David R. Henderson  

Kling on Bush and Baker on Health Care

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Like many entrepreneurs, Bush began by trying to solve one problem and ended up having to solve another. The problem that he and his partner tried to solve was reducing the cost of childbirth, in part by making more effective use of midwives. However, the business foundered because of weaknesses in its management information systems, particularly those that tracked the byzantine process of collecting payments.

As Bush's company invested more resources in developing better systems for payment tracking and other functions to support the obstetrics business, solving the problem of health care information systems emerged as a greater profit opportunity than solving the problem of the high costs of medical services for childbirth. Thus, the company pivoted toward software services.


This is from Arnold Kling, "American Health Care as Viewed by an Entrepreneur," the other Econlib Feature Article for September. Kling, as most of you readers know, was the founding blogger of Econlog. This is his review of Where Does It Hurt?: An Entrepreneur's Guide to Fixing Health Care, by Jonathan Bush and Stephen Baker. Jonathan Bush is a cousin of former president George W. Bush.

Kling quotes a striking idea by Bush and Baker, one that some of my students in the military have stated also:

The army had effective programs in place for teaching sophisticated procedures to all of us, no matter what education we came in with...

Later, when I graduated to medic training... the same model prevailed. Ordinary people were trained to carry out sophisticated work, but now in medicine. Those who tested well were mastering work that in hospitals is only entrusted to surgeons.. If we got this training into the private sector (and loosened up regulations), you'd be getting primary care for $18 an hour.


Beautiful!

Bush and Baker see clearly the difference between the political process and free-market processes:

But let's consider this process [lobbying members of Congress to loosen a regulation in the health-care sector] for a moment. It has nothing to do with innovation or satisfying customers or delivering results. It has everything to do with cultivating influence among politicians and regulators.

Slightly humorous aside: I just noticed that the first two words of this post's title are "Kling on." I don't think I would have noticed if my wife and I hadn't been watching a lot of reruns of "The Big Bang Theory."


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COMMENTS (6 to date)
Effem writes:

Since when is the military the "free market?" Funny how those who don't trust the government to run large scale programs often DO trust the government to run the military. To me, the military proves the government can effectively run something if it chooses to do so.

David R. Henderson writes:

@Effem,
Since when is the military the "free market?"
It’s not. Nor did I say that it is.
Funny how those who don't trust the government to run large scale programs often DO trust the government to run the military.
Good point. This is a criticism I have often made of people who trust the government to run the military.
To me, the military proves the government can effectively run something if it chooses to do so.
Possibly. But this example I’ve focused on shows something else: that even a very inefficient organization (the military) can do well if it can figure out a way to get around heavy regulation. Think how much better the private sector would do if unencumbered by regulations on who can practice medicine.

Glen Smith writes:

I'd look at the medic thing as more of an indication that OJT is the best training you can get. The capitalist generally does not like people learning on his dime and his customers probably don't like paying a trainee, especially for what they see as a critical service.

triclops writes:

The real lesson here is that a lot of medical school is signaling and barriers to entry.

It's a twisted irony that joining the military is usually the most efficient way to become a professional in certain fields.

Jeff writes:
To me, the military proves the government can effectively run something if it chooses to do so.

The Pentagon: a bastion of fiscal prudence and efficiency.

R Richard Schweitzer writes:

The ""government"" does not run the military.

Salient points:

1. The "government" is not a person, nor
is it a body of individual persons. It is a
mechanism through which individuals and groups
using that mechanism may control, constrain and
even influence, but not "run" the
operations of the military institutions.

2. The control, constraint and influence over
the military institutions are conducted through
political means for political objectives
accepted, consented to, or required by the
body politic. There is no element of "trust" involved; there is simply sufficient satisfaction with that part of the political processes.

3. The military (Naval ground and air) are structured institutions operated within (run by) self-perpetuating oligarchies of individuals whose personal motivations determine the character of those institutions. The public (polity) do trust (in fact, admire) those motivations, principally because they are formed in, accepted and commonly understood in the prevailing public culture.

4. The personal motivations of political representatives are not so commonly understood or accepted by the polity and do not imbue the trust accorded to those who actually run, preserve and develop the military institutions.

5. We may therefore conclude that the public is satisfied and trusts the way the military is run because it is not run by the political representation that controls the uses of the mechanism of government.

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