^{Posted on March 11, 2004}

Weak health care market forces lead to thoughts of government solutions

Health Affairs
March/April 2004
Are Market Forces Strong Enough To Deliver Efficient Health Care Systems?
Confidence Is Waning
By Len M. Nichols, Paul B. Ginsburg, Robert A. Berenson, Jon
Christianson
and Robert E. Hurley

The quest for greater efficiency in the delivery of health care services is eternal in a country that spends far more on health care than any other, consistently has growth in spending that outstrips that of income, is unable to provide insurance coverage to at least 15 percent of its population, and ranks poorly among industrialized countries in systemwide measures such as life expectancy and infant mortality. Add to this our quality problems, and it is hard to be complacent about the value U.S. citizens receive for their health care dollars. Inefficiency also puts a very high public-sector price tag on universal coverage, which helps polarize the politics of this issue.

Typically, all analyses of health system reform address the same key question: What and how much can markets do alone, and how much help might they need from government to produce more efficient outcomes or a more equitable distribution of health care resources? As we enter another season of broad debate about the structure of health care financing, the Community Tracking Study (CTS) site visits of the Center for Studying Health System Change (HSC) can make a unique contribution to analyses of the power and limits of market forces.

The CTS is a longitudinal study that tracks changes in local health care systems nationwide. Researchers conduct site visits to twelve randomly selected and nationally representative communities every two years to interview leaders of the local health care system about changes in the organization, delivery, and financing of health care and the impact of those changes on people.

We were struck by how many of our respondents-especially those traditionally
not predisposed to seek larger roles for government-echoed sentiments similar to the following. An insurance broker said, “The delivery system is a mess. The sectors don’t talk. No one wants to change. The government must do something.” A surprised benefit consultant reported: “There now is a lack of resistance to government involvement.” And capturing a sentiment expressed in many different ways, one local policymaker said, “If the private sector can’t figure all this out, it’s scary to think that we might actually end up running to government-I mean, HCFA!-to do it.”

The theme of “everyone feels constrained from changing his own behavior” cut
across many respondents’ views. Some kind of intervention stronger than what
has been tried before is thought to be necessary to force change. At the same time, there was general recognition that “fault” lies all around and that all sectors-including public programs-need to change their behavior for high-quality, effective health care to become more affordable in the long run. Perhaps it is this recognition of shared blame and shared self-interest in the status quo-plus a growing awareness in each community that health care creates jobs and contributes to local economic health-that has led a diverse array of leaders to begin to look to government as a focal point for a solution, at least as a convener or referee among stakeholders with diverse interests.

What is palpable across the twelve communities we studied is the recognition that private market forces are limited in their ability to achieve social objectives in health care services, and a growing sense that a broader conversation about what to do next should begin soon. This conversation may find more willing participants than would have been possible four to six years ago.

http://content.healthaffairs.org/cgi/content/abstract/23/2/8

Alain Enthoven responds (excerpts):

It is late, probably too late, to avert the inexorable progression to “Medicare for All.” U.S. employers would need to have an epiphany soon. But when it comes to health care, most of their horizons are so limited and their vision so constrained that such a change seems unlikely. What is becoming most likely is that the winning candidate in 2008 will make “Medicare for All” a foundation of his or her platform. And employers, incapable of controlling costs and desperate to get medical expenses off their financial statements, will lead the candidate’s campaign finance committee. Labor and small business will join them. The large and growing numbers of uninsured, by then reaching well into the middle class, will consider the issue to be of top priority.

Medicare for all will end up with an impasse like Canada’s, only much more
costly. The Medicare model will not deliver efficient health care systems. A
properly structured market model, based on existing demonstrated successes,
could.

http://content.healthaffairs.org/cgi/content/abstract/23/2/25

Comment: A final quote from the Nichols, et al article: Given how emphatically the nation rejected substantially more government involvement in health care decision making via the Clinton Health Security Act, it is a testament to the extent of malaise among private health care market participants today that a willingness to reconsider major government involvement surfaced frequently in our interviews during our 2002-03 site visits. At the same time, many respondents quickly added caveats such as, “But we can’t say that out loud.” Thus, the next system overhaul discussion period is likely to be long, for much political and educational work will have to precede any consensus decision to intervene in particular ways.