One of the best-kept secrets in the United States is that workers pay almost all of the costs of their health care. They do so through employee contributions to premiums, out-of-pocket payments for services, a shift of compensation dollars from wages to benefits, and state and federal taxes such as the payroll tax that supports Medicare.
But instead of serving workers’ best interests by trying to give them the best care at the lowest cost, insurers, providers, employers, and unions act like adversaries. Insurers leverage their purchasing power to exact discounts from providers and their administrative power to reduce benefits. Dominant providers leverage their market position to raise prices independently of cost or quality. Employers leverage their power in labor markets where workers have limited job options to extract higher deductibles and out-of-pocket payments from employees. Unions, which now represent a tiny share of American workers, resist to the extent they can.
The numbers spell out the sorry result. On average, family premiums and out-of-pocket costs are about 40% of median household income (and even more if the payroll tax for Medicare is included). Meanwhile, health care outcomes for the population as a whole are improving at a rate far slower than premiums are increasing. This continuing transfer from wages to health care does not reflect better value for money.
To get on to the pathway to lower total costs with better outcomes like the parties involved in the mid-Atlantic region are trying to do, players in other regions must understand that they are in acommon system with a common pool of limited resources and that separate, zero-sum strategies are destructive. With that in mind, they must seek four changes.Harvard Business Review — HBR Blog Network
The Big Barrier to High-Value Health Care: Destructive Self-Interest
Lindsay A. Martin, Donald Berwick and Thomas Nolan
21 comments:
The barrier to everything we consume is that a surplus must be extracted out of workers efforts in order to motivate businesses to employ us, or even to motivate us to employ ourselves.
It's the idea of surplus that leads to profit theory, why a gain for one has to result in a loss by another in a closed monetary economy (hard-money).
A steady-state system cannot be maintained without an external add in a monetary economy.
https://en.wikipedia.org/wiki/Exponential_decay
If surplus is extracted from workers wages it follows the decay function naturally until activity ceases.
TINA (except for public investment or slavery). Take your pick.
Since the beginning of surplus societies, slavery or servitude, often debt servitude, has been the norm. The largest capital asset of the US at the time of the Civil Was was the slave base that supported the agricultural sector of the economy.
Productivity increases due to technological promised to deliver humanity from that, but this would only be possible if land, labor and capital shared the surplus. Land and capital has resisted that, trying to maintain and increase its disproportionate share.
Even in an open system with fiat money, if land and capital capture most of the surplus through rent, the result will continue to be debt servitude and owing to technological innovation, as permanent and growing surplus of labor resulting in a permanently falling real wage.
It's a death spiral.
"It's a death spiral"
An exponential one at that...
Paul,
I would say AT BEST 1,000 people out of 7B humans understands this like you do...
Less than 1,000 humans possess this KNOWLEDGE you exhibit here imo...
Feel special now? ;)
rsp,
Yikes !
You folks are depressing me.
"Feel special now? ;)"
I always feel special…Most everyone else probably feels like I'm a moron. :-)
You know the old saying that to be an expert you have to be 50 miles away from home (where no one knows you)?
When I'm 50 miles away I'm invisible.
But thanks for the compliment…there are a lot of people here at this site, more than anywhere else I've found, that know what "is".
"It's the idea of surplus that leads to profit theory, why a gain for one has to result in a loss by another in a closed monetary economy (hard-money)."
Paul - I think you are over simplifying the problem. Even hard money systems are not zero sum closed environments, otherwise how would population growth be possible?
New technologies applied to the production process improve labor productivity which is the basis for rising living standards. Cutting edge technologies introduce new valuations which undermine investments in older technologies made in previous business cycles. Hence, Marx's theory about the tendency of the rate of profit to fall.
The key to having a society that is both free and also capable of accommodating capitalist profit is to make it fluid. Let Schumpeter's creative destruction of capital challenge and unseat today's 1% and replace it with tomorrow's top dogs rather than let a calcified entrenched oligarchy to develop and lead to a class stratified society. That means say goodbye to bailouts.
Too costly and disruptive, Ed. According to Peter F. Drucker, there's a reason that large corporations rule the roost. They are more efficient, e.g., not only due to economies of scale but also the skills of the managerial class and knowledge workers.
Once this system of managerialism is in place, really disruptive innovation not only results in economic change but also social and political. A system has been put into place in order to smooth the otherwise wrenching transitions. But the shift from the Industrial Age to the Digital Age and Knowledge Society presents an opportunity similar to the transition from the Agricultural Age to the Industrial Age. Drucker discusses the challenges and opportunities in Managing the Next Society.
Ed,
"Even hard money systems are not zero sum closed environments, otherwise how would population growth be possible?"
The only population growth was in the hard money societies as they found new sources of the metals and/or invaded the external non-hard money (reciprocating) societies and killed those societies off in the process of absconding with their metals that they used for jewelry and idols and the like...
So these hard-money societies were able to grow in this way.
The whole metal thing is dark Ed...
With state currency you dont need the metals anymore and taxes can be very low and taxes dont have to discourage human exchange that is facilitated thru non-monetary methods (barter, etc...)
rsp,
rsp,
"The only population growth was in the hard money societies as they found new sources of the metals and/or invaded the external non-hard money (reciprocating) societies and killed those societies off in the process of absconding with their metals that they used for jewelry and idols and the like..."
Matt - Fiat money hasn't changed human nature. People are still trying to rip off their neighbor's wealth in one way or another.
"So these hard-money societies were able to grow in this way."
Hard money or soft, human population growth has been more or less the same at about +1.5% to 2% per year going way back in history.
"The whole metal thing is dark Ed..."
Matt - I think you are fixating on this "whole metal thing" a little too much. I was responding to what Paul wrote and so I addressed it in that context. I know it must seem astonishing to you that someone like me can find value both in libertarian ideals and MMT concepts, but there it is. Maybe I'm a total fluke, but I think not. Maybe I'm a little sensitive but to me you're coming off as judgmental to the point of being dogmatic as if I am some kind of heretic. There are lots of different ideas floating around out there in the zeitgeist.
"With state currency you dont need the metals anymore and taxes can be very low and taxes dont have to discourage human exchange that is facilitated thru non-monetary methods (barter, etc...)"
Yes, I know how it's supposed to work. I do like your point about how taxes can be very low. Would you care to elaborate on what kind of tax reform you would recommend for the current tax code?
Aside from that, I know how fond you are of metal morons but get a load of the morons in this video.
http://www.youtube.com/watch?v=ndshbH3qZ6Y&feature=youtu.be
"Paul - I think you are over simplifying the problem. Even hard money systems are not zero sum closed environments, otherwise how would population growth be possible? "
Ed, that's kind of my point...no system is viable without public spending to drive it...
Hard money systems restrict monetary growth so they necessarily restrict economic growth.
The MMT system doesn't do that...it lets the economy decide how much money it needs.
Just to clarify...
ALL systems are closed...there is no system known that can expand from within.
An open system is just a concept...it's a view that allows multiple systems to interact...but all of the interacting systems are closed. There can only be accounting-type interactions between the systems.
Whatever one system gains the other must give up.
Growth then is a direct function of how much the system is allowed to interact with other systems.
A fiat (ex-nihilo) system is not a closed system by definition...it is unique and has no limits to expansion.
Of course, it isn't real...we just attach the concept to a money system and make it real by entering the numbers on balance sheets.
If economic growth is correlated with anything it is correlated with energy availability and energy cost. Economies take off with abundant access to cheap energy and vice versa.
Bullion and 100% reserve convertible fixed rate systems are tightly closed. If the numeraire, e.g. gold or silver, is not increased or credit is introduced, then money growth — hence economic growth — commensurate with population growth is impossible, at least without a significant amount of barter that gets around money-mediated exchange.
Convertible fixed rate systems with fractional reserve lending or other available credit are not tightly closed, but they cannot tolerate saving for long before the debt burden becomes unsustainable. If real assets are transferred, then creditors end up owning everything and everyone is indentured to them, either through actual slavery or debt servitude.
Such systems require some way to reset the system, such as jubilees or redistribution through taxation and government spending to maintain the flow or funds needed for circular flow.
"If economic growth is correlated with anything it is correlated with energy availability and energy cost. Economies take off with abundant access to cheap energy and vice versa." -Tom
If we starve the system of funds, it still wouldn't go anywhere, energy or no. As long as we have a monetary economy that's a given...it's the definition of the system.
We have a monetary economy...capitalism...it can't grow any faster than the flow of funds, no natter how cheap energy is.
If we move away from a monetary economy, then maybe...but TPTB aren't going to let that happen.
As far as energy, it's a constraint, but it's another voluntary one...
We constrain ourselves by basing our economy on dwindling fossil fuels, while orders of magnitude more energy pours in on us and goes unused because it isn't profitable.
Then there's people-power...more labor and less mechanization, but we won't do that because it isn't profitable either.
We constrain ourselves because of money and profit, not energy.
Most of the benefits of growth are realized by the few.
A steady-state economy is not a growth model.
A government committed to abundant free energy could easily overcome that obstacle.
But TPTB won't let anything happen if they can't be at the toll gate.
"Such systems require some way to reset the system, such as jubilees or redistribution through taxation and government spending to maintain the flow or funds needed for circular flow." -Tom
Which gives us pretty much the same result as if we had spent the money in the first place, except with considerable more pain to the bulk of the population.
"You can pay me now or you can pay me later".
Keynes recognized that excessive saving is poison to a monetary economy, which is why he said to euthanize the rentiers. There has to be some way to preserve circular flow.
See economic growth/energy from 1000 to 2000 CE here.
"There has to be some way to preserve circular flow." - Tom
There is...tax excess saving and income at the top.
This is what puts the "circular" in flow.
Otherwise I would not characterize flow as circular...in the net it is more like linear...flow moves down a transaction chain and dissipates as saving until the transaction chain stops dead.
A new jolt of spending is required to start a new chain.
It is redistribution that puts the circular in flow.
The natural flow is to saving, and there is no reverse except under extreme conditions.
I could have sworn that I already posted this comment, but now I see that it appears to have vanished, so I will attempt to recapitulate it again.
"The only population growth was in the hard money societies as they found new sources of the metals and/or invaded the external non-hard money (reciprocating) societies and killed those societies off in the process of absconding with their metals that they used for jewelry and idols and the like... So these hard-money societies were able to grow in this way.
Matt - I wasn't trying to make a point about metals and hard money. I was simply responding to Paul's comment which referenced hard money. That said, hard money or soft, human population on this planet has expanded at an annual rate of roughly 1.5% to 2% over the millennia. I don't see how fiat money has made nations any less war like and resource grabbling than hard money systems.
"The whole metal thing is dark Ed..."
Dark? I dunno.... I think this video is pretty funny.
http://www.youtube.com/watch?v=ndshbH3qZ6Y&feature=youtu.be
"With state currency you dont need the metals anymore and taxes can be very low and taxes dont have to discourage human exchange that is facilitated thru non-monetary methods (barter, etc...)"
I like your point about "taxes can be very low". How low? Do you have a model in mind for tax reform?
Keynes was against excessive saving (hoarding). That economic rent should be taxed away, as the classical economists knew and neoclassical economists ignored following Say's law and ignoring that modern economies are monetary.
Keynes acknowledge that a certain amount of saving was prudent and desirable, so policy should accommodate it. Government is the only sector that can sustainably supply the difference between saving and consumption for all that can be produced at full employment to be sold in an economy that does not run a permanent and sufficiently large external surplus. That's evident from the sectoral balance identity and Fisher debt-deflation wrt to private money creation through lending/borrowing.
In fiat system, currency supply is elastic and it can expand to meet demand for saving. But in a convertible fixed rate system currency creation is limited by convertibility, that is, the stock of the numeraire as base good, so interest rates have to be set high enough to discourage it.
Interest rate setting is not needed for this under a fiat system as long a country has a strong and stable enough currency to preclude excessive exchange rate volatility.
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