The False Efficiency-of-Scale Argument: The Particular Case of Health Care Reform

The President proposes a "health care exchange" that will create an economy-of-scale efficiency. It will simulate, he argues, the effect of a free-market economics through collective bargaining power.

Why is it necessary to simulate a free-market price through non-free-market means?

The President's exchange plan keeps the decisional process a product of consolidation which affirms the belief that centralized control is the model of efficiency despite having produced the Great Recession.

According to the President, the exchange is a proven, too-big-to-fail model of success that will benefit "The People" instead of insurance company profits.

By organizing massive bargaining power "like Wal Mart," the President says (which is organized to be "too big to fail" despite the Great Recession), We (The People) will have all the benefit of a proven organizational technology on our side to effect the change we need.

While the President argues the benefit of a too-big-to-fail organizational technology to a fare-the-well, he does not consider the detriments.

The Wal Mart Model, for example, has for many years consolidated the marketplace. While it affords a competitive price, its has meant the demise of small businesses that are our best source of employment. It is no coincidence that the demand now is for "jobs jobs jobs!"

Since Wal Mart is too big to fail, the detriment (the organizational error and distortion that is inimical to a free-market economics like lower prices but with a diminishig demand that causes delfation) is turned into a success that accumulates along with the benefit. Organizing for this kind of success, whether it is consumer retail or health care, is to also organize for massive failure that the marginal beneficiaries (like shareholders, and in the case of health care, its providers) are immune and, even worse, have a stake in conserving.

In a marketplace that is allowed to consolidate, the error (the detriment, the failure) proliferates and the benefit accumulates. In a free-market system, the benefit proliferates and the risk dissipates. Instead of our MBA graduates organizing a highly innovative, pluralistic economy, they are paid huge bonuses from the accumulated profits of organizing a consolidation of industry and markets in the name of efficient economies of scale. The result is the Great Recession, very expertly accomplished with the value of The People's debt being worth more than the value of their assets.

Is this where the organizational plan for health care is headed? The probability, based on experience of using this model, is very high. It is a risk we do not have to take.

In the case of health care, consolidation of the market will benefit all those health care professionals sitting around applauding the President's initiative when he announced putting the plan to a vote. It will conserve an accumulative benefit with an accumulative cost that deflates the economy and causes Great Recessions through consolidation of industry and markets.

Whatever cost savings can be had from an organized bid-exchange will be easily countered by the organized consolidation of the providers. The cost of health care will be perpetually parked on the ask, never on the bid.

The market will be organizationally rigged with an economy-of-scale efficiency.

When the revenue stream on potato chips runs out to support ever-increasing costs in the authoritarian name of public health and welfare, it will be something else ad infinitum. Freedom is crushed under the weight of holier-than-thou elits interested more in accumulating wealth and demonstrating power than administering the general welfare.

The benefit will be consolidated by health care providers at the expense of insurers. Costs will not be reduced, they will be a consolidated benefit--an accumulation of wealth and power that causes crises with the highest dergree of predictive utility.

The People should not allow elite authorities to persist in error.