Competition is missing from the healthcare reform attempts

Competition is missing from the healthcare reform attempts

Yesterday, the long awaited Senate healthcare bill was introduced; I was hoping that it would promote sufficient competition, which is missing from all other healthcare bills.

The lack of competition or the diminishing of competition in many sectors of the American economy is preventing improvement in our health care sector, as well.

There is not sufficient competition in the current health care system at the points where health care services are paid for, i.e. where healthcare services are provided, whether by physicians, hospitals or other health care providers (clinics, physical therapy services, etc.)

Only in social or centrally controlled systems is competition missing, nay prohibited. Yet this is what largely characterizes the American health care system. The providers of health care services (physicians, hospitals, physical therapy centers, etc.) should be competing with each other. The payers for health care services should be encouraging competition and shopping for the best value in services. The largest of these payers is the Government’s Medicare and Medicaid; the other payers are the health insurance companies. Payers also include individuals who, in increasing numbers, pay in part or in full for healthcare services.

Take the insurance companies: their purchasing agents are shopping for the best value for their copier machines and paper supplies but are they shopping with equal fervor for the best values for laboratory, physical therapy, operating room, hospital, physician, or any other services? I do not know but I doubt it. I heard from a surgeon that much waste is seen in operating rooms because there does not seem to be an incentive for efficiency in the hospital. The reason must be that prices are set and set so high that does not incentivize efficiency. High prices may survive if there is no competition, if there is not another hospital’s operating room that offers the same service for less.

If the purchasers of a product, primarily the insurance companies, cannot vote with their feet, the providers of the product have no incentive to compete, to be more productive and more efficient. The supply of health care service providers needs to be increased increasing the choice for health care purchasers thus spurring competition.

The “public [insurance] option” debate in the healthcare reform proposals has a potential for being effective only if the operating methodology of the “public option” is one that introduces and/or increases competition in the provision of healthcare services. I have not heard the discussion of the details: how would the “public option” operate? If it is not more than a government subsidized (funds or in-kind subsidy) insurance company which is staffed by hiring people who have worked in the private insurance companies it will have no impact but will have a high price tag to the tax payers. If on the other hand, the “public option” health insurance company will encourage and promote competition among doctors, hospitals, and other health care service providers it will attract customers with lower premiums and it will force the private health care insurance companies off their comfortable secure seats where they are de facto protected from competition by the fixed prices of the largest of them all, the Government’s Medicare and Medicaid program.

Once the insurance companies feel forced to compete they will in turn create incentives for all providers of materials and services for the healthcare system to compete, resulting in lower healthcare costs.

A “public option” entity should achieve the clout and credibility to influence regulations and other actions to promote competition in the health care system and to provide greater choice to all Americans whether individuals or companies. There is a greater probability of decreasing costs and improved quality due to competition than due to the various other centrally designed scenarios in the various current reform proposals which generally have no track record of success.

I would hire executives of Wal-Mart to run the “public option” health insurance company. They know how to get the lowest prices out of their suppliers…we need nothing less drastic in the American health care system.

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