• 07 Aug 2009
  • What Do You Think?

Why Can’t Americans Get Health Care Right?

 
 
Change is desperately needed, agreed readers of Professor Jim Heskett's online forum. But how to make that change remains in doubt. What can Americans learn from solutions implemented by other countries? (Forum now closed; next forum begins September 4.)
 
 
by Jim Heskett

Summing Up

Does U.S. health care need more pull or push? There are clear symptoms that something is wrong with U.S. health care. In Edward Hare's words, "It's making us uncompetitive and turning us against each other." In this month's discussion, several of you (for example, Lisa Manners) provided excellent comparative data of the kind that we have seen all too little in the public debate on the matter. And nearly everyone admirably avoided the political rhetoric that has clouded rational thought about a truly complex problem.

The possible causes related to the symptoms suggested above are numerous in a channel that includes, in your comments, food and tobacco producers of unhealthy products (Christy Hitchens, Tom Dolembo); lifestyle equipment and service providers; developers and manufacturers of high-cost pharmaceuticals and medical equipment (James Shanahan, Karen); health care providers such as doctors and hospitals placing profits before client needs (David Stahl, John Van Slyke, Roger Chen, Jan Fersing, Hugh Quick, among others); the agency problem separating payers such as individuals, businesses, and the Government from users (Adam Hartung, Tom Witt, William Freyd); profit-oriented risk managers and payment processors such as insurers (R. MacKenzey, Emre Erkut, and others); specialized service providers (including malpractice lawyers) at various points in the channel (C. J. Cullinane, Michael Otten, and others); providers of currently insufficient and uncoordinated information and education (Mark Beaty, Carlos V., Scott Beaumont, among others); and finally citizens, patients, and their loved ones who do or don't take part in managing their own wellness and care (Mary Parker).

All of this is transpiring in an economy in which more and more people work as contractors in need of portable self-insurance and a consumer-based rather than an employer-based insurance system (Greg Bownik, Al Rossow, Katherine Daley).

No wonder it's hard to define the problem and take action or that several of you concluded that the response requires more time to gather and digest information, test ideas, define the purpose, and align it to a strategy (Akram Boutros, Jack Slagle, Nikos Mourkogiannis, among others). This all will require more leadership (Paul Karras, Phil Clark).

There was general agreement that change is needed. The means by which change should be achieved is in question. Where, for example, should fiat or regulation ("push"), incentives or subsidies ("pull"), or the provision of new information, education, or even competitive alternatives be employed? Given the current proclivity toward "pull" (or as we discussed in an earlier column, "nudge") to what extent and how should we employ incentives? For example, Curtis Craig suggested, "Let's incentivize quality of health care and deincentivize unhealthy or inefficient practices." Just how could that be done? By whom? What do you think?

Original Article

It is said that health care is the biggest threat to the long-term health of the U.S. economy and therefore, to some extent, the global economy. Americans pay much more for what they get (at least measured in terms of share of GNP spent, results obtained, and the percentage of the population covered) than any other country. And things don't seem to be getting any better.

There are a large number of examples of various approaches to the problem extant in the world, nearly all of which include greater government involvement than in the United States. The current debate in the U.S. centers, to some extent, on whether there should be a publicly administered alternative to the private health care system, as opposed to other countries in which private care is supplementary to the public system.

Harvard economist Greg Mankiw, for example, argues that a public option, to the extent that it will require Government subsidy while providing price leadership under a nonprofit cover, will over time drive most if not all health care to the public option (as happened with home mortgage giants Fannie Mae and Freddie Mac), creating the equivalent of a single-payer option. As he argues, "consumer choice and honest competition … are usually achieved without a public provider. We don't need government-run grocery stores or government-run gas stations to ensure that Americans can buy food and fuel at reasonable prices." The problem, of course, is that we are not talking about food and fuel; we're talking about health care, about which consumers and providers may be less rational.

For example, behavioral economists would tell us, among other things, that in the world of health care: (1) consumers have personal fears and lack of information that don't exist with food and fuel, (2) they equate cost with quality, turning the idea of rational markets upside down, (3) individuals' decisions regarding wellness affect the rest of us, (4) rationing is necessary but difficult to achieve, (5) there is an agency problem when neither payers nor providers (including pharma) are penalized by higher costs, (6) there is a "fee for services" vs. a "fee for results" payment system, (7) the U.S. has too many high-cost specialists performing work that could be performed more effectively by general practitioners and registered nurses, (8) high levels of liability encourage the practice of "overly-safe" and expensive medicine, (9) providers have fragmented and often incomplete information, and (10) consumers either have too little information with which to make rational decisions or don't make good use of the information they have.

Why, in a country that provides more medical research to the world than any other, can't Americans get health care right? Is it a problem of too much money chasing the problem? The wrong kinds of capacity? The wrong incentives? Too little or too much regulation? Too much pride in a dysfunctional system? What, if anything, can we learn from solutions implemented by other countries? For example, should Americans have a public option? What else? What do you think?

To read more:

N. Gregory Mankiw, "The Pitfalls of the Public Option," The New York Times, June 28, 2009, p. 5.