Health Care Reform and Competitive Advantage

Why do we need universal health care from a competitive business standpoint?

I blogged in "Air, Water, Food, Shelter, and.....," that we needed to nationalize heath care insurance. Let me refine my idea and better explain why:

To nationalize heath care insurance would be a competitive advantage for business, which if it is not now, will soon be a competitive dis-advantage if we don't do it.

Wal-Mart versus Joe's Variety Store:

First, lets looks at Wal-Mart versus Joe's Variety Store. Joe's only has 21 employees, Wal-Mart has 2,100,000. The same dynamics that put most of the stores like Joe's out of business a long time ago, volume, now can come to play in health care. When the Wal-Mart first came to town, Jane's Dry Goods could not compete on price and had to close up. But, Joe's was able to offer superior customer service, and although the prices were slightly higher, they had customers willing to pay the difference. Joe's even joined a purchasing co-op to get better pricing on some goods.

But now, after the cost of merchandise inventory, labor, and facility payments; health care has now past utilities and capital costs to become Joe's fourth highest business expense. And it looks to be getting worse. The store tried to band-aid this by switching to part-time workers instead of full-time workers. But the real good workers left to go work somewhere else, leaving Joe's with rest. So, not only have costs gone up, but productivity has gone down, hitting the store at both ends.

Now there is no doubt, by either Republicans or Democrats, the Right or the Left, Socialists or Capitalists, that the demographics going forward will mean employment shortages in the health care industry and more patients coming through the door. The retirement of the Baby Boomer generation has cemented this fact in stone. (I have advocated for a few years now that we bring females from places like the Philippines in and send them to nursing school, then they must work here for a time period to pay back their education. And then if they are productive they can stay if not, we send them back.)

There is no doubt, if the store were to hire all full-time employees again to raise productivity, that health care costs will soon pass facility costs at Joe's, if they haven't already, and become the number three fixed cost. This is something that they can't afford to do. They would have to close down.

Now Wal-Mart has the financial flexibility and size to help out its own fate. They could give scholarships to medical school students, then after med school and their internship, they must treat Wal-Mart employees for a discounted rate. (The government should give companies huge tax breaks and incentives to give math, science, and medical scholarships. I am talking like for every $1 put in a scholarship, the company should get $2 or $3 [or more?] in tax deductions. This would be better than collecting more taxes and then having the government give out the money because of their, the governments, high administration costs.)

So, just from just looking at Wal-Mart v. Joe's Variety, Joe's can no longer compete, it is either offer health care and hire full-time workers, or hire part-time employees and have poor productivity. In both scenarios Joe's goes Chapter Seven.

Now Joe has now closed his variety store and became a partial owner in the town's local steel mill, Springfield Steel, Inc.

Springfield Steel, Inc. versus Baosteel Group:

Springfield Steel is a very small steel mill, with 153 employees. Baosteel Group is China's largest steel producer, with 15,325 employees.

Now Springfield has remained competitive because of two things: 1) productivity through technology, and 2) the U.S. Dollar. The ratio of employee per ton was vastly superior for mills like Springfield over their foreign competitors with the use of the latest computers and machinery. The power of the U.S. Dollar also helped keep their prices level while other currencies fluctuated in wild swings, causing the foreign mills to mis-judge their capital costs and often be on the wrong end of a currency move.

Going forward these two advantages will evaporate. Baosteel will soon catch up with technology, all they have to do is buy it (or buy one and use reverse engineering to replicate). As the standard of living increases in the BRIC countries of Brazil, Russia, India, and China, and also South Korea, Indonesia, Chile, Taiwan, etc., go up, the U.S. Dollar (because of the debt, deficit, and mis-management) will continue to fall against these currencies. In addition commodity based currencies (countries with a more favorable ratio of commodities to population) like Canada, Australia, New Zealand, Norway, and even Russia, will also see their dollars go up versus the U.S. This will allow a country like China to move more people from an industry like steel production to other industries (their "service sector economy"), and keep overall employment in a narrow band.

As these factors occur, Springfield Steel must now adopt the same tactic that Joe's Variety Store tried. Part-time workers instead of health care costs they can't afford. This will lower production and the employee per ton ratio will narrow. Soon, Springfield Steel will go out of business.

Now is the Time:

Taking health care off of the table for businesses (and employees) is now no longer an option, it is a necessity. Just like debating what is causing Global Warming, it no longer matters. We have to fix it to remain. As I advocated in "Air, Water, Food, Shelter, and.....," taking health care insurance costs away from employers and employees is the best thing that we can do right now to remain competitive and have a future. (Next after that is using the smart-grid and net-grid positive technology to drastically lower energy costs for the same parties. Imagine if the average worker got paid from the electric company instead of paying them? This would have the benefit of higher net taxes and lower net wages for employer/higher net wages for employee, without giving them a pay raise.)

If we do not nationalize health care insurance this will continue to put small businesses at a competitive dis-advantage to larger ones, and then all U.S. companies to foreign ones. Nationalizing heath care insurance is the number thing that we can do to help keep all U.S. companies at a Competitive Advantage. Even a staunch Right-wing Republican Capitalist can see that a competitive advantage would be a good thing.

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