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.
