Rant time. Friday’s Kaiser Health Policy Summary contains a report on US DHHS Secretary Mike Leavitt testifying to Congress why the feds should not cut payments to Medicare Advantage plans – even though it is thoroughly documented that these plans (designed to save taxpayers money by managing care) actually cost up to 10% more per enrollee than “wasteful” fee for service. Leavitt’s comment:
“There are those who want the government to do the market’s job,” Leavitt said. “The president and I are for competition. If the world has learned anything from the 20th century, it is that the marketplace beats government at controlling costs and delivering value.”
Travel back in time to 1980 and observe that US health spending as a % of GDP was under ten percent and not the highest among advanced nations. Twenty five years later, we’re far and away #1 at 16% and no other nation exceeds 12%. What happened was, beginning in the early 1980s, we began to embrace the idea that marketplace competition would control health spending better than government regulation. We are still paying and paying and paying for that disastrous idea.
The rest of the world shrinks in horror at our catastrophic health care financing model, and our leaders hum merrily along. If the US should have learned anything from the past 25 years, it is that our romance between health care and the for-profit marketplace has become a dysfunctional and bankrupting marriage. Marketplace competition has a place in health care – it should not drive the show.
John McDonough
After 25 years of pursuing market competition as the answer to rising health costs, we are in a deeper and deeper hole. Some might suggest one answer is to stop digging. Seems to me, Prof. Porter suggests we keep digging — just in another part of the hole, maybe even with a shiny new shovel. Let’s stop digging.
John McDonough
I think Michael Porter, the famous Harvard Business School professor, has just written a book on the thesis that the relentless increase of health care costs reflect an industry that is hermetically protected from any kind of serious competition. Imagine if we had national instead of state licensing, so doctors could practice anywhere. Or international!! Just to mention one point.
Example 1: the market for prescription drugs is distorted by patents, and as a result, US consumers pay the highest prices in the industrialized world; the market for generics has no such distortion, and US consumers pay among the lowest prices in the industrialized world.
Example 2: in Maine, there are two hospital markets; in the southern half of the state, there are hospital choices for most consumers, and hospital costs are competitive; in the northern half of the state, there is no hospital competition, and prices are through the roof.
This is not to say markets are the answer — not at all the point. Ditto regulation. Just to suggest that a healthy dose of regulation and competition seems to be optimal. What’s the healthy dose — that’s why the argument never ends.
John McDonough
> Marketplace competition has a place in health care – it should not drive the show.
What place is that? Can you be more explicit?
You might to look at Tyler Cowen’s piece in the 3/22 Times. http://tinyurl.com/2jj3l4