Callahan and Wasunna's Medicine and the Market
Equity v. Choice
By Daniel Callahan and Angela A. Wasunna
Medicine and the Market
(2006 - The Johns Hopkins University Press)
Some Soft Conclusions (on competition)
Our reading of the literature and data on competition in health care allows only a soft conclusion: it may work here and there in bringing an increase in efficiency and cost control, but most likely only if coupled with strong government regulation designed to make it work. There is no consistent evidence anywhere that an unregulated competitive market can achieve those goals, much less do so while maintaining reasonably equitable access.
Moreover, when looking at the European experience, many countries turned to various competitive strategies to control costs, with mixed success. The most effective means always turn out to be government-imposed supply-side restrictions - with the help of demand-side control imposed by government monopsonistic purchasing clout. To control the availability of expensive technologies, hospital capacity, physician supply, physician fees, or the cost of pharmaceuticals works wonders for cost control. Even relatively successful competition has nowhere had the comparative force of direct government interventions to contain costs.
Here are our summary conclusions (on private health insurance):
On equity. Private health insurance contributes to the regressivity of health care financing in the United States and Switzerland. In Germany and the Netherlands, however, mainly affluent people purchase private insurance, contributing to the progressivity of the financing system. On the delivery side, private health insurance creates access based on willingness and ability to pay, and typically discriminates against the poor, ill, and elderly. Equitable access has also been undermined as a result of greater sophistication in risk-rating, which enables insurers to select preferred risks. The philosopher Allen Buchanan has noted that the conditions necessary for private insurance to be economically viable for those who sell it contradict the necessary ingredients for equitable access, which requires regulation of competition and the availability of generous public funds to fill in gaps in access.
On efficiency. With private insurance, there are no criteria to determine access to care from willingness and ability to pay. In most countries, private insurers compete with or parallel the public system. Private health insurance may cover cost-effective services, which the public sector does not deliver because of mismanagement. Private health insurance may cover more rapid access to services or the costs of amenities, such as private hospital rooms, not covered in public insurance packages. Administrative costs may be systematically higher in a health system with competing private insurers than in a monopsonistic system, because of the costs associated with marketing, promotion, and underwriting. In addition, if private insurers operate on a for-profit basis, further revenue needs to be generated to pay shareholder dividends.
Careful regulation can limit the harm that is a potential result of private insurance, mainly by keeping it at a limited level and working hard to make certain the public system does not require private insurance to guarantee good health for the population. At the systems level, financing health care mainly through private insurance is neither equitable nor efficient, and the United States is a clear example of this. Insurance overheads and a competitive market have made the U.S. system the most costly in the world, yet it still fails to cover the health care needs of millions of its citizens. That much said, a modest degree of private insurance can satisfy some desires for expanded choice, as in the United Kingdom, without harm to the public system.
The Case for Government
One such ingredient (of effective strategies for the provision of health care in the face of growing costs) is that only universal health care systems, government run and financed, or at least governmentally managed and monitored, will be able to cope with those pressures. The market is too much of a wild card to be depended upon to control costs, and is congenitally prone to introduce unfettered efforts to expand choice beyond affordable boundaries and to let individual preferences, regardless of their social or economic implications, rule the day. There are several things that government, and only government, can do. The first is to keep a central eye on the entire health care system and to manage it in a way aiming at the public interest. A good federal government system will decentralize as much as possible, giving regions or states considerable control over their local and regional policy, but it will work to coordinate all of them toward a common end: equitable and high-quality care. A second role of government is that, through its political system, it can find ways to gain the contribution of all citizens in defining the goals of the system; argument and debate will be the rule, but that is as it should be in democratic societies. This will be all the more important if we are correct in projecting cost pressures that will, for earlier specified reasons, just get worse and worse, with little chance of turning back. Those pressures will necessitate rationing and priority setting, sometimes in ways that will deny people the kind and quality of health care they desire, and even on occasion need. It is well understood that unlimited space travel is not possible with limited budgets, and so finite goals are set. It is far less understood that unlimited medical goals will not be possible with finite budgets. But such budgets are necessary and, in the future, will probably allow far less managerial maneuvering than is now possible. The necessity for citizens’ active role in setting priorities and determining limits - their informed consent to being denied treatments they want - will be all the more imperative. But that is only possible with integrated national systems, not fragmented mixtures of public and private health care with no guiding - and visible - hand, which is government’s role.
(Closing comment)
The market is not the way to go as a general panacea for health care, even if it works well in other sectors of society. But possibly it can contribute something. We want to leave that door open, looking carefully before entering.
http://www.press.jhu.edu/books/title_pages/3375.html
For a recent Quote of the Day message on Porter and Teisberg’s Redefining Health Care:
http://www.pnhp.org/news/2006/june/porter_and_teisberg.php
Comment:
Callahan and Wasunna, in “Medicine and the Market,” confirm what Porter and Teisberg expressed in Redefining Health Care market competition has failed to provide equity and efficiency in health care. They both acknowledge that the government must play a major role in financing health care, but their concepts of how market principles should be applied are quite different.
Porter and Teisberg, in their unwavering belief that market competition will always provide greater quality at lower cost than would government control, would radically contort the health care delivery system to make it more amenable to market forces. They would shove competition down the gullet of the health care system merely because it’s good for you, even if empirically it makes you regurgitate, threatening your ability to thrive.
In contrast, Callahan and Wasunna demonstrate that government-run universal programs are effective in ensuring equity and efficiency whereas reliance on markets inevitably fall far short. (In their book, they demonstrate that
purer market-based models in the proving grounds of developing nations may be effective as business entities, but a disaster for health care equity.)
Although Callahan and Wasunna make it very clear that universal health care systems must be “government run and financed, or at least governmentally managed and monitored,” they suggest that we should continue looking for
possible contributions that the market might be able to make.
That should lead us to a consideration of how the policy community should allocate its efforts. Do we engage in an intensive, expensive, time-consuming effort to identify market manipulations that might produce a slightly favorable tweak to the system, merely to placate the market ideologues? Or do we move forward immediately with enacting a proven, equitable and efficient system for all?
Every half hour we delay, another person dies for lack of insurance! That’s 3000 every two months (the same number as the tragic one-time loss of 9/11, except that this is repeated over and over). We can let the entrepreneurs work on the periphery with their market solutions. If they can show us something that will improve the system then we’ll take a serious look at it. In the meantime, let’s get busy with adopting a system that immediately will begin to save tens of thousands of lives.