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How to Make Market Competition Work in Healthcare

Brezis and Wiist write a provocative article and make several salient points regarding the broken state of our current healthcare system. We take no issue with their telling of the well-known tale of how vested interests manipulate markets so as to generate huge profits while providing little benefit (or even causing harm) to the public. We would, however, argue with their implication that profits and corporate self interest are the root problems afflicting US healthcare. Winston Churchill once famously noted that “democracy is the worst form of government, except [for] all those other forms that have been tried.” The same, we would argue, can be said about the economic system of capitalism. And just as democracy works well only with an informed public under the rule of law, so markets work well only under sufficient regulation to ensure transparency for consumers and fair competition among suppliers. When government focuses on ensuring these two requisites of a functional market, the opportunity to profit can be transformed from an instrument of the corrupt practices lamented by Brezis and Wiist to the most powerful and effective tool we have to further societal good—including higher-quality and lower-cost medical care. The problem is that under our current healthcare system, the ability to profit bears almost no relationship to the value of care provided. At the same time, the lack of accessible information regarding the real value of competing healthcare services precludes productive competition, and is easily exploited by vested interests to convince the public that more of the most technologically advanced healthcare is always better. Finally, protectionism by the profession and microregulation by government combine to stifle innovations in healthcare delivery that might otherwise bring down costs. None of these problems is primarily the fault of the pharmaceutical industry, for-profit hospitals, or any others who profit under our current system—as they are simply behaving in a rational way, taking advantage of the opportunity to profit where they may. Rather, we are at fault—the American public, our elected officials, and the medical profession itself—for our persistent tolerance of a dysfunctional system in which profits can be gained whether or not value is provided. So let us change the system. Rather than blaming profits and greed, let us focus on finding ways to fix the broken US healthcare market—by realigning incentives to reward value, increasing the accuracy and transparency of information available to insurers and patients, and making room for innovation in models of healthcare delivery. Below, we describe the most fundamental obstacles to value-driven healthcare under our current system, and briefly propose solutions that might move us towards a more functional healthcare market: one in which competition drives down cost, and providing value is rewarded.