Michael Porter, who has made his name throughout the
business community by advocating his theories of competitive advantages, is now
swimming into even more shark-infested waters, arguing that competition can save
even America’s troubled heath- care system, the largest in the world. Mr Porter
argues in Redefining Health Care that competition, if properly applied,
can also fix what ails this sector. That is a bold claim, given
the horrible state of America’s health-care system. Just consider a few of its
failings: America pays more per capita for health care than most countries, but
it still has some 45m citizens with no health insurance at all. While a few
receive outstanding treatment, he shows in heart-wrenching detail that most do
not. The system wastes huge resources on paperwork, ignores preventive care and,
above all, has perverse incentives that encourage shifting costs rather than
cutting them outright. He concludes that it is "on a dangerous path, with a
toxic combination of high costs, uneven quality, frequent errors and limited
access to care." Many observers would agree with this
diagnosis, but many would undoubtedly disagree with this advocacy of more market
forces. Doctors have an intuitive distrust of competition, which they often
equate with greed, while many public-policy thinkers argue that the only way to
fix America’s problem is to quash the private sector’s role altogether and
instead set up a government monopoly like Britain’s National Health
Service. Mr Porter strongly disagrees. He starts by
acknowledging that competition, as it has been introduced to America’s health
system, has in fact done more harm than good. But he argues that competition has
been introduced piecemeal, in incoherent and counter-productive ways that lead
to perverse incentives and worse outcomes: "health-care competition is not
focused on delivering value for patients." he says. Mr Porter
offers a mix of solutions to fix this mess, and thereby to put the sector on a
genuinely competitive footing. First comes the seemingly obvious (but as yet
unrealized) goal of data transparency. Second is a redirection of competition
from the level of health plans, doctors, clinics and hospitals, to competition
"at the level of medical conditions, which is all but absent". The authors argue
that the right measure of "value" for the health sector should be how well a
patient with a given health condition fares over the entire cycle of treatment,
and what the cost is for that entire cycle. That rightly emphasizes the role of
early detection and preventive care over techno-fixes, pricey pills and the
other failings of today’s system. If there is a failing in this
argument, it is that he sometimes strays toward naive optimism. Mr Porter
argues, for example, that his solutions are so commonsensical that private
sectors in the health system could forge ahead with them profitably without
waiting for the government to fix its policy mistakes. That is a tempting
notion, but it falls into a trap that economists call the fallacy of the $20
bill on the street. If there really were easy money on the pavement, goes the
argument, surely previous passers-by would have bent over and picked it up by
now. In the same vein, if Mr Porter’s prescriptions are so
sensible that companies can make money even now in the absence of government
policy changes, why in the world have they not done so already One reason may
be that they can make more money in the current suboptimal equilibrium than in a
perfectly competitive market — which is why government action is probably needed
to sweep aside the many obstacles in the way of Mr Porter’s powerful
vision. We can infer from the last two paragraphs that
A. there is no easy money on the pavement for passers-by to pick up.
B. Mr Porter is very likely to fall in a trap set up by the
economists.
C. competition alone is not enough to cure the health care system.
D. only government actions can sweep aside the obstacles along the
way.