You may never have heard of Joseph Schumpeter, yet he coined the phrase that may best describe the changes in today’s insurance industry. Schumpeter, an Austrian economist, popularized the term “creative destruction.”
In his later years, teaching at Harvard, he wrote a book that agreed with Marx’ premise that Capitalism would eventually yield to Socialism. He differed with Marx, however, in his assessment of the method by which this would occur.
Schumpeter believed that capitalism would not implode due to the normal push and pull of the marketplace, but rather as a result of democratic majorities voting for restrictions on innovation and entrepreneurship; restrictions which would ultimately burden and destroy the capitalist structure.
The fascinating variable in our world is that the collapse has happened to the financing mechanism of the market (insurance companies) before affecting the manufacturing side (doctors, hospitals and other providers) of the equation. It has been said that if you put all of the economists in the world end-to-end, they still wouldn’t reach a conclusion. I’ll bet they would agree on this conclusion: we are witnessing the “creative destruction” of the United States’ medical system.
Moreover, it is happening just the way Schumpeter hypothesized. Until recently, the manufacturers sat on the sidelines watching the finance people undergo their destruction. We are beginning to see some early signs that the hospitals and providers are slowly awakening to the realization that they are next.
The best hope for resolving some of the long-standing issues in the medical care and delivery system and for moving us away from the brink of government-controlled health care may be both of these communities realizing that they have to come together – and that time is rapidly running out.
Public support for the new health care plan is continuing to erode and consumers are willing to be a part of the solution, but they are waiting for our industry to offer some “creative construction.”
Check out more blog entries from David Saltzman.