“This is going to hurt a bit” –
both Doctors and Economists say this,
but for very different reasons
All systems collapse.
All systems – whether empires, hospital systems, the American medical system, and the universe – tend toward entropy.
Entropy:
disorder, randomness, uncertainty, chaos, collapse
There are two general factors why societies and organizations become vulnerable to collapse.
Stress
Stress occurs at all levels. And while “stress” can generally be planned for, unexpected “stress surges” must be countered with reserves: money, people,etc. “Stress surges” cannot be accommodated for without these excess reserves.
And yet, even with adequate reserves, a major stress surge – or shock – can be catastrophic to a system, if that system does not have enough resources. (This has been identified by Nassim Nicholas Taleb as a “Black Swan Event.”)
The American health care system is at risk of a shock that would likely lead to the epic, sudden, and violent collapse of the system.
Declining Marginal Returns
The second general factor why societies and organizations are vulnerable to collapse is declining marginal returns. This basically means that spending more money no longer provides the return it once did.
For example, think about your favorite fruit. Now let’s say that you come across a tree with your favorite fruit growing on it. The bottom part of the tree and the trunk are planted on firm ground. However, as you look up, you realize that the top half of the tree grows out from a cliff over a 400 foot drop into a canyon below.
The lowest – and easiest-to-reach – fruit gets picked first. As the low-hanging fruit is picked and eliminated, you begin to think about climbing up into the part of the tree that is hanging out over the cliff.
You ask yourself, “Is getting the fruit on the top half of that tree, while hanging out over the canyon really worth the risk?”
You now understand the concept of declining marginal returns on a personal level.
The procedures, treatments, and drugs that once offered a great return on investment are no longer providing the return they once did.
And the costs associated with bringing new products to the market have become so great that it almost doesn’t make sense anymore.
Doctors and their salaries have been blamed for the huge increases in healthcare costs in the United States. But, you can see two things from the chart above:
- The “costs” of healthcare are NOT because of the salaries of doctors, but the costs of the system protecting itself.
- This system is going to collapse. It is no longer a matter of “if” but “when.” The number of revenue producers are far outweighed by the revenue suckers. (Regardless of what they may think, administrators do not produce revenues or income.)
Is it possible to keep a system– society or organization – from collapsing?
Absolutely. There are two key ways to survive:
- By getting control of a new source of energy, or
- By managing and fostering innovation.
It eventually becomes impossible to keep doing this, because of declining marginal returns on whichever strategy you are pursuing (whether by “conquest” –purchasing other companies or “income producers” or by innovation).
The Collapse
A “collapse” can simply be understood as a loss of the energy needed to maintain social complexity. A collapse, then, is the sudden loss of social complexity, stratification, internal and external communication, exchange, and productivity.
The “energy” needed to keep a system from collapsing is more often than not money. And a big part of the reason why the American system is collapsing is because politics is what is consuming the overwhelmingly vast majority of the “energy” needed for innovation and change.
To further make this point, the American system is spending more money on “medicine,” “health” care, and research than it ever has before. And, yet, lifespans are not only NOT increasing, they are now starting to decrease.
Energy (more often than not, as money) fuels innovation. And if the energy is being used in ways that are providing diminishing marginal returns, then innovation is very difficult, if not impossible.
The New Health Economy is transforming from a top-down, command-and-control, paternalistic system to one that is messy, cooperative, and lucrative, but yet will actually help more people than ever before.
Just remember that “transformations” – a thorough and dramatic change in form or appearance – are extremely difficult and can cause a lot of pain and big messes, at least at first.
Fear not; there is peace on the other side, but you must tread the path to change.
Oh!
And everything is about to change.
“It is one thing to see the land of peace from the wooded ridge.
It is another to tread the path that leads to it.”
-St. Augustine
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