Obamacare is built on the assumption that healthcare can be more productive, that we can squeeze more health per dollar out to the system that is built to give it to us. Practically everything I write is based on the same idea — big time. I believe we could do healthcare better for half the money we pour into it now.

There is a widely-cited theory that this is fundamentally impossible, popularized by William Baumol, a New York University economist, in a 2012 book, The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t. Baumol trades on the idea that healthcare is mostly the individual labor of highly trained professionals (doctors, nurses, and technicians) whose labor cannot simply be baked into machines and software. So we can’t expect healthcare to become any more productive, especially as healthcare keeps getting more complex.

We can’t both be right. What’s the daylight between these two radically different points of view?

I believe that the Baumol argument assumes many things that are simply not true. These include:

  • We are using doctors and other personnel at their highest and best use (when in fact we waste masses of clinician time on documentation and other processes that do not add value at all, let alone value that only they could add)
  • The goal against which productivity should be measured is provision of healthcare processes, such as how efficiently one can do a gall bladder removal or an uncomplicated birth (as against, say, improvement in health of patients and patient populations)
  • There is not much wasted motion within those processes (when in fact there is a great deal wasted, as anyone who has applied lean manufacturing principles to healthcare processes has discovered)
  • There is little that a doctor or nurse does that could be supplanted by a machine, or helped by automation in a way that would make it more efficient (a laughably bald assumption being disproven every day in every sector of healthcare).

Most importantly, the Baumol argument assumes that everything we do in healthcare is necessary and beneficial (when in fact at least a third of all we do is waste, unnecessary, not helpful and often actually harmful). What is the productivity of doing a procedure more efficiently, if it is a procedure you actually shouldn’t be doing at all? How do you measure the productivity increase of dropping an unnecessary or wasteful procedure (such as routine colonoscopies as mass screening for colon cancer)?

The flip side is: The Baumol argument takes no cognizance of the many procedures that could be supplanted by less expensive treatment paths, such as medical management for simple back pain in the place of complex back fusion surgeries.

The search for greater productivity in healthcare will lead us somewhat toward streamlined processes, a fair amount to automation, and massively to simply not doing what does not need to be done.