How to heal health care: Open up market solutions to expand choices, cut costs
March 21, 2009
By DAVID MERRITT
The financial crisis has led many to savage free-market competition. In health care, government certainly has a vital role to play in expanding coverage as well as improving quality, but so too does a free, fair and functioning market.
We all know the current state of health care. Every year consumers pay more, with millions of Americans going without any health care coverage at all.
Businesses both large and small are hemorrhaging under the weight of rising costs. The quality of care seldom seems to improve, and the waste and inefficiency in our system is breathtaking. This can be changed. Just as we do in every other sector of the economy, we need to put the market to work in health care. A market-based system will transform our ailing health care system to deliver more choices of greater quality at lower costs.
For example, take purchasing health insurance. Consumers are restricted to those insurance products licensed in each individual state, which are often dominated by one insurer. This means it is illegal for a resident of one state to buy insurance in another state.
These government barriers to free trade stifle competition, with disastrous results. The absence of robust competition artificially inflates the cost of insurance, preventing millions of Americans from purchasing affordable coverage. This shifts the cost burden to those who pay for insurance and to government programs. To reverse this, competition must flourish. More competition among insurers in a nationwide market will encourage creative products, better services and lower prices -- just as it always does wherever competition thrives. Only then can every American afford health coverage.
Coverage clot
In fact, in a 2008 report, University of Minnesota researchers said that cross-state selling for insurance would expand coverage for up to 17 million Americans.
There is a precedent for breaking down state-based markets. Until the 1970s, cross-state banking was illegal. A wave of regulatory reform in every state, and in Congress, dropped banking restrictions, which led to the creation of a nationwide -- better yet, global -- ATM system where consumers could access their money anywhere, anytime. We will see similar success in expanding insurance coverage if market forces are allowed to work.
Regulatory barriers on technology cause unnecessary struggles for providers. Telemedicine is a way for doctors and hospitals to use technology to deliver better care and expand access to specialists, regardless of location. Videoconferencing with experts, transmitting images and records for second opinions, remotely monitoring patients, virtual emergency rooms and telepharmacy services can transcend state borders.
However, licensing barriers, for the most part, restrict technology to within state borders, meaning that both ends of a connection must be in the same state. State governments should seek agreements on how to reform these barriers to unlock the better care that patients can receive through this kind of technology.
Opening eyes
Breaking down regulatory barriers is vital to transforming health but so is the availability of information. Information on performance, cost and quality allows consumers to make informed decisions.
The reality today is that health care consumers are blind. No other industry operates on this outdated system.
It is difficult for consumers to determine how a doctor stacks up against his or her colleagues, how much a hospital charges for an elective surgery, or which surgical team has the lowest mortality rate. Americans are beginning to demand more information. According to a 2006 survey by America's Health Insurance Plans, 93 percent of Americans say they have the right to know more about the quality of care they receive.
The best data available to prove this point is hidden in the Medicare system. Medicare's national claims history holds detailed information on nearly every doctor and hospital in the country, which can be analyzed to identify the most efficient hospitals, best doctors and most effective treatments. This information will save lives and save money now, but it is locked away by the federal government. Taxpayers must continue to demand the release of this data.
California is moving in this direction. Through the California Hospital Assessment and Reporting Taskforce, the state began posting hospital comparative data in 2004, from patient safety to mortality. Florida takes this a step further, providing cost and quality data, posting drug costs, and require reporting from hospitals. Dozens of other states have followed suit. We should expand these kinds of initiatives -- and replicate them throughout the country.
Health is the largest and most important sector of our economy. It is not irrevocably broken. It can be fixed if we eliminate mindless regulation and give the market an opportunity to work.
David Merritt is a project director at the Center for Health Transformation, an advocacy organization founded and led by former Speaker of the House Newt Gingrich.
