By Johnathon Ross, M.D., M.P.H.
New England Journal of Medicine, June 16, 2011

Re ‘Managed Competition for Medicare? Sobering Lessons from the Netherlands,’ by Kieke, Okma, Marmor and Oberlander (NEJM, June 15):

The fundamental flaw in much of the market rhetoric we hear is that health care is not an ordinary product and will never be regulated by market forces.

You can’t exit the market when you are very ill – you buy or die. The doctor not the patient orders the tests and treatments.

The search for information about symptoms is why you go to the doctor. Even a good doctor is sometimes unsure of a patient’s diagnosis or what the long-term costs will be until after some very expensive tests are done.

We have all heard about people with chest pain who were cured with five dollars worth of Maalox and those who needed $100,000 worth of open heart surgery. Americans already face high out-of-pocket costs and it has not controlled health care costs or insurance premiums.

If you are in agony from a ruptured appendix are you going to haggle with the surgeon over his fee on the way to the operating room? The most complex and costly services are the least negotiable.

If open heart surgery was on sale would you have two? The most expensive services are necessary but not really desired like a new car or a Rolex.

Most economists recognize that health care is not a normal product and not subject to the usual market forces. When there is market failure (and health care is a classic example), then the second best solution, regulation, is needed.

The health care systems wit the best outcomes for the least cost are all highly regulated or socialized. (See the Commonwealth Fund data on this fact.) Even here in the U.S. the best quality at reasonably low cost is being turned out by the VA, a completely socialized system.

We already have a national health insurance system that works for the sick elderly and disabled called Medicare. Medicare spends only 3 percent on insurance overhead vs. private insurance which regularly spends 20 percent or more. We should improve and expand Medicare to all. Multiple studies by solid health economists suggest that we could save over $400 billion by the simplicity of this system. This is enough to cover all the uninsured and improve coverage for all the rest of us.

As noted by the authors of this paper, an unanticipated outcome of the Dutch competition was increased cost due to complexity.