by Gary Shapiro
We must build new nuclear power plants. We need more electricity: estimates for usage of many hybrid and electric cars assume a stable electricity source. If France can get 80 percent of its power from nuclear, so can we. The anti-nuclear movement, which unfortunately still holds sway in Washington, is based on thirty-year-old presumptions and spectacular failures, like Three Mile Island and Chernobyl. Nuclear energy is safe, carbon-neutral, and cheap, when we get the plants built. But our regulatory process is designed to delay and impose huge costs on every new nuclear project. The U.S. process takes decades, and has crippled our nuclear industry. Japan, Korea, France, and others have much shorter planning and construction cycles.
We must continue to pursue renewable energy sources but be realistic in our estimates. Solar, wind, and saw grass are nice, but their ability to replace existing energy sources has been exaggerated. We should still encourage their development through tax benefits, but we need an honest assessment of their potential to help us set realistic goals.
We must incentivize Americans to buy cars that use less gas. I’m not generally in favor of higher taxes just because if you want less of something you tax it. But that’s why it makes sense to institute a higher gas tax. This is only punitive if you drive a gas guzzler. Gasoline taxes should be increased five cents every six months for the foreseeable future. This will encourage Americans to consider fuel efficiency in their car purchases over the long term. It will also influence where they choose to live over the long term. Proceeds from the gas tax should be invested in alternative fuel source technologies and in infrastructure. The anti-tax brigade should recall that President Reagan raised the gas tax to pay for infrastructure.
We must encourage people to move closer to their jobs. My company offers any employee $25,000 if the employee buys a home in the county where we are located. The purpose of the program is to save energy, to get our employees to spend less time commuting, and to establish loyalty. The $25,000 is in the form of a three-year, forgivable loan. Even without the tax benefits, the program is successful and appreciated, and a good recruiting tool to attract employees. Imagine if this loan were tax-free income—many people would move closer to their jobs. Plus real estate agents would be quite busy.
We must encourage telework. Not every employer has jobs amenable to telework, but many jobs are, and they should be encouraged. This means formal programs, restricting employer liability, providing the equipment and tools, and deploying broadband and leadership at the top. Major weather events such as snowstorms have proven that many employees can and should be encouraged to spend some time working from home.
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An Innovation Lesson in Health Care
PRIVATE INNOVATION
Jim Traficant was undergoing his second liver transplant when the thought struck him, There has to be a better way. He had had a fast recovery following the procedure, but it wasn’t long before complications arose: His body was rejecting the new liver. He was rushed back to the hospital, where he remained for a month and was kept alive with expensive life-threatening treatments.
When he got home, the rejection happened again. He repeated his ordeal once more. After another month in the hospital, where he was treated with experimental medication, Jim returned home and began to study his medication and blood work results. This led to a breakthrough. He was able to identify an algorithm that could predict when rejection would occur. When his body rejected the transplant a third time, Jim was prepared. Based on the results of his work, Jim was able to avoid another hospital stay with the proper medication.
The better way Jim realized was in the data—the health information. It was the key to proper medical treatment. What astonished Jim was that his doctors weren’t so much interested in the data as they were interested in treating the problems that arose. In other words, Jim’s treatment was reactive rather than proactive.
This didn’t make any sense to him. He knew there were reams of data on his condition and on others like him. Why couldn’t we use that data, as a physicist uses equations, to predict a future event? Jim wanted to find a way to put the “science” back in medical science. For too long, he felt, medicine has behaved more like an art: You feel your way around until you hit upon the solution. That might work for a painter or writer, but it doesn’t work when lives are on the line. As many as 98,000 Americans die each year as result of medical errors, with up to 7,000 of these deaths attributed to adverse drug events from medication errors. That’s a crisis, and Jim was determined not to allow himself to become another statistic.
These days Jim Traficant is the vice president of Harris Corporation’s Health Care Solutions business. One of Harris’s principle projects is developing the CONNECT system, which is an opensource software that allows health-care providers to exchange patient information seamlessly. It acts much like a Wikipedia page—connecting your information to every other conceivable page of relevant information. The U.S. government has incorporated CONNECT in many of its departments, such as the Social Security Administration and the Department of Veteran Affairs, to establish interoperability between agencies and to improve care. This all resulted from Jim’s insistance as a patient on the edge of life: there had to be a better way.
If I could think of a credo for innovation, I probably couldn’t do better than that: Finding a better way is the heart of innovation. It’s recognizing a need, knowing the tools at your disposal, and creating that better way. Jim found a better way, and today thousands of patients are better off because Jim wasn’t willing to accept the status quo.
And now CONNECT is revolutionizing the way we think about health care. It’s lowering costs and improving patient care, leading to fewer medical error fatalities. That’s innovation at its best.
GOVERNMENT INTERVENTION
But there’s a flip side to this health-care coin. The Obama administration’s health-care reform law made greater interoperability between government agencies a priority. It has helped establish CONNECT as the gateway to reforming our entire health-care system—for the better. But the law is also a classic example of the government trying— and failing—to use government as a stand-in for the free market.
For instance, the government cannot reduce costs—in any industry— without having prices rise somewhere else. Only the free market can do that. But that’s not my biggest beef with Obamacare. Rather, my concern begins with how this whole bill of pie-in-the-sky promises was created in the first place.
What all Americans should be upset about is how both parties turned an appropriate national debate on the health of Americans into a unregulated scrum in which brute force, deception, and backroom politics resulted in bad legislation. The absence of real substantive discussion or any attempt to agree on the facts led to the party-line passage of a huge, little-understood spending program.
First, calling it health-care “reform” was totally deceptive. The bill’s focus was obtaining coverage for working poor Americans who do not presently have health-care coverage. Most of the bill prescribed a method of defining the coverage and then imagining creative ways of paying for it.
Second, a central premise of the debate was that somehow Americans now have inferior health care compared to the rest of the Western world. Statistics on infant mortality, birth weight, and life expectancy were used to “prove” that Americans paid more for health coverage but got less in return. Yet those statistics say more about American society than they do about American health care. Compared to the rest of the developed world, more underage women have babies in the United States; compared to the rest of the developed world, Americans are fatter. While we can regret these facts, we cannot say they are the result of America’s inferior health-care system, so using them to argue for health-care reform is disingenuous. These are lifestyle choices that American make, and they cannot and should not be viewed as caused by the health-care system.
In fact, by measures that don’t consider lifestyle, such as cancer detection and cure rates for most d
iseases, the United States is the best nation in the world for health care. There is a reason the world’s wealthiest individuals with life-threatening diseases flock to the U.S. for treatment: We have the most successful and innovative treatments. So the premise of “reforming” health care was flawed.
Third, the debate was most memorable for its lack of facts. In July 2009, President Obama charged that a surgeon gets paid $50,000 for a leg amputation. In fact, as the American College of Surgeons pointed out the next day that Medicare pays a surgeon between $740 and $1,140 for a leg amputation. This payment also includes the evaluation of the patient on the day of the operation and patient follow-up care that is provided for ninety days after the operation.69
The College noted that this wasn’t the first untrue comment by the president:
The President suggested that a surgeon’s decision to remove a child’s tonsils is based on the desire to make a lot of money. That remark was ill-informed and dangerous, and we were dismayed by this characterization of the work surgeons do. Surgeons make decisions about recommending operations based on what’s right for the patient.
But if the president was overzealous in his efforts to get his signature bill passed, the debate in Congress was worse. Based on an offhand comment by Sarah Palin about “death panels,” the Republicans made that a unifying description of the health-care bill. Yet the only relevant phrase Republicans could point to in the legislation was a provision, originally supported by many key Republicans, that compensated doctors for talking with patients about all their end-of-life options.
Anyone who has dealt with a terminally ill relative or friend and gone through this process understands that it is an excruciating time and that doctors play a vital role in carefully and sensitively describing the options. Nonetheless, this somehow became the provision that Republicans pointed to as allowing “death panels” and became the primary argument for their opposition to the bill.
A much more important, but little noticed and discussed, provision in the bill effectively imposes some type of rationing of Medicare by a panel of unelected Americans. This huge cut in reimbursements to doctors without any specifications, guidance, or criteria gives a few unelected Americans enormous authority to effectively cut $350 billion in funding for various treatments in medicine that they perceive as too costly, unnecessary, or ineffective. This little-discussed provision in the legislation, if not reversed by a later Congress, means that doctors who want to use certain forms of treatment for a specific patient’s needs may be paid little or nothing at all.
THE COST OF GOVERNMENT INTERVENTION
The final 2,000-page bill was drafted by a handful of lawmakers behind closed doors and not shared with members of Congress until hours before the House vote. But something was happening across the country. Democratic lawmakers found themselves confronted by angry constituents at town hall meetings, upset at the bill’s soaring cost. The constituent uprising and Tea Party protests were so alarming that many Democratic members said they could not support the bill if it expanded the federal deficit.
Thus for the Democratic House leadership, the March 2010 vote hinged on their ability to claim significant deficit savings. Days before the House vote, the leadership announced that the supposedly “nonpartisan” Congressional Budget Office (CBO) had scored the legislation and had said the bill would result in $100 billion in savings over the next ten years.
But to score the bill, the CBO was given a set of assumptions provided by the Democrats and the Obama Administration. So less than a month after the bill was signed into law, the CBO quietly acknowledged that it had understated by at least $115 billion the cost of the health-care bill. The CBO also explained that its scoring did not include fifty-two items that had no specific funding level but that the law said should be given “such sums as may be necessary.”
Since the initial CBO scoring, I questioned whether the government scorekeepers were candid in saying the health-care bill would reduce the budget deficit. In April 2010, I publically challenged Dr. Peter Orszag, then director of the Office of Management and Budget, on this when he spoke at the Economic Club of Washington.
It turns out that those of us who expressed skepticism on the health-care bill’s deficit-reducing qualities were right. Although one always appreciates vindication, it doesn’t change the fact that the health-care bill passed based on a huge and fraudulent deception aimed at the American people.
Yet the health-care deficit fraud continued. While running for Congress in the Fall of 2010, Democratic Representative Jim Moran of Virginia produced a glossy brochure that defended his vote on bill as “reducing the federal deficit by more than $100 billion over the next decade.” He cited the House Budget Committee as his source. Apparently, unlike the CBO, the House Budget Committee saw no need to correct its errors.
Despite the CBO correction, as of November 2010, if you went to the White House Web site you would still have seen the fiction that the health-care law would “reduce the deficit by $100 billion over the next ten years.”
In fact, the health-care law will not only explode the federal deficit, it will impose huge new costs on states that must pay for creation of insurance pools and the processing of the estimated 16 million additional Americans to the expanded Medicaid program. Moreover, the law puts an increasing amount of the Medicaid burden on the states. These new costs are a growing concern in state capitols.
Should it matter that the new health-care law may raise our federal and state deficits by at least $2 trillion more than promised? Yes. Five percent annual interest on $2 trillion is $100 billion. That means our kids will have to pony up roughly $100 billion each year just to finance the new costs from this bill. With states already in serious fiscal trouble and some cutting school to fourday weeks, this new burden forces us to confront a rather scary future of inflation, choking taxes, cuts in services, and a declining economy.
If the public had known the true cost of health-care reform before our political leaders sought the rushed and fixed CBO scoring, then we would have had a different outcome. If political leaders from both sides had tried to define the problem, which was originally about millions of underinsured Americans, had agreed on the facts, and had debated different solutions and their true costs, we would have had a more intelligent discussion and a much better result. Maybe we could have had malpractice litigation reform as part of the law, which would save about $40 billion in spending, according to the CBO.
Some proponents of the bill explain these deliberate deceptions through the old adage “the ends justify the means.” In fact, then–House Speaker Nancy Pelosi, in a rather unguarded moment, said that we would have to pass the bill to find out what’s in it. This Machiavellian logic eliminated any chance for cost-effective improvements in health-care coverage, which a reasoned examination of the facts would have aided.
Sooner or later our nation is going to have to address our serious budget crisis. It will require tough decisions, compromises, and, above all, an adherence to facts. Americans deserve the truth. Sadly, they did not get it in the health-care debate.
WHAT SHOULD HAVE HAPPENED WITH THE HEALTH-CARE DEBATE IF INNOVATION MATTERED? THE TECHNOLOGY INDUSTRY PROVIDES SOME LESSONS.
The consumer technology industry is defined by rapid innovation and falling prices. Its success has allowed content creators, service providers, Web sites, blogs, and all sorts of new media to flourish. It is intensely competitive and yet loved by consumers. This fast moving, deflationary, job-creating, $160-billion industry has several basic tenets that all participants understand. These principles are relevant to the health-care debate.
1. Competition produces better products and lower prices. Consumer electronics is an intensively competitive, lowmargin business. Companies succeed by innovation, quality, reputation, and efficiency. With the advent of the Internet, consumers are better informed than ever about the quality of their products.
Lesson for policy makers: Competition requires consumer choice an
d information. Consumer insurance choice is limited as companies are artificially restricted from competing across state lines. Consumers have little incentive to be smart purchasers when someone else is paying—many doctors see patients flood their offices once their deductibles are met. Consumers should not be ordering from a menu without prices: they should always pay a portion of their health-care costs. As in the rest of the economy, there is no such thing as a free lunch.
2. Innovation is rewarded. The first to market takes big risks but also sees gains in sales, reputation, and market share. Failure is considered a learning experience.
Lesson for policy makers: The proposals debated ignored the risks and costs imposed on health-care providers (malpractice litigation, for example) without addressing incentives for health-care providers. My wife, a retinal surgeon, has developed a promising treatment that could save tens of thousands of macular degeneration patients a lifetime of uncomfortable and costly injections and save Medicare at least a billion dollars. Yet there is little financial incentive for the medical world to pursue further development of this treatment, and it will certainly be opposed by drug companies.
3. Government-set standards discourage innovation—the marketplace provides it. For several years, various policy makers have tried to impose design standards on technology— which fortunately our industry has defeated, to the benefit everyone. We beat back efforts to restrict recording capability, to add government-mandated buttons to the remote control, to equalize volume, to make every product include features that few would want but all would pay for, and to create products that reject every type of interference. Instead, the industry let the consumers choose what they wanted, and this has produced a robust competitive market that did not foreclose introduction of products like the iPod, the PVR, and HDTV.