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Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 3

By: Steve Johnson

7/22/2009 - 68 Comments

Obama’s healthcare reform bill will expand the government’s role in healthcare and create an even larger system of price controls, increasing the cost for everyone.

This is part 3 in an article series addressing the current healthcare reform proposal by President Obama.

Yesterday, I explained why adding a system of collecting and sharing pricing information will not be effective at reducing costs because prices are fixes by the local and state governments anyway.  Today I’m addressing why forcing technology upgrades will not increase efficiency or reduce costs.

3. Technology is not being upgraded fast enough

Investments in technology always need to have a return on investment (ROI).  No business today just buys new computers without first calculating the ROI in improved productivity.  Before making technology investments money needs to be saved up to pay for the new technology.

Obama wants to force medical clinics to upgrade their medical record systems without first saving money to pay for them or calculating the ROI.  Under the current terms of the healthcare reform bill, Obama wants to tax small businesses that do not provide insurance by 8% of their payroll to pay for the new technology. 

Increasing the taxes on the small business sector is about the stupidest thing to do right now with unemployment at nearly 10%.  Small businesses will have no choice but to lay off more workers. 

Let me see if I understand this. Instead of letting each medical clinic save up the money they need and calculate the ROI before upgrading their medical records to insure that they are making a wise investment, we are going to take the money from the middle-class and funnel it through the government and then somehow result with a more efficient and lower costing healthcare system? 

Not every technology investment has a positive ROI and it usually takes many experiments with technology before achieving a good ROI.  Just ask any IT director. The wrong technology put into operation without the proper buy in and transition plan can be a disaster that leads to much lower productivity and high turnover rates that nullify the ROI. 

A large part of the need for advance technology is to properly document the level of service that was given to a patient so that a medical clinic can properly get reimbursed by one of the many governments’ regulated insurance providers.   Therefore, the problem is again the middle man. If the governments role was reduced from the medical payment process, new technology would not be needed and costs would actually be reduced. 

Gabriel E. Vidal recently wrote an excellent article addressing healthcare reform, here is a quote further explaining this position:

“Given the level of technological advance and capital investment in healthcare of the past 40 years, one would expect quality to increase and prices to come down relative to other goods and services. This is true of other capital-intensive industries like consumer electronics and air travel. But in healthcare we have the opposite phenomenon: higher prices and, at best, equal or slightly improved quality in some locations or, at worst, lower quality in other locations, particularly government owned institutions. And too few consider that perhaps government participation is to blame.”

“Obama also proposes to reduce the cost of health care by upgrading medical records from paper to electronic. While the benefits of health information technology (HIT) are undeniable, the industry is nowhere near the level of development required to have a material impact in productivity and quality of care. It is truly in its infancy.

Billions of dollars have already been invested in HIT. Some systems have worked, while others have not. Billions more will need to be allocated until the best systems are adopted. But the idea that somehow a government agency with no shareholders at risk will help us better coordinate the allocation of capital and the experimentation necessary to develop these solutions is laughable, especially when one of its agents, the Department of Veterans Affairs, in all likelihood has the record for the most expensive failed HIT experiment to date, the $467 million computer system at its Bay Pines hospital in Florida.”

If the government was not so involved in price controls and heavy regulations, many medical clinics would not ever need to invest in an electrical medical records system.  The best way to save money in the healthcare industry is to reduce the governments’ role and encourage private businesses to compete on cost and quality. 

Tomorrow, I will address the forth part of the proposed healthcare reform in part 4 of this article series.

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 1

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 2

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 3

Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 4 

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