The consumer electronics industry is defined by rapid innovation and falling prices. Its success has allowed content creators, service providers, Web sites, blogs and all sorts of new media to flourish. It is intensely competitive yet loved by consumers. This fast moving, deflationary, job-creating $160 billion industry has several basic tenets that all participants understand.
Advocates on every side should consider these market-based lessons, as they are relevant to the current health care debate.
1. Competition produces better products and lower prices. Consumer electronics is an intensely competitive, low-margin business. Companies that succeed do so on innovation, quality, reputation and/or efficiency. Consumers research carefully before buying as their money is on the line.
Lesson for Congress: Competition requires consumer choice and information. Consumer insurance choice is limited as companies are artificially restricted from competing across state lines. Consumers have little incentive to be smart purchasers as someone else is often paying -- many doctors see patients flood their offices once their deductibles are met. Consumers should always pay a portion of their health care costs.
2. Innovation is rewarded. The first to market takes big risks but also gains in sales, reputation and in market share. Failure is considered a learning experience.
Lesson for Congress: The proposals being debated ignore the risks and costs imposed on health care providers (malpractice litigation, for example) without addressing incentives for health care providers. My wife, a retinal surgeon, has developed a promising treatment that could help thousands of macular degeneration patients avoid a lifetime of uncomfortable and costly injections and save Medicare millions of dollars. Yet there is little financial incentive for her to pursue further development of this treatment, and it will certainly be opposed by drug companies.
3. Government-set standards discourage innovation. The marketplace provides it. For several years various policymakers have tried to impose design standards on technology -- which fortunately our industry has defeated, to the benefit of everyone. We beat back efforts to restrict recording capability, add government-mandated buttons to the remote control, equalize volume, make every product include features that few would want but all would pay for, and create products which reject every type of interference. Instead, the industry let the consumer choose what they wanted and this has produced a robustly competitive market that did not foreclose introduction of products like the iPod, the personal video recorder and HDTV.
Lesson for Congress: Some current reform proposals presume health care savings as doctors are forced to follow certain treatment regimens. This will dramatically discourage the type of innovation, which has made our nation the health care destination for the world's wealthiest people.
4. Never go large scale without testing and proving the concept or model first. No company starts without a prototype. The prototype is tested, researched and given to carefully chosen users for feedback. Nothing is perfect from the start so production is raised as market demand builds and feedback comes back.
Lesson for Congress: Without a national consensus, radically changing an industry that consumes 17 percent of our GDP is a risk that no rational or strategic business would undertake as it has a high certainty of failure. Congress should try some pilot projects and evaluate their success.
5. When things are not going well, define the real problem. Companies with declining sales undertake rigorous analysis of what they are doing wrong -- it's a matter of survival and necessity. When Best Buy was on its deathbed a dozen years ago it brought in teams that honestly assessed the cause of the problems, and the company changed to correct them, succeeding. Companies like Apple, Intel, Motorola, HP and TI have redefined themselves repeatedly by confronting their problems and acting to shift the direction of the company.
Lesson for Congress: Our nation's health care costs and large uninsured population are the problems Congress must address. The costs stem from a lack of information and competition, a population that engages in unhealthy behavior (obesity reportedly adds $147 billion annually to health care costs), unnecessary testing to avoid litigation, and end-of-life costs consuming much of all health care spending. A cardiologist I know performed invasive cardio procedures this year on two terminal Alzheimer patients, one over 90 years old, as both lacked living wills and their family members asked they be kept alive at any cost. Simply encouraging living wills when getting a drivers license could cut health care costs.
The health care debate is important and sadly divisive. But like a nation going to war, a consensus is needed and we lack that consensus. Congress should borrow a prescription from the most innovative industry and follow these market-driven principles. It should also remember the physician adage: first do no harm.
Gary Shapiro is the president and CEO of the Consumer Electronics Association.
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