Health Manpower Planning In “A Zero Marginal Cost” Economy.

Posted on | March 20, 2014 | Comments Off on Health Manpower Planning In “A Zero Marginal Cost” Economy.

Mike Magee

This week an economist with rose colored glasses suggested that there were two reasons for extreme optimism toward the United States economy, even as Putin goes out on an economic limb to assume the liability of his old Soviet partners. The first positive is our well publicized movement toward energy independence, with the beginnings of natural gas surpluses already visible and available for export.

The second is the emerging signals that the American health care cost curve is not only flattening, but actually indicating some possibility of reversing itself. This was reinforced on March 19th by Citigroup executive and former CBO head Peter Orzag when he said that “The news on the cost trends in Medicare – unbelievably good…The first five months of this fiscal year, the increase in Medicare compared to the previous year – 0.0, despite the baby boomers retiring…Health care is an exciting sector right now because there is a ton going on, and there is a ton that should be going on, not only in coverage, but on changing the way doctors and hospitals are paid….There is much better news on the cost curve in the past 4 or 5 years than people realize…Basically everything you think you know about our fiscal future, if this slowdown in health care costs were to continue, would be wrong. Our fiscal future would be much, much better.”

Say what? OK, what is going on here? Jeremy Rifkin, president of the Foundation on Economic Trends calls it the “zero marginal cost society”. He says that, “We are beginning to witness a paradox at the heart of capitalism, one that has propelled it to greatness but is now threatening its future: The inherent dynamism of competitive markets is bringing costs so far down that many goods and services are becoming nearly free, abundant, and no longer subject to market forces.”

Rifkin calls our rapidly expanding technology infrastructure the “Internet of Things”, a zero margin data assessment and onsite delivery system all in one. He notes that we already have 11 billion independent data sensors at work, with growth projected to 50 billion by 2020. Attached to what? To “natural resources, production lines, the electricity grid, logistics networks and recycling flows, and implanted in homes, offices, stores and vehicles, feeding big data.” Already major disruptions in energy, manufacturing, education and entertainment are obvious.

Rifkin sees “ 3-D printers, open-source software and recycled plastic as feedstock” in our near future, with “ households and businesses that are generating and storing green electricity on-site from their solar and wind installations”. Crazy you say. Well, 37 million buildings in the U.S. are already fully sensored and tied in electronically to the nation’s energy grids. Cisco is projecting private sector productivity gains of 14 trillion by 2022, and G.E. says productivity gains will fundamentally impact the business plans of over half of all global economies and businesses by 2025.

You don’t have to be a genius to know that productivity gains usually mean job losses. In a capitalist society, this has traditionally meant a decrease in for-profit and occasionally government jobs. What about non-profits. Well here is where it gets interesting. In the past decade (2000 – 2010), nonprofit revenues increased 41% compared to for-profit increases of 16%. 50% of the non-profit revenue came in the form of service fees, 36% in government grants, and only 14% from private philanthropy. Numbers of organizations grew 25% during those years from 1.3 million organizations to 1.6 million. By 2012, non-profits accounted for over 5% of our Gross Domestic Profit, and the shift in that direction continues.

Where can we expect sector growth. Rifkin believes “opportunities lie in the collaborative commons in fields that tend to be nonprofit and strengthen social infrastructure — education, health care, aiding the poor, environmental restoration, child care and care for the elderly, the promotion of the arts and recreation.”

From a sociologic standpoint, says he, we are already moving from a capitalist neighborhood based society to a virtual collaborative commons where everything is shared, and usually at a zero margin cost or completely free. It’s not only the 1.7 million cars that were shared last year, “ but also homes, clothes, tools, toys and other items “. As for the job market, consider the head winds like “workerless factories and offices, virtual retailing and automated logistics and transport networks”.

So let’s sum up:

1. National security in the future will depend more on economic strength than on military strength.

2. The U.S. reluctance to getting drawn into expensive areas of conflict, and Putin’s apparent willingness to do just the opposite, will strengthen the U.S. position.

3. In addition to energy independence and investment in high technology, and education based solutions, the U.S. should reinvigorate our aging infrastructure while fully building out the collaborative commons.

4. The linchpin of the collaborative commons, because it contains the largest bank of financial, social and human capital, is health care. Manage this sector efficiently, and everything above will swing in our favor.

5. But remember, efficiency and productivity go hand in hand. And “workerless factories and offices, virtual retailing, automated logistics and transport networks” mean more self-management and patient responsibility, less over use of diagnostics and pharmaceuticals, better and different nutrition and fewer doctors and hospitals.

Are you ready for that?

For Health Commentary, I’m Mike Magee.