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
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. Massachusetts
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.
Tuesday, October 23, 2012
On Transparency and Choice
Long-time friend and colleague
Frommelt was kind enough to send me a copy of a September 22
Wall Street Journal article titled “How to Stop Hospitals from Killing
Us.” The author was one Marty Makary, a
Johns Hopkins surgeon known for the development of a widely recognized surgical
After roundly condemning the health care establishment for preventable errors that “kill enough people to fill four jumbo jets in a week,” Dr. Makary offers transparency as a solution. He suggests that if hospital safety data were publicly available, patients would look at them and choose providers with the best records.
I’m all in favor of transparency, but I’m not so confident that it would have the results that Dr. Makary foresees. Publishing hospital performance information in an easily perusable form is not an easy thing to do and most people are not apt to spend a lot of time trying to understand it.
A more effective approach, I think, would be one in which providers are organized into competing entities (Accountable Care Organizations?) and employers and insurance companies take responsibility for evaluating them based on quality, cost, and patient satisfaction. Such organizations could afford to employ individuals with the time and expertise to study these matters in detail and reach informed judgments. These judgments could then be made available to individuals for use in choosing an insurance company or provider.
Of course, once the choice was made, the individual’s basic insurance coverage would be limited to a particular provider organization for the length of the contract. Some people might not like that very much, but limitation of choice is an essential part of cost control and sooner or later they will have to get used to it.