Healthy Competition: What's Holding Back Health Care and How to Free It

By Ohsfeldt, Robert L. | Independent Review, Summer 2006 | Go to article overview

Healthy Competition: What's Holding Back Health Care and How to Free It


Ohsfeldt, Robert L., Independent Review


* Healthy Competition: What's Holding Back Health Care and How to Free It By Michael F. Cannon and Michael D. Tanner Washington, D.C.: Cato Institute, 2005. Pp. xi, 171. $9.95 paperback.

There certainly is no shortage of critics of the health-care system in the United States. Indeed, health-policy experts have reached something approaching a consensus that the U.S. health-care system represents a prime example of the "wrong" way to organize and finance a health-care delivery system. The World Health Organization ( The World Health Report 2000: Health Systems: Improving Performance [Geneva: World Health Organization, 2000]) has ranked the U.S. health-care system' thirty-seventh among the 191 member counties, approximately equal in performance to the healthcare systems of Chile, Costa Rica, Cuba, Dominica, and Slovenia, and well behind those of France (ranked first) and Italy (ranked second). The factors that contribute to this mediocre ranking are relatively high levels of overall health spending, less than stellar population health outcomes, and relatively poor access to care among those lacking health insurance.

Despite the consensus that the U.S. system has shortcomings, a clear consensus about the specific health-system reforms required to rectify these shortcomings has not emerged. A common theme among many critics, however, is that reliance on decentralized market forces and competition, relative to health systems in other developed countries, is a primary contributor to the U.S. system's underperformance. For example, Donald L. Bartlett and James B. Steele (Critical Condition: How Health Care in America Became Big Business-and Bad Medicine [New York: Doubleday, 2004], chap. 6) argue that a government-managed single-payer system would improve access to needed care, while reducing the resources wasted on the promotion of unnecessary care by profit-seeking service providers and the shifting of payment responsibility by profit-seeking insurers. In a similar vein, Steffie Woolhander and colleagues ("Costs of Health Care Administration in the United States and Canada," New England Journal of Medicine 349, no. 8 [2004]: 768-75) contend that billions of dollars "wasted" on administrative costs across numerous private health-insurance plans might be saved by moving to a Canadian-style single-payer health system. Such critics argue that market competition creates waste in the form of duplication of facilities, diverts resources from patient care to administrative costs and profits, and degrades the quality of medical care.

However, in Healthy Competition, Michael F. Cannon and Michael D. Tanner provide a concise and highly readable summary of the evidence refuting the case against market competition in health care. To some extent, that this effort is required at all is dismaying. Even the most vociferous critics of competition in health care generally acknowledge that market forces can work to improve consumer welfare in markets for many types of products, such as personal computers or household appliances. The critics maintain, however, that these same market forces often harm consumers of health care because health care is "different" (for an excellent discussion of this view, see James C. Robinson, "The End of Asymmetric Information," Journal of Health Policy, Politics, and Law 26, no. 5 [2001]: 1045-53). Cannon and Tanner, in contrast, provide a valuable service by accumulating the evidence that demonstrates that although health care is not the "same" as personal computers or household appliances, it is not so "different" that market forces cannot work to consumers' benefit.

Cannon and Tanner begin by summarizing what is "right" and what is "wrong" with the current U.S. health-care system. The oft-noted fact that U.S. population health measures (for example, life expectancy at birth) appear to be less than stellar when compared to other developed nations relates primarily to differences in measurement and population characteristics across countries. …

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