Manhattan Institute for Policy Research.
Subscribe   Subscribe   MI on Facebook Find us on Twitter Find us on Instagram      

National Review Online


Flunking the Market Test

December 16, 2009

By Paul Howard

Atul Gawande is one of my favorite writers on health care and medicine — always even handed, intelligent, and interesting.

But I’ve got issues with his latest piece in The New Yorker: “Testing, Testing.”

In a nutshell, Gawande thinks that it’s okay that the health-reform bills Democrats are moving through Congress don’t have a have a master plan to control health-care costs — because there is no master plan, no single silver bullet that would work across the entire system.

The bills just throw a lot of potentially good ideas out there (bundling payments for Medicare patients; medical homes for primary care, etc.) and hope that some of them will stick. Gawande reports — accurately — that no other country has found a magic bullet for containing health-care spending. Everywhere you look, costs rise much faster than inflation.

Gawande’s article, however, hinges on a single big comparison between health care today and U.S. agriculture at the turn of the century. At that time, U.S. agriculture was fragmented, expensive, and inefficient (just like health care today), and so the U.S. government funded dozens of small demonstration projects and programs — helping to transform America’s family farms, boosting productivity and slashing food prices along the way.

Gawande argues that rather than trying to impose a single big idea on America’s health-care system, Democrats are just trying out of lots small things that might work — just like the government did in agriculture. He thinks this is the right approach.

Many of the individual ideas — better primary care, electronic health records, bundling payments — are embraced by experts on the left and the right. And mandating more transparency and disseminating information on best practices is certainly a useful and legitimate role for government in the health-care sector.

But funding a slew of pilot projects on Medicare and Medicaid reform is not really what Democrats are doing or want to do. If that were all the debate was about, they could’ve done that easily, with bipartisan support from Republicans — and for a lot less money than the trillions Democrats plan to spend. Instead, they wanted to create a new government-run entitlement program to cover the uninsured, and they are close to achieving that.

So here’s the missing part of Gawande’s analysis: At the end of the day, if farmers find a new, better way of producing crops, they embraced it because it make them more profitable. Also, food delivery, distribution, and marketing is relatively unregulated — at least compared to health care. As a result, new ideas in agriculture blossom all the time – fast food, organic food, “slow food”, and GMOs - and global competition ensures a whole menu of innovative ideas and choices for consumers at a wide range of prices.

In health care, innovative new health-care platforms and practices face enormous resistance from entrenched stakeholders and payers — witness the hostility of traditional hospitals to physician-owned hospitals, or medical associations to the spread of retail health clinics. Along with health-care unions, stakeholders lobby politicians (who control regulation and reimbursement policies) to kill or hamstring the competition before it can bite into their bottom line. Never mind if retail clinics or specialty hospitals offer cheaper prices or higher quality — patients often don’t get any say in the matter.

This is because third-party payers — government programs like Medicare or employers — pay for health care, not the patients themselves. As a result, competition is not at the market level but at the political level, ensuring that expensive, inefficient, or even dangerous practices thrive long after they would have died out in a truly competitive industry.

Gawande is right about this much: Government reform, done right, can empower innovation from the bottom up — as it apparently did in agriculture. But the converse is also true: Government control from the top-down can strangle innovation, as it has for decades now in health care.

Critical government regulatory and tax policies stand between providers and patients, dictating the rules of the game and keeping entrepreneurs on the sidelines. Until that changes and consumers can choose among competing providers and insurers with their own money, not much will change — no matter how many pilot programs we try.

Original Source:



America's Legal Order Begins to Fray
Heather Mac Donald, 09-14-15

Ray Kelly, Gotham's Guardian
Stephen Eide, 09-14-15

Time to Trade in the 'Cadillac Tax' on Health Insurance
Paul Howard, 09-14-15

Hillary Charts the Wrong Path on Wage Inequality
Scott Winship, 09-11-15

Women Would Be Helped the Most By an End to the 'Marriage Penalty'
Diana Furchtgott-Roth, 09-11-15

A Smarter Way to Raise Paychecks
Oren Cass, 09-10-15

Gambling with New York's Pension Funds
E. J. McMahon, 09-10-15

Vets Who Still Serve: After Disasters, Team Rubicon Picks Up the Pieces
Howard Husock, 09-10-15


The Manhattan Institute, a 501(c)(3), is a think tank whose mission is to develop and disseminate new ideas
that foster greater economic choice and individual responsibility.

Copyright © 2015 Manhattan Institute for Policy Research, Inc. All rights reserved.

52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494