Reihan Salam

Obamacare’s threat to healthcare innovation

Reihan Salam
Sep 27, 2013 20:14 UTC

Next week, the new state-based health insurance exchanges established under the Affordable Care Act, better known as Obamacare, will be open for business. Or rather — some of them will be sort of open for business, as the exchanges have been plagued by a series of technical glitches and delays. The Obama administration is now characterizing October 1st as the beginning of a “soft launch,” during which federal and state officials will work out various kinks. And though this might sound like just another bureaucratic foul-up, the success of the exchanges in these first few months will have enormous implications for the ultimate success of Obamacare.

The exchanges are online marketplaces that will allow individuals and small firms to compare the coverage options and pricing of various health insurance plans. They are also the platform through which people will apply for income-based subsidies for purchasing health insurance. One of the biggest challenges facing the officials setting up the exchanges is that applications for subsidies are meant to be processed in real time, to make the experience as easy and accessible as possible. This is much easier said than done. In Massachusetts, which has been operating an exchange of its own since 2007, applying for subsidies is a time-consuming process that involves filling out a 15-page form and providing proof that one is eligible for subsidies in the first place, and then waiting for state officials to get back to you. While Massachusetts’ approach is slow-moving, it has the advantage of being tried and true, as it is very similar to the way the states have been determining Medicaid eligibility for years. Real-time verification, in contrast, represents a break with established practice, and it would be a miracle if it didn’t involve major hiccups.

If the exchanges work smoothly, they have a decent shot at enrolling large numbers of the young, healthy Americans the Obama administration is counting on to make its new coverage expansion effort economically viable. If the exchanges don’t work smoothly, however, they might deter all but the sickest, most vulnerable healthcare consumers from enrolling, and this in turn would make the new insurance pools far more expensive to cover.

But even if the exchanges work smoothly, it’s worth asking whether the exchange model as it’s currently conceived is the best way forward for the American health system. Recently, the Christensen Institute, a small think tank devoted to applying the concept of “disruptive innovation” to solving major public policy challenges, released “Seizing the ACA: The Innovator’s Guide to the Affordable Care Act,” a paper that analyzes the various ways Obamacare helps and hinders new business models that might make medical care more accessible and affordable. The idea behind disruptive innovation, first devised by Clayton Christensen, a management theorist at Harvard Business School, is that in many industries, incumbent firms will focus on the needs and interests of their best customers, which is to say their most profitable customers. When these incumbents innovate, it will generally be to better meet the needs of their existing customer base, or to cut costs. This focus on existing customers means that many less-affluent or less-sophisticated customers are left out, as they can neither afford nor understand the product in question. Disruptive innovations aim to serve this market of non-consumers by offering cheap, easy-to-understand alternatives that might at first be inferior to the highest-quality products offered by incumbents, but which tend to get better and better over time. One classic example of a disruptive innovation is the personal computer, which was much cheaper and easier to use than the mainframes that were once the only game in town, and which spread like wildfire as the market for computers expanded from a handful of big companies to a large majority of U.S. households.

Ben Wanamaker and Devin Bean, the authors of “Seizing the ACA,” argue that while some provisions of the law will make it easier for entrepreneurs to introduce disruptive innovation in medical care, others will make it much harder. For example, they observe that the individual mandate promises to increase the demand for expensive primary care. This in turn will create an opportunity for new care delivery models, like low-cost retail health clinics that use nurse practitioners rather than doctors to treat common ailments. The employer mandate, similarly, will spur firms to offer “good enough” health coverage that meets the basic needs of workers without offering more care, and more expensive care, than what they really need.

How computerized work affects immigration

Reihan Salam
Jul 19, 2013 14:53 UTC

In 1900, 41 percent of the U.S. workforce was employed in agriculture. One hundred years later, that share had declined to 1.9 percent. Over that interval, the jobs that were easy and cheap to mechanize were mechanized, and now we are left with a handful of jobs that machines find extremely difficult to do. Machines can’t make strategic decisions about which crops to grow, and as a general rule they can’t fix themselves, so that leaves a significant role for managers and mechanics. Until recently, machines were also really bad at doing things like picking heads of lettuce and other delicate crops, as this requires a deftness of hand and an attention to detail that machines lack.

This is why the agricultural sector continues to have an appetite for less-skilled labor, which has been a huge driver of the recent comprehensive immigration reform effort. The idea is that because native-born Americans will never pick cucumbers — or at least because they will never pick cucumbers at a wage that would make for affordable cucumbers — we need a steady supply of less-skilled, low-wage workers to keep farms that grow cucumbers and lettuce and other delicate crops viable.

Now, however, a number of innovative firms have developed machines that use sophisticated sensors and an enormous amount of raw computing power to do jobs that had once been beyond the reach of machines. The reporters Gosia Wozniacka and Terence Chea recently described a Lettuce Bot that can “thin” a lettuce field in the time it would take twenty workers to do the same. Though the Lettuce Bot and machines like it remain expensive, there is every reason to believe that prices will fall. These picking machines are not quite good enough to pick fresh-market fruit, but they’re getting there. The reason these machines are being developed is the same reason agribusiness interests have been agitating for a substantial increase in less-skilled immigration: the supply of workers willing to work the fields is not big enough to keep wages extremely low, and so farms have been desperate for low-cost alternatives.