Alan K. Henderson's Weblog


Old comments migrated to Disqus, currently working outtechnical issues

Wednesday, November 15, 2006

Health Care Reform

Over at FrontPage Magazine, Jamie Glazov interviews Manhattan Institute senior fellow David Gratzer on the topic of his latest book, The Cure: How Capitalism Can Save American Health Care. He summarizes his five-part strategy:

Make health insurance more like other types of insurance; Foster competition; Reform Medicaid, using welfare reform as the template; Revisit Medicare; Address prescription drug prices by pruning the size and scope of the FDA.

He discusses the issue of competition in detail:

Competition drives innovation.

That’s not just true of health care. It’s true for every sector of the economy. Think about the computer sitting on your desk – it’s much better than the computer you had just a few years ago. It’s faster and more powerful. It’s also cheaper. No wonder – hundreds of companies compete, trying to build a better computer for you (and others) for less money.

Health care doesn’t follow that general rule of thumb. Consider that health insurance premiums have doubled over the past 5 years. Would anyone argue that health insurance is twice as good? Part of the problem is that – with Americans overinsured – we haven’t seen a proper market for health care in the United States. People don’t demand better quality at lower prices.

It’s also true that much government regulation has stood in the way of competition. As I argue in The Cure, Congress has worked hard to reduce competition for, say, community hospitals from physician-owned surgery clinics, even though studies suggest that the latter tend to have better health outcomes at lower cost. The FDA has raised the regulatory bar so high that only a dozen companies in the world can bring a drug to the nation’s pharmacies. The end result: less innovation for pharmaceuticals.

Note that health care sectors that do follow the competitive model - I am thinking specifically about LASIK - do experience innovation and long-term efficiencies of scale that bring down costs. Otherwise I'd still be wearing glasses.

For those interested, the Association of American Physicians and Surgeons has a wealth of information on medical reform.

Labels: ,

Site Meter