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Globalization and the role of US health insurers

Thomas Friedman in The New York Times has written a seminal article on the (free registration required) impact of globalization on industrial competitiveness. Simply put, the web of fiber optic cables that now connects the world, coupled with the explosion in wireless connectivity, make borders, trade policies, and time zones completely irrelevant. And, the tremendous investment in education on the part of the Chinese, Indians, and others makes our lead in some areas of technology, science, medicine, incredibly tenuous.
Lots of adjectives, and you may well dismiss this as mere blog ranting. Before you do, note this. India passed its first comprehensive, enforceable Intellectual Property law last month.
Already, pharmaceutical firms, medical technology companies, software developers and the like are flocking to India, and deals are being consummated. India has a long tradition of excellence in science and math education, a highly motivated and ambitious workforce, lots of very experienced citizens presently working in the industrialized world, and many more scientists, mathematicians, physicists, and teachers than we do.
Companies are not investing in India just because it is cheaper. Yes, today the cost of labor is certainly less than in the US or EU, but the quality of the workforce, particularly in the sciences and technology, is rapidly approaching excellence. In the near future, we will find ourselves losing out to India and China not on the basis of cost, but due to their ability to compete head to head with our best.
IBM recently built an R&D center in China. After conducting an IQ test on graduates of the best universities in the country, evaluating the top 20,000, IBM selected the top 20. Unsurprisingly, some of their best research is now coming out of that facility. To paraphrase a Chinese researcher, when you are one in a million in India, there are a thousand others just like you.
What does this mean to you, or more accurately, why am I ranting about this in a blog that is ostensibly about managed care?
It frustrates me to no end that health plans, HMOs, the Blues, employee benefits purchasers, brokers and consultants don’t see the direct and vital link between health care and productivity. We are about to get our collective butts kicked by the rest of the world, in part because the health insurance industry does not understand that they are in the productivity business.
Medical guidelines, drug research, quality of care indicators, physician reimbursement, plan design and provider profiling focus on cost and highly questionable “quality” indicators. This is utter nonsense. If health care providers and payers want to be relevant, they had better figure out that their job, their reason for existence, is to enhance and improve the productivity of their customers’ workforces.
Stop thinking like a cost center and start thinking like a profit center. Or find your customers disappearing as they lose the competitive race to Indians and Chinese firms.

2 thoughts on “Globalization and the role of US health insurers”

  1. I’m glad Friedman has seen the light, but this idea about the loss of US hegemony has been floating around the left blogosphere for quite a few years. The first mention I recall was when Bush refused to finance stem-cell research. The research, of course, continued – just not in the US. Only belatedly have some state governments now stepped up to the plate; but without federal backing, it is probably not enough to gain a leadership position in this field ever again.
    It has been the left that maintains that we must fund lower education, to improve the lot of the country, not just because we care about poor people. It is hard to furnish our graduate schools with educated people when local school boards are arguing about evolution in the classroom. Bush’s tight visa program has been a boon to our citizens who want to go on to graduate school, because fewer foreign graduates are applying. Unfortunately, they may be less qualified than previous generations of applicants.
    And just recently India has revealed how greatful they are that Jim Welsh and GE brought the ethic of cut-throat competition to their country. Now it’s blowback time.

  2. For a complete copy of the conference proceedings, check their website at; the proceedings are not posted yet but should be within a few days or couple of weeks. another source is the Center for the Study of Health System Change

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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