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Sunday, April 23, 2017

Cost Savings versus Job Creation: The Case of the Health Care Sector

Last week Paul Krugman pointed out the negative labor market consequences of the rise of Amazon over downtown retail.    Today, the University of Chicago's new Dean of the Harris School suggests that the health care sector should reduce its labor/output ratio in order to reduce its costs.

Here is a quote from this NY Times piece;

As President Trump seeks to fulfill his campaign pledge to create millions more jobs, the industry would seem a promising place to turn. But the billionaire businessman also campaigned to repeal Obamacare and lower health care costs — a potentially serious job killer. With Mr. Trump renewing his push to replace Obamacare, he faces a dilemma.
“The goal of increasing jobs in health care is incompatible with the goal of keeping health care affordable,” said Katherine Baicker, a Harvard University health economist who sees advantages in trimming the industry’s growth. “There’s a lot of evidence we can get more bang for our buck in health care. We should be aiming for a health care system that operates more efficiently and effectively. That might mean better outcomes for patients and fewer jobs.”
END of Quote
So, we need Silicon Valley to enter the health care sector?  How would Silicon Valley sell personal services currently provided by doctors and nurses? Where is the inefficiency and the waste?   In a world of heterogeneous patients who differ with respect to their personalities, non-cognitive traits (such as staying on prescribed medicines) and initial health conditions, how can computer Apps substitute for the human touch?  What will be lost by such labor to capital substitution?  I understand that for a standardized service such as transporting me from USC to home that there are many close substitutes to achieve this.  In the case of heterogeneous patient care, could Silicon Valley offer a "better product" than what we now have? As the Boomers age, will robots tend to them?  If "yes", how much $ would be saved? What would be lost?
As more states introduce living wages and higher minimum wages, how will this affect the demand for robots in the health care sector?