Before I jump into the topic, you might want to know: Why do we, venture investors, care about the debate? Is this another case of financially comfortable people getting in touch with their inner left-winger? I can’t answer for the deeper layers of my psyche, I’ve given up on such explorations. All I can say is: We The VCs don’t like the ever escalating portion of our GDP spent on healthcare, 17.6% in 2009 and expected to rise to 19.5% by 2017.
More specifically, for our startups, the cost of employer-sponsored health insurance has risen by 119% (!) in the last decade. We’re in the business of financing the dreams of entrepreneurs, not lining the pockets of insurance companies.
(For more on the the GDP threat and other toxic issues see my January 11th, 2009 Monday Note here.) And, on the unproven assumption we have a heart and soul, how could we like the spectacle of close to 50 million (this is likely to be the 2009 number) uninsured people?
With this out of the way, on to the debate.
First, I see a terrible error in reasoning: we can’t keep treating healthcare like a business. We’re not dealing with the financials of Boeing, Walmart or Apple. Once upon a time, an aspiring executive, I wanted to be initiated into the brotherhood of executives. Knowing my pangs and playing on them, McGraw Hill,
the publishing giant now trying to get rid of Business Week,
sold me a subscription to management books series. Luckily, these were good books, I fondly remember Robert Townsend’s Up The Organization! and, to today’s point, Peter Drucker’s
The Practice of Management.
Take a look at the enthusiastic Amazon reviews. More than thirty-five years later, one idea from the book still sticks to my mind: the difference between businesses and institutions. The Army, Congress and, according to the great management sage, hospitals all are institutions; they shouldn’t be thought of, or managed like businesses. (I won’t get into the “business” of Congress with lobbyists.)
To our now costly regret, we’ve allowed medicine to be run like a business. When doctors mortgage themselves to buy expensive imaging equipment installed right into their office, guess what happens? Medicine leaving, rightly, much to the doctor’s judgement, a doctor now motivated to run expensive diagnostics, just in case.
If you have the time and stamina, read the great New Yorker article on a Texas town, McAllen, featuring the highest per capita medical costs in the entire country. Why? The equipment and a culture of treating medicine as a business, of milking/bilking patients and, in most cases, their insurance companies. The latter always have the solution of raising premiums on customers who can’t go elsewhere for fear of being denied coverage because of a pre-existing condition.
If you want an even more disheartening read on the state of healthcare in the US, versus the rest of the world, grab T.R. Reid’s The Healing of America.
Again, take a look at the Amazon reviews. The subtitle reads: A Global Quest for Better, Cheaper, and Fairer Health Care; it foretells the awful story inside, not by a left-wing firebrand but by a moderate soft-spoken scholarly but readable writer.
In a nutshell: We, the US, are number one (we always like the sound of that) in per capita spending; but, depending on the way outcomes are measured, we rank something like thirty-seventh on the quality/efficiency of our healthcare.
To quote the author: “You don’t need an advanced degree in yajnopathy to recognize that the stars are aligned and the timing is propitious for the United States to establish a new national healthcare system.”
Yet, we’re mired in heated controversy and ugly lies. More