Healthcare as Public Utility

Computing functions once associated with PCs are moving back to big servers in the Internet Cloud, leaving mobile client devices to handle the user interface (UI) but not the data storage and analysis. I find this shift especially interesting, having grown up in the mainframe world at IBM as computing functions moved to PCs.

In the case of speech recognition and Apple’s SIRI artificial intelligence, even the UI function is now split between client & server. This has huge implications for healthcare, with IBM’s Watson and AT&T’s analytics engine aimed at different parts of the healthcare problem.

The networked mobile device (phone, tablet, etc.) will serve as a health gateway between a host of medical & environmental sensors and cloud-based services that collect & analyze the collected data. The benefits will not just target individual patients but be applied across large populations.

Given the potential benefits for society, as described by Dr. David B. Agus, Dr. Stephen C Schimpff, Vinod Khosla, Clayton M. Christensen, and others who have written articles published here, I ask this, “Is there a role for government in funding or promoting this vision of the future of health care?” It will surely be expensive, and that means only very large companies will be able to handle the Big Data mining & analytics tasks.

The problem with big, for-profit companies is how they measure success. They use terms such as ROI & payback period since investors want a quick return. Public entities, however, can take a long-term view of investments, and they measure success differently. Governments can use terms like better nutrition & public health or improved national security and economic development, since these benefits apply to all of society and resonate well with the taxpayers who fund the investment of public funds, at least theoretically.

The Long-term Benefits of Public Investments

Even free-market economists can recognize the benefits of public investments in utility projects that require a long time to deliver large public benefits. Private companies answering to shareholders often can’t justify those investments. Here are some examples:

• Municipal Electric Utilities. At the turn of the century, electricity was so critical to economic development of cities and regions that municipalities would build them with public funds if they couldn’t get private companies to do it.
• Water & Sewage Treatment. The same arguments go for water, and while there are many examples of private companies serving the region’s need for safe drinking water and the handling of waste water, including companies that drill wells and install septic systems, citizens often vote for public water services.
• Airports. Cities aren’t interested in having carriers such as Delta and United build private airports, because that would stifle competition. Instead, they prefer public airports open to all carriers since that promotes competition and economic development. Construction and airport operations are outsourced, but construction costs are funded by municipal bonds guaranteed by taxes and paid off from gate fees and retail space rental.
• Cable Television. Cable evolved because terrestrial TV broadcasting could only carry a limited number of channels, but the cost of laying cable and operating the networks was expensive. Smaller markets often had trouble attracting cable companies who viewed them as too small of a business opportunity. So to entice cable companies, municipalities often would grant companies a franchised monopoly in exchange for an agreement to connect schools and hospitals and pay a franchise tax as percent of subscription fees.
• Broadband Internet. Big broadband carriers often view rural and inner-city markets as too small and unprofitable, but instead of allowing municipalities to install their own fiber-optic networks, they’ve convinced more than a dozen states to pass laws prohibiting that, even when they refuse to provide service themselves. In the states that still allow it, some municipalities have invested in broadband to promote competition and economic development because the benefits to the community are so large and include better education & commerce, distance learning, access to jobs, telehealth & telework, and e-government. Besides, companies and households are attracted to locations with the fastest Internet, and towns without access see their young people go off to college and never return.
• Public Health. We also know that prevention is less costly than treatment and that having access to clean water and nutritious food has had a profound effect on health and the ability to contain rising health care costs. Studies show that people living in poverty with less nutritious diets and less access to preventative care are generally more obese, and they have more resulting cases of diabetes and related illnesses. They also have more expensive medical problems – problems that the rest of us end up paying for. So shouldn’t health care also be treated as a public utility?

While I personally favor a single-payer national health care system, promoting that is not the purpose of this article. I just want to share a perspective of investments when costs are high and the benefits are large and wide but take a long time to accumulate. Please share your reaction and perspectives below in the Comments section.

Healthcare as a public utility or profitable industry?