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Thursday, December 08, 2011

Effective Competition

I have long believed that the best way, perhaps the only way, to get health care providers to become serious about cost control was to create competition that caused them to fear losing patients unless they did so.

I have also believed that because the economics of health care are unique, the forms taken by the competition would also have to be unique.

Well, we now apparently have an example.

Health insurance companies in Massachusetts have created policies that they call “tiered.”  Subscribers still have free choice of hospitals, but if they go to ones that have high cost, the deductible will be higher.  The range is something like a $150 deductible for a low-cost hospital and $1,500 for a high-cost alternative.

It seems to be having an effect.

The December 7 issue of the Boston Globe has a front page story about a cost reduction effort at Brigham and Women’s hospital – which is in the high-cost category.  Concern about the implications of the new “tiered” insurance plans was mentioned in the article, as was the Brigham’s experience last year of having Harvard Vanguard, the state’s largest medical group, shift a portion of its admissions to the nearby Beth Israel Hospital where costs were lower.

It all reminds me of the quotation that is taken from Abraham Lincoln’s second address to Congress and provides the title for this blog:

As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.”

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