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Blue State Dukes it Out With Blue Health System

Starting in 2008, California implemented several Medicaid cuts aimed at putting the system on a more sustainable footing. In a particularly controversial move, the state proposed to reduce Medicaid payments to doctors and other health care professionals by 10%, and the health sector has been fighting it ever since. Recently CA’s 9th circuit court of appeals reversed a lower court decision to block the cut. The California medical association will appeal the decision, but Gov. Brown’s office is jubilant:

The 9th Circuit decision protects California’s right to make federally authorized pay reductions under Medi-Cal, said Gareth Lacy, a spokesman for Brown’s office.

‘The Court of Appeals ruled that trial courts cannot block California from making Medi-Cal cuts that were approved by the federal government,’ he said. ‘This decision allows California to continue providing quality care for people on Medi-Cal while saving the state millions of dollars.’

The CA dustup typifies the problems of the professional guilds in the age of blue model decay: as the financing dries up, the state goes after revenue wherever it can, which eventually results in squeezing the incomes of people like professors and doctors. The increasing weakness of the professional guilds makes it easier than ever before for the state to feed the budget beast by raiding their coffers.

Health care, law and higher education are the biggest industries in America today where guilds (professional associations that control entrance into the profession and influence or control the activities of practitioners) still play a large role.  In every case we see that costs are rising faster than inflation because our demand for the services these guilds produce is growing faster than the ability of the guilds to supply them affordably. Ultimately what needs to happen is for the revolution in IT to transform these industries, destroying or reshaping the guilds themselves, and providing society with the services it needs at a price it can afford.

Until that happens, we are going to see ugly pressures on both the producers and the consumers of these services. Producers in health care are going to be squeezed as cash strapped governments try to control costs — and consumers will be squeezed by de facto rationing. It isn’t going to be pretty, and the court battle in California is just one of the ugly skirmishes we will witness until we manage to develop a 21st century health care system that meets our needs without breaking the bank.

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