Before health care reform can happen, the nature of the problem must be identified. I am convinced that the root of the problem is an absence of price competition between the providers of all the goods and services that doctors order for their patients.
In most markets, patients make their own buying decisions while trying to hang on to as much of their hard-earned money as possible. This forces businesses in that market to lower their prices in order to attract business. The lower their price, the more demand for their product or service, and the higher the price, the lower the demand. Businesses are forced to operate as efficiently as possible to be able to undercut their competitors price, and research is driven to find the most cost-effective technology for the same reason.
In health care, doctors make the buying decisions, but they don’t share the typical consumer’s inherent need for thrift, since it is not their job to be concerned with cost. Therefore, for businesses in that market, price competition is counterproductive. No increase in demand for their product of service can be gained through lower prices, since the doctors that choose their product are not motivated by price. The only result of lower prices would be less revenue. On the other hand. higher prices do not decrease demand, since doctors, again, are not concerned with price. The result is more income, and higher profits. Obviously, the sensible path for businesses in this market is to raise prices as high as possible.
The end result of all this is skyrocketing inflation in health care, and no need to find the most efficient methods or more cost-effective technology. Add uncontrolled inflation to inefficiency and overly expensive technology, and you have the basis of our health care crisis. The problem of unaffordable health insurance is the result if inflated health care costs. Long story short, the absence of price competition in this market is the cause of the health care crises, and must be corrected in order to adequately reform health care.
The solution is to give the decision maker the incentive to cut costs, thus forcing price competition on the market. The problem that arises is that doctors are the most qualified to make treatment decisions, but giving them a financial incentive to cut costs creates an unacceptable conflict of interest between their income and the patient’s health. Note that the same conflict of interest extends to insurance companies in managed care, or the government in single-payer medicine.
The answer is for patients who were willing and able, to:
- Have their doctor identify more than one acceptable treatment option whenever possible
- Have a convenient way to compare price and quality
- Receive a positive financial reward for choosing less expensive options. Cash back on a medical insurance debit card , for example.
These changes would create price competition in the market while respecting the individual rights of the patient. For example, the makers of drug A would then need to be concerned with the price of drug B, and pharmacy C would have to worry what pharmacy D was charging for them, and so on throughout the market. This would drive prices downward, and prompt businesses to find more efficient methods and more cost-effective technology.
Consumers would benefit both from being able to receive financial rewards, but also from having more control over their own health care. We would all benefit from the positive effects of price competition in the market, and the underlying cause of the health care crisis would be corrected.
