An old friend of mine, John Martin, has taken a leadership role in raising awareness of one of the great demographic trends of our time: the aging and impending retirement of massive numbers of Baby Boomers. Martin, the CEO of the Southeastern Institute of Research, has partnered with Matt Thornhill to launch the Boomer Project, a group that specializes in market research on the Baby Boomer generation. He also is an organizer of the Older Dominion Project.
In a meeting of the Older Dominion Project held in Richmond yesterday, leaders from business, government, academia, foundations and the not-for-profit sector set up committees to study issues such as long-term care insurance and the workforce “brain drain” that will occur when Boomers retire. (Bill Lohmann has the story here.)
It’s not clear from the story what the larger mission of the Project is other than, as Martin put it, “to create a marketplace of ideas.” But it sounds like a great initiative. One thing I appreciated about the tenor of the event (as I deduce from reading the story) is that there does not appear to be an operating presumption that the challenges of an aging population are problems that government alone must solve.
Of course, there is a role for government, along with the private sector and the not-for-profits. Virginia state government will have its hands full with two big challenges, and we should consider ourselves darned fortunate if it just handles them well: Fully fund the retirement expenses of roughly 500,000 state and local government employees, and ensure that Virginians have access to quality nursing homes and long-term care. Those are issues that greater minds than mine are thinking about already, so I will not dwell upon them.
I would focus instead on a third challenge facing the Old Dominion, which may be the most important of all even though it is typically considered outside the scope of state government: The sky-rocketing cost of health care. Health care bills are becoming increasingly burdensome to all segments of society — but especially the elderly. And the situation could well get worse. As we all know, Medicare is running on borrowed time.
Of course, Medicare is a federal program, which means that the Commonwealth of Virginia cannot fix it. However, it is within the power of the Commonwealth to address health care costs generally.
Although you would never imagine it from the national-level debate over health care, there are more fundamental causes than greedy drug companies that drive health care inflation. Despite advances in medical science, the health care sector as an industry has lagged the national economy in productivity growth. The preferred solution to Virginia’s health care crisis (and the nation’s) isn’t transferring more wealth from the haves to the have-nots, it is to spur innovation, boost productivity and improve patient outcomes. Achieving greater productivity is our way out of the health care dilemma — but public policy mavens just aren’t talking about it.
Now, let us ask why the health care industry is lagging in productivity. Is it because doctors and hospital administrators are somehow greedier or stupider than executives in other sectors of the economy? Or is it because health care is one of the most heavily regulated industries in the country? Politicians like to blame villains, so they tend to hew to the first interpretation. I happen to believe that antiquated government rules are the root problem. Here’s how state-level regs inhibit innovation and slow a desperately needed restructuring of the health care system:
- Certificate of Public Need imposes a layer of regulatory review over hospital expansions and the purchase of medical equipment, which effectively creates competition-free zones for hospitals and freezes the industry structure in place.
- Insurance mandates, typically passed at the behest of special interests, hobble insurance companies from devising discount health care plans for businesses and individuals who can’t afford the expensive plans. Thus, the ranks of the uninsured swell, and hospitals pass on the cost of treating them to everyone else.
- Professional licensing requirements converts the health care workforce into a collection of professional guilds, which, like industrial craft unions, are more concerned about protecting their turf than finding more productive ways to deliver health care services.
Those are just the highlights. There’s more the state could do to promote consumer-driven health care by increasing the transparency of the medical marketplace, and much paperwork that could be eliminated if someone could persuade all health care providers to adopt common IT standards.
A wholesale reformation of Virginia’s health care industry may be beyond the scope of the Older Dominion Project, but I can’t think of anything more important that state government, business leaders and the health care industry possibly could do to improve the lives of the elderly — and everyone else.
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