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Monday, October 29, 2012

Planned versus Market Economy 

The great Socialist experiment of the twentieth century assumed that a planned economy was a practical alternative to commercial markets.  It believed that people could sit in a central location and decide how much wheat should be raised, how many cars of what type should be built, how many men’s shirts of what size and color should be produced each year and so on, and the result would be plenty for everyone, fairly distributed. 

By the end of the century, that idea had pretty much been abandoned everywhere, with a singular exception.  Health care.  States with Certificate of Need laws still make central decisions about how many hospital beds, MRI machines, open heart surgery programs, etc. are “needed” and prevent any more from being developed.  The Massachusetts legislature declares that providers should be reimbursed by means of global payments (i.e., capitation) rather than by fee-for-service.  Federal authorities use “meaningful use” definitions to tell providers how they should employ computers.  The intellectual community is fixated on single payer; i.e., national health insurance and gives no attention whatsoever to the study of market forces in health care. 

The cost of health care is rising to levels considered unsustainable and quality is not what it should be, but we cling to the planned economy model.  The Republicans talk about making use of market forces, but they refer mainly to moving Medicare beneficiaries into private insurance, which already operates in a competitive market place.  
 
The cost and quality problems don’t lie with insurance companies.  They lie with providers.  But not even the most conservative politicians are ready to say that yet. 

Small wonder that the problems in health care seem so intractable.

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