Health Care Spending III: Alice in Health Care Land

AliceWhen Alice tumbled down the rabbit hole, she entered a world (“Wonderland”) reminiscent of her own—but in which everything seemed upside-down, and nothing worked as expected.

After spending over a year researching the economics of the health care industry, I’ve concluded that health care is its own economic Wonderland.  If you were given the hypothetical task of designing an economic system in which the laws of ‘economic physics’ had been miraculously suspended, you could not do a better job than the current US healthcare system.

As a result, health care costs continue to escalate considerably faster than most other household expenses.  Our $2.6 trillion in 2010 health care spending represented nearly 18% of GDP, a proportion that has doubled during the past 30 years.

Economic fundamentals

Most of my knowledge of economics comes, not from academics, but from working as a researcher and adviser to businesses over a period of 40 years.   As a result, I always err on the side of empiricism (i.e., what is) and pragmatism (i.e., how to improve it).

For reference I always come back to capital fundamentalism—the basics of supply, demand, and market exchange.  A ‘pure’ economic exchange works something like this:  you own a product or service that I want to acquire.  You name your price (or we negotiate and agree on a price), I decide whether it’s ‘worth it’ or not, then I decide whether I want to buy, and (if appropriate) in what quantity.  In the purest form, I am also the consumer or user of the product or service, so I can make this value choice first-hand.

Then we ‘do the deal’. I pay you and acquire the product or service, and everyone’s immediate economic needs and goals are presumably satisfied.  We all live happily ever after.  Or if not, and I’m not happy with the result you provided relative to the price I paid you, I buy from another provider next time.

Read the rest of this entry »

  • Latest Posts

  • Topics

  • Archives

  • About this site

    COMPETING IN THE KNOWLEDGE ECONOMY is written by Timothy Powell, an independent researcher and consultant in knowledge strategy. Tim is president of The Knowledge Agency® (TKA) and serves on the faculty of Columbia University's Information and Knowledge Strategy (IKNS) graduate program.


    "During my more than three decades in business, I have served more than 100 organizations, ranging from Fortune 500s to government agencies to start-ups. I document my observations here with the intention that they may help you achieve your goals, both professional and personal.

    "These are my opinions, offered for your information only. They are not intended to substitute for professional advice."


    We typically publish monthly on or about the 15th of each month, subject to our client workload. Use the RSS feed links below to subscribe to posts and/or comments. Better yet, follow us on Twitter @twpowell to be notified of new posts and related developments.

    Thanks for reading! Please mention us to others and add your non-spam comments and suggestions -- we value your input.


    COMPETING IN THE KNOWLEDGE ECONOMY is sponsored by the Knowledge Value Chain® (KVC), a methodology that increases the value and ROI of Data, Information, Knowledge, and Intelligence.

    The contents herein are original, except where otherwise noted. All original contents are Copyright © TW Powell Co. All rights reserved.

    All KVC trademarks, trade names, designs, processes, manuals, and related materials are owned and deployed worldwide exclusively by The Knowledge Agency®. Reg. U.S. Pat. & TM Off.


    E SCIENTIA COPIA. Knowledge is the Engine of Value.