How to Make Competition Work in Healthcare

A lack of regulation and transparency preclude value-driven health care in the current U.S. health care market. The authors suggest repairing the health care system by realigning provider incentives, increasing the availability of information with which consumers can make health care decisions and creating public tools to enforce provider competition based on cost and quality of care.

The current fee-for-service system rewards higher volume of care, not higher quality. For competition to successfully increase quality and drive down prices, consumers must be able to make informed choices among providers, and consumer demand must be sensitive to the price of services. There is a lack of comprehensible information about providers and health plans, however, and insurance’s grouping of risk disconnects patients from financial liability when paying for health care. The medical profession also fosters anticompetitive practices, while the pharmaceutical industry works to maximize profits rather than social welfare.

The authors recommend creating a monitoring system for the quality of physicians’ care, assessing how payment methods affect costs and care outcomes. Independent public-private partnerships could help consumers make informed choices by observing physician groups or health systems and report on the costs and benefits of their services. Government regulations could prevent corporations from harming the public interest in pursuit of profit.