[Vision2020] Borden and Universal Health Care Use the Same Business Model

Thu Jan 19 16:48:48 PST 2012

Jay,

I am glad we can have a productive conversation despite our differences. 

You wrote,

"The missing piece in your analogy (of my analogy) is that I didn’t turn around and offer free widgets to everyone, and then turn around and only bill the people that can afford it.   On the contrary, when they want a new widget, they’ll have to pay for it.  And because they suddenly had to pay for it, they were much more scrutinizing of how the widget was used."

I could not agree more that this is the crux of our inability to see our different perspectives. You are absolutely correct that if people were not charged for each item they selected and people were only charged by ability to pay the system would bankrupt everyone and collapse. 

However, I think that is your misunderstanding of the Universal Health Care system. It is not communism.  If  countries with Universal Health Care operated in such a fashion as you described, that is exactly what would happen. Thankfully, it doesn't. It operates in the way Costco does. Everyone pays a membership fee. The fee is dispersed amongst the providers in such way as to keep them financially afloat. In exchange for that cash up front, they agree to keep the fees for their services not free, as you think, but affordable for the members. 

So, for a real life example. I pay $55 a year to Costco. Costco gives a portion of the fee to the Pharmacy. In turn, the pharmacy charges me $80 for a 90 day supply of medication vs. Walmart which would charge me no fee, but $190. It would make no sense for me to do as you claim I would, order twice as many medications that I needed for two reasons. One, I am still poor, despite the lower costs, I am limited in resources to keep buying the same medications just because they are cheaper. And second, decreased utility. The extra meds, although still available for less cost, would not do me any good and make me more poor. Most people don't have that kind of money to waste. 

Hope you followed my points. If not, I suggest you take a look at Prof. Gier's articles, as he offered, about Universal Health Care as he is an excellent source. 

Donovan Arnold

________________________________
 From: Jay Borden <jborden at datawedge.com>
To: Donovan Arnold <donovanjarnold2005 at yahoo.com>; Moscow Cares <moscowcares at moscow.com>; keely emerinemix <kjajmix1 at msn.com> 
Cc: vision2020 at moscow.com 
Sent: Thursday, January 19, 2012 12:47 PM
Subject: RE: Borden and Universal Health Care Use the Same Business Model

I appreciate the kudos… but I’m not trying to pat myself on the back, only to demonstrate my view.   

(And you’ve been more than kind in your responses… thank you).

The missing piece in your analogy (of my analogy) is that I didn’t turn around and offer free widgets to everyone, and then turn around and only bill the people that can afford it.   On the contrary, when they want a new widget, they’ll have to pay for it.  And because they suddenly had to pay for it, they were much more scrutinizing of how the widget was used.  

You’re trying to connect the dots of my making customers responsible for their own widgets to Universal healthcare just “spreading the cost” around and tossing widgets into the street for anyone to consume.

(Yes, this analogy is REALLY breaking down…)

Costco’s model works because they tend to both BUY and SELL their inventory in BULK.  They are actually intended/marketed such that they sell to OTHER businesses (B2B), but if you’re an end-customer and want to purchase pianos in a 3-pack, that’s fine too.  (Yes, I know, you can get many merchandise items individually… but generally speaking most of their products are larger in both VOLUME and QUANTITY… I think I bought peanut butter from Costo 3 years ago and haven’t had to go back since…)

If you link that to Universal Health Care and point to savings…. well I don’t know if I would purchase a dozen ER visits at a time, or choose the flu shot with “50% more!”

If you want to make a link to another enterprise and point to savings, might I suggest Walmart.

Walmart (by several other people’s description) is the “single choice” threat moving into any territory.   Walmart succeeds because they undercut competition (private practices) by offering lower prices.  They engage in supplier-specific contracts with individual suppliers to offer products that no one else can touch (semi-price-fixing)… and to sell their products ONLY in their store.

On the flip side, because of Walmart, other retailers (doctors) can’t afford to stay in business.  (How many articles have I read where “someone used to own the local greenhouse/nursery, but now they just work at the Lawn & Garden at the local Walmart?”)

The end result is a place that people hate to go, but have no other real alternative (since the other choices have been destroyed), purchasing inferior products/services that they can’t stand...

Now… today, people are responsible for paying their own bills at Walmart.  That keeps the purchasing in check (minus the Walmart shop-a-holics).

To press the analogy further,  imagine if Walmart suddenly said “all you can take buffet… pay one fee and take whatever you can carry off the shelves”.  

People would start to grab two or three or four of items, even though they wouldn’t need them, because the cost difference is zero.  As a result, Walmart would have to RAISE prices to keep up with the “flat-fee” demand… (and at this point you head on down the slippery slope of starting to charge ONLY the more wealthy folks shopping at Walmart, yada yada yada…)

This is an obvious deadlock debate… I see widgets, you see universal health care, I see Walmart, you see Costco.   I have ZERO argument with anyone who says that the current health care system needs alterations… but I can see ZERO benefit in having the same folks that run the DMV and the IRS suddenly managing my health insurance… I see only disaster.

Jay

From:Donovan Arnold [mailto:donovanjarnold2005 at yahoo.com] 
Sent: Thursday, January 19, 2012 7:30 AM
To: Jay Borden; Moscow Cares; keely emerinemix
Cc: vision2020 at moscow.com
Subject: Borden and Universal Health Care Use the Same Business Model

Jay,
I think it is great that you were able to turn a failing business. Not many people have that gift. I think your example does relate directly to health care, but in a way that gives credence to Universal Health Care and highlights problems with our current system of care.
What you did to the failing widgets company is exactly what Universal Health Care does all over the world. Our health care system is like a business that is going broke, with unsatisfied customers because the way it is doing business. What kind of business lasts with 13% increases in costs annually and just keeps passing the cost to the customers? That didn't work for your predecessor, and it isn't working for health care either. 
The steps you took, are the ones Universal Health Care makes. First, you lowered costs of the widget so everyone that needed one could afford it. Universal Health Care does it the same way. It is the bulk of sales, not the high price per unit that makes it work financially, as you well know. The Costco model works better than the local jewelry model for high demand products and services. 
Second, you took steps to reduce costly replacements by prevention through education. Universal Health Care also works on this business model. By giving people the access to education on health and behavior and proper use of medications and treatments, the cost of repairs are greatly reduced because the damage never occurs in the first place. 
Finally, Universal Health Care works on the business principles you adopted of a fair contract that holds both parties accountable. Both you and Universal Health Care pay for about 100% of damage that is not the fault of the client. However, if the person is neglectful or uses it not as intended they are not completely covered, but you don't make the costs of fixing the problem beyond their ability to pay. 
I really don't see the difference between what you did with a widgets company and what Universal Health Care does for health care. Jay, I don't see why the taxpayers should have to use the broken business model you had to fix than the proper working one you have now. Do you? 
Donovan Arnold

From:Jay Borden <jborden at datawedge.com>
To: Moscow Cares <moscowcares at moscow.com>; keely emerinemix <kjajmix1 at msn.com> 
Cc: vision2020 at moscow.com 
Sent: Wednesday, January 18, 2012 4:30 PM
Subject: Re: [Vision2020] More Proof Preventative Health Care Saves

Yes, that’s the decision that the previous business owner made.    (Whose name didn’t sound anything like “Bay Jorden”).  

While he thought he was doing good, he was ruining his company (and thus his ability to continue servicing his customers with the product).

You can ridicule the specifics all you want, the only relevance that translates to my point is one of human nature.  I believe (and I have experienced the trend) that people care less when they are not directly tied to finances.

Is there anyone on this list that rents out residential property?  Would you say that people take more care of the apartment/house when a security deposit is on the line?  Or would you say that people generally take care of the facilities regardless?

Jay

From:Moscow Cares [mailto:moscowcares at moscow.com] 
Sent: Wednesday, January 18, 2012 1:26 PM
To: keely emerinemix
Cc: Jay Borden; vision2020 at moscow.com
Subject: Re: [Vision2020] More Proof Preventative Health Care Saves

According to Jay Borden:

"Turns out the problem had nothing to do with design… it was customers not bothering to read or learn anything about proper use of the widgets, or trying to use the widgets for a completely different purpose altogether. 

Tack on a free replacement guarantee, and customers didn’t bother to self-educate… they just let the company “fix the problem” with the warranty."

So, what you are telling us, Mr. Borden, is . . .

Although the customers clearly violated a product's warranty by " . . . trying to use the widgets for a completely different purpose altogether . . . ", the company honored the warranty and replaced the product.

That's right up there with . . .

John Smith was going into the widget business.  He would go to the widget manufacturer, load up his truck with widgets (at $10 each), take them back to his store, and sell them at $9 each.  This went on for a couple months.  He was wondering why he was losing money on what he considered to be a sound business venture.  He sought advice on what he should do from a business advisor; let's call him Bay Jorden.  Bay Jorden, after weeks of meticulous research into John Smith's business practices, came up with what he considered a sure-win solution.  He suggested to John Smith that what he needs is a . . . larger truck.

Sidebar to Mr. Borden:  Do you know if this guy is selling cars?  I have a friend that can certainly use a new car . . . every year.

Seeya later, Moscow.

Tom Hansen
Post Falls, Idaho

"If not us, who?
If not now, when?"

- Unknown

On Jan 18, 2012, at 12:57 PM, keely emerinemix <kjajmix1 at msn.com> wrote:
Turns out the problem had nothing to do with design… it was customers not bothering to read or learn anything about proper use of the widgets, or trying to use the widgets for a completely different purpose altogether.  
> 
>Tack on a free replacement guarantee, and customers didn’t bother to self-educate… they just let the company “fix the problem” with the warranty.

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