The Decay of the Healthcare System is a Decay in “Trust.”​

Published by David Loney on

There is an ‘Institutional Void’ in the US healthcare system: we lack a “Trust” institution. Banks act as ‘trust’ institutions, ensuring depositors monies are loaned to vetted companies and qualified home owners. Neighbors don’t approach neighbors, or a loan shark, to borrow the money to buy their first home, normally, they go to the bank. The bank as trust builder offers security to the depositor, reduces the costs of the transaction, and in so doing builds a future for both the new homeowner, the saver, and ultimately for society. The bank builds trust, that builds the house. Trust grows commerce and commerce grows our nations wealth. Without trust, and the Trust Institutions that build and maintain that trust, you have failed commerce, and failed societies.

Health insurance companies, hospitals, and your family doctor once played the role of trust broker in Healthcare. Over these past five or so decades these institutions slowly lost our trust. We can blame greed, status, ignorance, fear, power… all of these for the loss of that trust, and the concomitant breakdown of the system. There’s plenty of blame to go round. Even the patients are to blame to some extent. But blaming isn’t fixing.

My thesis is simple: an institutional void must now be filled by a new player. This is the essence of what most of us are arguing about, I believe. We are arguing over who should fill this institutional void: Government? Amazon, Warren Buffett, and JP Morgan? This past two weeks the response to Jeff Bezos, Warren Buffett, and Jamie Dimon’s announcement that they would enter the healthcare battle was met with a great deal of cynicism. Much of the criticism came from the deep experience, knowledge, and wisdom of those who have courageously strained against this ravenous, GDP devouring “tape worm” (if I may borrow the moniker from Mr Buffett) without even a glimmer of hope. In most developed countries, government has filled the institutional void in healthcare: England, Canada, Ireland… or government has regulated the system to effectively restore trust amongst the players, as it seems it has in Japan. My purpose here is to encourage us by arguing that the development of a ‘trust institution’ is a natural societal and industry evolution when institutional voids arise. This is nothing new. And they are invented by innovative visionaries. Banks didn’t always exist. The NYSE, LSE, CBOE are old, but were not always there. Where would commerce and society have arrived at without these institutions of trust? Would commerce and society have arrived at all? Borrowing, saving, home ownership, corporations, commodity trading…. Look at a failed society and you will see the failure of trust, and with that, Institutional Voids – the lack of, or failure of institutions necessary to restore trust.

Napoleon is quoted as saying, ” A leader is a dealer in hope” ( only I trust he said it in French). If we are going to succeed, we need to begin with hope, not wait for it. These three modern day leaders, Dimon, Buffett, and Bezos, are dealing out some hope. Healthcare, and health insurance, as an industry, are in their infancy. We just need to build a new institution. It has been done before. A “Healthcare trust” that does for health care what commodities exchanges have done for agriculture and manufacturing, what banks have done for home owners, what stock exchanges have done for our public companies and the economy, and what digital marketplaces have done for trade- this is what is required, now. And so here come a bank (JP Morgan), a holding company (Berkshire Hathaway), and an electronic market place/aggregator (Amazon) to deal us that hope by beginning to build that healthcare trust institution in the image of the institutions they already know. That sounds just about right to me.

This article was originally posted in LinkedIn on February 13, 2018.