...the U.S. federal government has many options and capabilities for meeting financial challenges facing state & local governments, businesses and regular folks too as a result of COVID-19...
...In doing over things to improve U.S. healthcare, what is there not to like about using forms of socialism especially the form of socialism that is practiced by the NFL which is enjoyed by millions of Americans every year?
By Larry J. Pipes, Ph.D.
Management Strategist and Consulting Professional, Los Angeles, CA
An Economic Prescription for U.S. Healthcare
On Combining Capitalism, Socialism and Sports Competition
Rewinding time is not possible, but do overs are, sometimes we get another chance to do something right the second time that we got wrong the first time.
Suddenly in 2020, COVID-19 devastated economies and overwhelmed healthcare systems throughout the world. In the U.S., healthcare has been hit hard on several fronts resulting in damages to system finances, providers, employees, suppliers, lifesaving procedures and equipment and to patients. COVID-19 impacts demonstrate severe vulnerabilities of so-call “free market” enterprise economic systems that many say are based on capitalism with most importantly competitive markets wherein savvy consumers & suppliers interact. But pure capitalism doesn’t exist anywhere in the world — never has existed or will!
For years, healthcare insurers, payers, providers, researchers and governments have debated how best to organize and supply healthcare.1 There are many facets to the debate but one of the most intensely argued is the appropriate role of competition in healthcare markets. Claims are made at each end of the spectrum: some see competition as having no place in services aimed at protecting the sick2; and others that competition is the antidote for bloated, inefficient services and even “saves lives.”3
As the U.S. tackles the challenges of reopening and expanding the economy in the light of COVID-19, it is prudent for economic educators/researchers and political leaders to consider and agree on implementing changes to our badly damaged healthcare system along with other business and consumer sectors. For healthcare, damages and concerns include:
- Hospitals, health systems and doctors forced to lay off staff and cut otherwise essential services and costs.
- As a result of treating COVID-19 patients, the American Hospital Association estimates that U.S. hospitals and health systems will collectively lose more than $200 billion from March 1, 2020 to June 30, 2020. This includes factors like lost revenue from postponed surgeries, or an average of nearly $51 billion per month.4 These loss estimates don’t include costs of the physical and mental harm to health personnel.
- Low payment rates from government payers, which in part led the Congressional Budget Office to project that between 40% and 50% of hospitals, could have negative margins by 2025 prior to the pandemic. 5
- COVID-19 worries have kept patients away from doctors’ offices and forced the postponement and cancellation of non-urgent surgeries. The pandemic also has shut down large portions of the American economy, leaving many would-be patients without insurance or in a financial pinch that makes them curb spending.
- Health care provided the biggest drag on the U.S. economy in the first quarter. Spending on care fell at an annual rate of 18%, the largest drop for that sector among records going back to 1959.6
Now I’m not suggesting anything extreme that would be equivalent to “throwing out the baby with the bathwater”, but obviously Adam Smith whose “free market” ideas in Wealth of Nations opened the world to capitalism didn’t consider or offer solutions to cases of economic ravages caused by pandemics.
Generally, conservatives in Congress and throughout the U.S. are strongly against socialism in any form — arguing it’s an anathema to personal freedoms and economic prosperity. Well, $1.8 trillion in loan and paycheck protection legislation quickly and overwhelmingly passed by Congress and immediately signed into law by the POTUS which by the way added over $2 trillion to the U.S. National Debt is not the stuff of pure capitalism. And by all indications, there is more federal government stimulus to come.
Getting back to where we were pre-COVID-19 — the good or great days as some say – aren’t realistic. In fact, talk of making America great again begs the question what is the specific time period to which proponents of this want to return. Since the beginning of the 13 colonies and the establishment of the Republic, the U.S. has always faced non-trivial challenges on several fronts. Regardless, competition by and among healthcare providers and suppliers will remain. And Congresses and Presidents will have plenty of opportunities to influence and shape things going forward to improve healthcare and reopen/expand the economy.
Principles embedded in American Sports can serve as guides — me thinks. That is, in a Jan 29, 2012 CBS 60 Minutes interview that aired before Super bowl XLVI, NFL Commissioner Roger Goodell said that the NFL combines capitalism & socialism “…by sharing our revenue in a way that will allow every team the ability to compete.”7 So a relevant question for those who criticize socialism is: do they also have problems with the socialism practiced by American Professional Football? As the biggest sports entertainment enterprise in the World, the NFL, a cartel (exempt from anti-trust laws by Congress for 50 years), is a form of socialism that:
- Operates a draft for new players and has salary caps;
- Depends on public tax money and/or tax breaks to help fund stadiums;
- Is composed of 32 teams owned by billionaires that contract with unionized millionaires;
- Shares 80% of annual revenues (estimated at $15 billion for the 2018 season) among teams.
Goodell (no leftist shield) said “One of the things we want every fan to feel in the country is hope when the season starts that their team can end up holding that Super Bowl trophy. And one of the stats we’re most proud of in the last 9 years we’ve had at least one team go from last to first.” In the NFL, the result is a financially engineered equality that allows a small town team in Green Bay, Wisconsin, to compete with a metropolis like New York. It produces lots of close games and those unscripted dramas that are essential to the NFL’s appeal.
Installing government economic policies that give hope to average Americans that they can succeed would be a good guiding principle as the U.S. reopens and expands the economy. Immediately some will raise questions about the cost and wisdom of capitalism and socialism combination schemes. Re costs, as already demonstrated with the Federal stimulus packages, the U.S. federal government has many options and capabilities for meeting financial challenges facing state & local governments, businesses and regular folks too as a result of COVID-19. Congress & the Trump Admin need only think-outside-the-box and avoid partisanship to achieve this (although avoiding partisanship may be very tough). One option is for the U.S. Treasury to mint a series of “$1 trillion platinum coins.” The coins would be created by Treasury and then sold to the Federal Reserve, which would credit the U.S. Mint’s account at the Fed with trillions in reserves (depending on the number of coins minted).
This approach could produce enough funds for State & Local governments and for businesses and individual citizens too. This would be legal, as U.S. law gives the Treasury Secretary the power to mint new coins “in qualities and quantities that the Secretary determines are sufficient to meet public demand.”
One challenge would be the potential for runaway inflation which would destabilize the U.S. financial system. Sharp-witted economists and financial wizards should be called upon to come up with policies to avoid inflation. However, this is a workable short-term solution. At some future point, bonds bearing interest above the near zero rate the Fed has currently established should be sold to repay or recover the account credits.
Finally, the literature is replete with thought provoking articles on the subject of organizing healthcare, competition and competitive sports to positively affect service delivery, patient safety and outcomes.8 9 10 I’ll say on this subject in the future. For now, I’ll end by asking this question: In doing over things to improve U.S. healthcare, what is there not to like about using forms of socialism especially the form of socialism that is practiced by the NFL which is enjoyed by millions of Americans every year?
References
1 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4556571/
2 Pollock A, Macfarlane A, Kirkwood G. et al. No evidence that patient choice in the NHS saves lives. Lancet. 2011;378(9809):2057–2060. doi: 10.1016/S0140-6736(11)61553-5.
3 Gaynor M, Moreno-Serra R, Propper C. Death by market power: reform, competition, and patient outcomes in the National Health Service. Am Econ J Econ Policy. 2013;5(4):134–166.
4 https://www.aha.org/guidesreports/2020-05-05-hospitals-and-health-systems-face-unprecedented-financial-pressures- due
5 Moody’s Investor Service (2019). “Medians – Revenue growth rate inches ahead of expenses as margins hold steady.” Accessed on April 29, 2020 at https://www. moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1190409.
6 https://989theanswer.com/news/business/hospitals-health-care-sector-reel-from-covid-19-damage
7 https://www.cbsnews.com/news/the-nfl-commissioner-roger-goodell/
8 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4949805/
9 https://bmchealthservres.biomedcentral.com/articles/10.1186/1472-6963-7-17