It was fascinating to hear Fareed Zakaria’s keynote address Friday morning at the CHIME Fall Forum in Orlando (sponsored by the Ann Arbor, Mich.-based College of Healthcare Information Management Executives). Speaking in the Mediterranean Ballroom of the JW Marriott Grande Lakes Resort, Zakaria—a noted journalist, commentator, author, and TV program host—mesmerized his audience with his brilliant overview of the economic and technological changes transforming the world these days.
But it was how Zakaria framed the challenges of U.S. healthcare that was particularly insightful. But let me navigate my way towards that.
To begin with, Zakaria talked about how much the world has changed since he was a boy growing up in India in the 1960s and 1970s (he was born in Bombay, now Mumbai, in January 1964). At the time he was born, the author noted, India was still relatively isolated from the global economy and from global society in key ways. Now, however, it is, like nearly every country (with a very few exceptions, like North Korea, which he didn’t mention), India has been drawn into the intense vortex of global developments, both economically, in terms of commercial interdependency with other nations, and technologically, as more and more of Indian society becomes connected to the web-driven world of 21st-century communications and global culture.
Zakaria noted that we’ve experienced three huge global economic transformations in the last few hundred years. He stated that “We’ve had this globalization evolution that has brought countries from all over the world into basically the same capital market system, and it has allowed for this great wave of globalization, which has included outsourcing” of goods, the processes of production, and labor. “In the 16th and 17th centuries, with the advent of tall ships, you began to move goods around the world,” he said. And then, “In the 18th and 19th centuries, you began to be able to move capital around the world; and now, you can send capital and jobs around the world through outsourcing. There are still 3 billion people still not participating in the global economy, but they will,” he advised. “There are still a billion people in India, and a billion in Africa, who don’t have access to the Internet.” But all that is changing, he noted: “You’re already seeing people outsourcing, in China, to lower-labor-cost countries like India; and companies in India now outsourcing labor and production to Bangladesh.” Meanwhile, the inclusion over time of more and more national economies into the global economic system has led to business prosperity throughout the world. “In 1979, the number of countries growing at 3 percent or more a year was about 32,” he noted. “In 2007, before the financial crisis, that number was 124. And it’s still 85 today.”
Meanwhile, the advance of information and other technologies is transforming not only business, but also societies, Zakaria noted. More and more individuals throughout the world are becoming plugged into communications and information technologies, and as such technologies move towards near-universalization, it is disempowering governments and other traditional power centers, and empowering individuals and average people. He provided an interesting example with regard to the execution of a coup d'état, noting that “In the 1940s, whenever there was a coup in any country, the coup plotters would go to the presidential palace and radio station and take those over. In the 1950s, it was the presidential palace and the TV station. Today, you would still take over the presidential palace. But what would be the point of taking over a radio station or TV station, since very handheld device has the power to transmit information? That’s the reality of today’s disaggregated information system.”
Meanwhile, computational power is going to continue to transform how people live and work, Zakaria noted, though of course, there have been downsides to it, too, as the ability to outsource industrial labor and production from a wealthier country to a less-wealthy one has meant, in the United States, the loss of many millions of manufacturing and other jobs, jobs that will never return. And he did not sugarcoat that reality for his audience. Speaking of industrial magnates, he said, “You play a kind of global arbitrage game, where you find the labor in one place, the capital in one place, the market in another place. But as an American worker, you’re trapped. And globalization and technological change are like a pincer movement, depressing your wages. Thus, “this extraordinary downward movement” in the real wages of average Americans, a trend that has continued for decades. “At an aggregate level, it’s been great for the U.S. economy. But for the average American worker, it’s been the opposite. I think Apple employs about 15,000 people in the U.S.”
But here’s where things got particularly interesting for CHIME Fall Forum attendees. Working to connect his broad presentation to the specifics of the U.S. healthcare system, Zakaria stated very clearly for his audience Friday morning that the advance of information technology, as important as it will be to U.S. healthcare, will not truly transform the system, in the sense that it will completely change its cost trajectory. And that is, he noted, because the dynamics of payers, providers, and patients/consumers in U.S. healthcare are such that the kinds of market-driven dynamics that continue to lower the cost of consumer technologies such as smartphones and tablets, for example—simply do not apply to how U.S. healthcare works, in reality.
In contrast to practically every other business field, Zakaria noted, “You have healthcare, which is part of that non-tradable world. So people look at healthcare and ask, why aren’t you getting more productivity? Well, it’s hard for the globalization piece to hit healthcare. The information technology is beginning to play its part, and you know more about it than I do,” he told the assembled healthcare IT leaders. “But the fundamental part we need to understand about healthcare is that globalization and the information technology revolution alone will not change the core dynamics of a system,” one in which distortions of how healthcare services are paid, and costs are accumulated, stand outside normal market dynamics.
“I’m always struck by the fundamental accuracy and impression of a 1961 article by Kenneth Arrow,” the Nobel Prize-winning economist who developed theories of economic equilibrium, Zakaria said. “He said, healthcare is not going to operate like any other market. First, you have a massive asymmetry between the buyer and seller. It’s different from buying a television. A doctor tells you to get a cardiogram, and you’ll do it. So that asymmetry between a buyer and seller is fundamental. Second, you think you don’t need to spend any money on it, and all of a sudden, you need to spend a lot of money on it, so that makes it ripe for insurance, which means the consumer is not paying the bill, which produces its own distortions. In every country in the world, but particularly in the U.S., we have wrung inflation out of literally every industry; in most cases, you’re seeing enormous price deflation—think about computers and technology.” But, he noted, healthcare and higher education alone continue to resist the kinds of market dynamics that have made most consumer goods and services relatively inexpensive and affordable.
Zakaria’s high-level analysis of the healthcare systems of a number of advanced countries was spot-on, and his statement that, short of the U.S. system converting to a single-payer, government-run system, the U.S. system will remain troubled by its cost curve, was astute, as was his recommendation that U.S. healthcare leaders look to the reform of its health insurance system that Switzerland accomplished two decades ago.
I found Zakaria’s analysis of IT and the U.S. healthcare system to be intelligent, and refreshing. And while some in the audience Friday might have felt a bit discouraged by it, they shouldn’t have been. The reality is clear: all of us involved in U.S. healthcare in some way should salute—and continue to work to implement and improve—information technologies that can help to transform the quality and efficiency of U.S. healthcare, while accepting that some of the dynamics of the U.S. healthcare delivery and payment system can only be corrected on a policy—and as Zakaria pointedly put it—political—level. It is important, in the end, to be realistic about what can be done, while leveraging every tool possible to improve quality and reduce cost, to the extent possible. And I for one am thankful that Fareed Zakaria put all of this into a global and historical context for us at CHIME15 earlier today.
