Quick, which British cell phone do you use?   No?  Okay, which French microprocessor is in your PC?  No again?

America leads the world in innovation, the legacy of historical laissez-faire approaches to fixing big problems using the private sector.  Obviously that is different now, even in science, where Pres. Obama made good on his promise to add more science to his cabinet but erroneously thought all of science was composed of progressive academics who think more taxpayer spending is the only way science gets done, leading to the Solyndra boondoggle and more to follow.

When I was a younger guy, in the 1980s, and the Japanese government was heavily subsidizing their semiconductor industry, and Taiwan was manufacturing boards cheaper(1), there were calls for America to 'invest' in the domestic semiconductor industry by progressives who claimed America could not compete against so much government money elsewhere.  It is laughable now to think that government subsidies and academia could have beaten the private sector - RAM would be $1,000 per GB if the government were involved - but that is dismissed as an 'exception' in modern times. Oops, biomedical is an exception also.

In health care, we spend more than everyone in the world to have the best, yet critics of the current system say helping people regardless of cost is bad.  Well, in that sense overpaying for an iPhone is bad also.

Apple Inc. is a juggernaut in consumer technology yet the actual service its phone provides is wildly overpriced.  It basically makes phone calls and checks some email, everything else it does is extraneous.  Why pay more when any basic phone for $9.95 can do all that?  If all phones were $9.95 everyone could have one and no one's phone would be better than anyone else.   That's the ultimate in progressive fairness.  

Yet Apple's iPhone became successful despite being unfair, incredibly expensive and even adapting a closed source Communist mentality - only Apple gets to decide what apps you can install on your phone.  They even told you what carrier you had to use initially.  If you didn't like it, you got a different phone.   So what if you are 'under-phoned', you can still make a call.

Yet the argument by some today regarding health care is that everyone should have the health equivalent of an iPhone and they should get it cheap and the turnaround should be just as fast as it is now.   That is not really practical. U.S. health care is expensive. Being the best makes things more expensive and health care is the only time progressive economists acknowledge that there is any trickle down theory at all.  72 percent of Americans said health-care coverage needed a major overhaul because it is too expensive, quality or not, so what was the government solution to expensive health care?  Increase coverage, which very few people asked for, yet it caught on quickly because businesses will be happy to offload insurance to the government.

It makes no sense because more coverage cannot make health care cheaper, unlike iPhones, which rely on economy of scale, and people said they wanted the cost to come down so more people could buy it, they didn't ask to be forced to buy it any more than they want to be forced to buy an iPhone.  As Michael Tanner in USA Today notes, when Italian Prime Minister Silvio Berlusconi needed heart surgery, he came to the U.S.  Ditto Canadian Human Resources Minister Belinda Stronach and Newfoundland Premier Danny Williams.  American is the envy of the world at the high end but it is shockingly inefficient.   Hospitals are one of the few businesses where competition makes costs rise; if hospital A gets a new MRI machine, hospital B will have to get one or they could get sued for providing inferior health care, etc.

What if Apple gpt to run health care?  Right now the United States spends $7,290 per capita on health care, far more than Holland, which still has pretty darn good health care, so let's say we want that cost to come down to Holland levels.  The average cost of a cell phone in 2010 was $76 but the cheapest iPhone is $199, 250% of that cost - cheaper is not really the Apple business model so we already may have the wrong company, they are more like health care as it is today. American health care costs 90% more than the Dutch pay so why does the model work for phones but not for health care? 

To begin with, Apple currently is not forced to add in expensive features and maximum storage space for all, they have different products for different people, and wireless providers are not forced to provide maximum bandwidth to all, lest they be sued.  Yet hospitals and doctors are forced to do just that.  Teary John Edwards-style lawyers get rich portraying hospitals and insurance companies as greedy death panels and doctors as incompetent, so medical providers are forced to carry expensive malpractice insurance and run a lot of tests they know are unnecessary, which drives up the costs. As a result, 91 percent of physicians engage in 'defensive medicine', ordering more tests and procedures than necessary as a protective measure due to concerns over malpractice lawsuits.  To lower costs and still increase coverage organically would just mean not making it open season on medical providers.   

Could even Apple pull that off?  It requires readjusting the mentality of Americans when it comes to suing; everyone knows it's bad but if they get in a car accident, watch the 'I am suing an insurance company, not a person' rationalization fly.  Apple would also have to make a lot of old people angry; right now, the old, the poor and Congress get a lot more for free than anyone else but you can't anger old people.  Unlike young people who have time to protest but not much else, old people vote.  And I essentially side with old people on this one.   When I got taxes taken out of my first paycheck, I began saying we should honor the commitments for every person even one day older than me but we should not saddle future generations with social security and Medicare.  Even when I was young, there were only 5 workers per retired person and this year the 'Baby Boom' births - kids born in 1946, after World War II ended in 1945(2) - reach age 65 so the workers to potential retirees now drops to 4.  When social security was created that ratio was 20:1.

So Apple would quickly find that retired people are not going to be educated by undulating silhouettes on television.  Opposite older people with massively subsidized health benefits are younger people who have no health issues and are already overtaxed who would be forced, under a system similar to Holland's, to pay more taxes to cover half the cost of their health insurance.  In other words, they would be paying what they have to pay right now if they want health insurance.  The upside to forcing coverage, proponents claim, is that the increased purchasing power would allow the government to negotiate with 'providers', whoever they would be - it requires suspension of disbelief that the same government that overthrew private health care is going to stand up to its union constituents and use its 'purchasing power' to get the best deal out of them rather than curry votes.  Standing against a union is unthinkable for Pres. Obama and, if you have ever tried to unload a box in New York City when the Teamsters are around, bad for your personal health too.

No, even Apple could not fix health care. Apple is successful because of innovation, as is American health care.  50% of the new drugs that give people better lives are created in America and it is well established that world leading medical research, primarily in the private sector, originates here.   The standard joke in business is that customers always want better, cheaper and faster and they are lucky to get two and that applies in health care is well.  Want the best when you need it?   America is still the place to go. 


(1) Irony: On my last visit to Hsinchu to visit TSMC a few years ago, workers in Taiwan complained that China was undercutting them using cheap labor, and that the quality of the product would go down if cost were the only concern.

(2) Sometimes now magically extrapolated out to being an entire generation.  Was I born the last year of the Baby Boomers or am I the first year of Generation X?  It depends on which marketing person you ask and if they claim a generation is 20 years, 18 years, or about 5 years, since each new high school class gets some new 'generation' label thrown at them.