For the past 30 years or so, a debate about the proper place for competition vs. regulation in our health care system has raged. That debate has now become a central theme in the 2012 presidential race. Democrats favor a regulated system while Republicans favor a more market-driven system, nationally and in Maine.
Americans have the most market-driven health care system in the world. We are now seeing the results. We have the world’s highest health care costs, the highest rates of un- and underinsurance, some of the poorest health outcomes, and an almost universal belief that our health care system is badly broken.
Having a choice of health care providers is very important, since trust is critical to healing. But full-blown market-based competition doesn’t work. It has been known for years that the more doctors and hospitals there are in a region, the higher the costs — a phenomenon known as “provider-induced demand.” The Institute of Medicine recently reported that our system wastes about $750 billion a year, more than 30 percent of our spending. Much is due to an oversupply of some services and technology.
Usually, I am a great fan of competitive markets — where the seller and the buyer each have the same information about prices, features and availability. When it comes to buying a car, washing machine, TV or computer, I go to Consumer Reports or other websites where I can get current and accurate information about the price, quality, availability, reliability and other characteristics of the product I’m interested in. I can also find the opinions of lots of other customers. Then I can decide, usually at my leisure, which features of those products are important to me, how much I want to spend, and when and whether to make my purchase.
Good information is the one indispensable ingredient of competitive markets.
None of this applies to the strange world of health care. I don’t know when I am going to have an injury or illness, what it will be, or what treatment will be recommended. There is vigorous disagreement among even the best-trained doctors about the most effective course of treatment for many conditions. Tests and procedures that have been standard for years can turn out to be more trouble than they are worth. Mammograms, prostate cancer tests and excessive imaging procedures for many patients are the latest examples.
The pricing of health care services is so complicated and irrational that it is impossible to determine in advance what the costs of treatment will be.
What about quality? Although there are efforts in Maine and elsewhere to measure and publish the quality of individual doctors and hospitals, they are very much in their infancy. During a recent personal encounter with the health care system, I found them to be of little use.
As far as shopping for health insurance (as opposed to health care), a recently issued report from Maine’s Consumers for Affordable Healthcare documents the early results of attempts by the Maine Legislature to increase “competition” in the health insurance market. Those results are just what I (and many other experts) predicted. If you’re young and healthy, your costs may go down a little. If you’re older and more likely to be ill, your costs will go up a lot. Instead of encouraging larger pools where risk can be broadly spread, the new pro-competition law goes in the opposite direction by enabling insurers to charge the most vulnerable even more.
Despite their claims to the contrary, insurance companies cannot effectively control health care costs. Price competition among them is really a race to the bottom resulting in skimpier policies with more policyholder costs that are not worth much when the time comes to use them. That’s why we’re seeing more and more bankruptcies due to medical costs filed by people who have health insurance.
Most of this is intuitive for many people. Nevertheless, the myth of the sanctity of free markets in health care keeps on chugging along, despite overwhelming evidence from around the world that they don’t work. That’s why I advocate for a health care system more like Medicare than a free market — sensibly regulated.
The next time somebody tells you we need more competition in health care, just remember that what you’re hearing is the sound of smoke being blown in order to create a smokescreen. What the free marketeers (mostly corporate health care providers who are benefiting from our current system) are really saying is, “Give us your money, and leave us alone.”
When it comes to competition and health care, let the buyer beware.
Physician Philip Caper of Brooklin is a founding board member of Maine AllCare, a nonpartisan, nonprofit group committed to making health care in Maine universal, accessible and affordable for all. He can be reached at pcpcaper21@gmail.com.
It is not just the myth of sanctity in free markets that keeps us from affordable and higher quality health care. The insurance companies exert a lot of pressure, and money, on Congress and that is a huge stumbling block in changing the system. The insurance companies have never had it so good, and if States regulate and not the Federal government, things will just get better for them. Citizens will suffer, of course. Is this what we want?
And again the call for the obvious, Public Option, is made and this time by a health care professional. Sooner or later Washington, and Augusta, is going to see the writing on the wall. And the sooner it’s seen and addressed, the sooner this constant ‘cluster’ is gonna’ get fixed. The big question right now is a simple one, that being who benefit’s from the current insurance syste ? It’s sure not the consumer !
Dr Caper, Health care inflation is attributed to 2/3 innovated technology (drugs, equipment, etc.) and 1/3 Patients excessive demand because they are spending someone elses money.
One third of spending can be controlled by high deductibles for every patient introducing cost consciousness. This would get insurers out of the doctors office and the doctor would have to deal with a cost concious patient as they did before the advent of collective health insurance.
Because health care has evolved toward the expensive end of the spectrum because of pooled money, political interference, and protection against competition, health care is out of reach financially for many people. Ordinary people will have to be subsidized on a prorated basis with health savings accounts to be able to afford care. This is already being done by General Electric and 17% of large employers, soon to become 50% according to RAND research. There is enough money in the system to fund health savings accounts. Under this system you will soon see the doctors that over test and over prescribe change their expensive habits or go out of business. Negating “provider induced demand” from doctors.
40% of all health care spending is in the last year of life. Do you think people spending their own money will spend their last dollar to be kept on life support. I don’t think so.
The crime of traditional low deductible and co-pay health insurance is the moral hazard of individual irresponsibility. That has to very visible if you get out and about at all. People spending their own money will want to spend it wisely and stay healthy – the missing ingredients from todays system.
Patients do not need good information in a competitive health care market. They only need an interest in spending their health care dollars wisely and a good gatekeeper doctor with the right information (sadly, somewhat missing in our health care delivery system).
Another problem of the delivery system is access. Often the only alternative is to use the emergency room because there are no 24/7 urgent care clinics or your primary care doctor doesn’t have an appointment open for two weeks or more. These are correctable problems and will reduce “provider induced demand” at the hospital level.
Rand research says people with high deductibles can save between 20 and 30 percent on their health care costs. I have recommended this approach, with Health Savings Accounts, since 1979, and it finally appears to be happening. With better rules governing health insurance, and a newly structured delivery system toward cost effective care, how would you view the coming competitive health care system that RAND says will be here in 10 years?