Wednesday, March 18, 2015

Market Forces in Health Care

What role should market forces play in health care?

As a general rule, we Americans believe that market forces are very useful.  People having to make choices based on what things cost assures a certain level of economic discipline, directing resources to uses considered most valuable and giving producers an incentive to innovate and be more efficient.

But we have been ambivalent about applying those forces when it comes to providing and obtaining health care services.  We tend to think of health care as a ministry that should be shielded from commercial considerations.

At the same time, if by driving an extra five miles a patient needing an MRI could receive one for half the price, that seems to be a reasonable thing to expect.  But if the MRI is covered by health insurance, the incentive to do so becomes very weak because the savings go to the insurance company, not the patient.

Many have addressed that problem and suggested the need for a system of financing that gives the patient some “skin in the game.”  The February 16 issue of Modern Healthcare included an interview with Mark Ganz, CEO of Cambia Health Systems, a health plan conglomerate operating in the northwest states.  Ganz is quoted as saying “Imagine if healthcare were priced to consumers.”  He cites drugs as an example and argues that involving the patient’s pocketbook more heavily in the purchase would reduce the cost of health care.

He may be right, but I am also impressed by the argument that sick people are not good shoppers for health services because their attention is focused primarily on their illness.

My own view is that a better approach is for health plans to assemble panels of providers with which they have negotiated prices.  They then offer separate health insurance policies, each covering services provided by a specific panel at a stated premium price.  Customers choose from among the competing panels and prices when they are well and able to give careful consideration to the choices.

It is an issue that we ought to be debating. 

This page is powered by Blogger. Isn't yours?

FREE counter and Web statistics from sitetracker.com