies "the structural forces dampening global growth and interest rates".  

They are:

• Technology - falling technology costs
• Demographics - an aging populace
• Globalization - competition on prices and labor

Thus far health care has been immune to, or benefited from, all three forces.

Health care technology costs are typically increasing, not decreasing, and used not to eliminate inefficiencies but to open up new product lines.  Since the 1970s a substantial number of doctors could have been replaced by computers since AI systems were already then giving good enough diagnoses.  AI diagnostic systems have improved but their use is always limited by some kind of licensing requirement. At the same time, electronic medical records have become more and more expensive and cumbersome.  They do not include a diagnostic field presumably to prevent AI from taking over.

The demographics will increase the need for medical care. After Medicare was introduced, doctor salaries increased from three times the average salary to seven times ( http://www.medpagetoday.com/Columns/At-Large/27158 ).  The demographic change will, no doubt, bring this inequality to new heights.

Health care has been able to escape globalization by a variety of protective laws.  Drugs cannot be imported, FDA prevents European approved drugs from being used, doctors are very hard to import (unlike computer programmers) and that is restricted also by state lines...

That adds up to the perfect storm.  While most families in the US have had their salary growth stop due to technology and globalization, health care has not and demographic changes will exasperate this.

Health care will give us the perfect storm.


Figure from http://www.mnhospitals.org/Portals/0/Documents/education/7016_GS01.pdf
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