Brands in the News

Healthcare Reform: Where are the Savings?

11 Mar , 2010  

I am hoping that someone reading this post can help me answer a basic question: how will the proposed healthcare reform reduce costs?

It is very hard to disagree with President Barack Obama when he says that we should reduce inefficient and unnecessary healthcare spending. I am entirely in agreement. Who can be against that idea?

I’m less certain that reducing the overall cost of healthcare is a good idea. Innovation isn’t free. Indeed, spending more on healthcare to improve outcomes seems like a very good idea to me.

Still, supporters of the reform package being debated by Congress note that one of the big benefits is that the bill will reduce healthcare spending. But how will this actually happen? I am totally unclear on this point.

From what I can tell, the proposed legislation will expand insurance coverage dramatically, and force everyone in the country to have health insurance in one form or another. This move will surely increase the cost of healthcare; it won’t reduce spending on people who currently  have insurance, and it will dramatically increase spending on people who don’t currently have insurance.

How will the legistlation reduce spending? The two drivers of healthcare costs are price and volume. Will the legislation reduce either one? If so, how? 

Is there something I’m missing?

4 Responses

  1. Nuthought says:

    Please Tim, lets at least have a relevant argument which focuses on the strategic goal of Health care coverage. You are demeaning it by focusing on one aspect (of cost) only. I could just as easily question as to how this fits into your blog header of “Observations on Brand & Branding” ? This post is a bit disappointing seeing as it comes from you, as we expect much better from the Calkins brand.

    • Tim Calkins says:

      Thanks for post. My goal wasn’t to demean the proposed reform, just to note that it isn’t clear to me how the reforms will reduce spending.

      I think the healthcare reform is a classic marketing and branding story. My sense is that right now many people don’t see the benefits, or don’t believe the benefits. One reason may be that those supporting the reforms haven’t communciated the details. In brand positioning terms, we are getting a lot of “primary benefit” but not much “reason to believe.”

  2. justadude says:

    Please read Paul Krugman’s assessment which addresses your query quite well.
    Link here:

    • Tim Calkins says:

      Thanks for the link. Paul Krugman is clearly a big supporter of the reform, but he doesn’t explain how the reform will reduce costs. He writes “There are many cost-savings efforts in the proposed reform….” but he doesn’t explain what they are and why they will actually work.

      I’m still unclear about the cost savings.

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