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Leading policy-makers and scholars explain how market forces, deregulation, and consumer choice can work to improve health care for all Americans.

Commentary

Perverse incentives in health care
John Goodman, Wall Street Journal, 4-5-07

John C. Goodman, president of the National Center for Policy Analysis (NCPA), has written a thoughtful and penetrating op-ed on the central shortcoming of American health care: an absence of entrepreneurship. Read the whole thing.

Research by John Wennberg and his colleagues at Dartmouth Medical School suggest that if everyone in America went to the Mayo Clinic, our annual health-care bill would be 25% lower (more than $500 billion!), and the average quality of care would improve. If everyone got care at Intermountain Healthcare in Salt Lake City, our health-care costs would be lowered by one-third.

Of course, not everyone can get treatment at Mayo or Intermountain. But why are these examples of efficient, high-quality care not being replicated all across the country? The answer is that high-quality, low-cost care is not financially rewarding. Indeed, the opposite is true. Hospitals and doctors can make more money providing inefficient, mediocre care.

In a normal market, entrepreneurs in search of profit would solve this problem by repackaging and repricing their services in order to make customer-pleasing adjustments. Yet in health care, contracts and prices are imposed by large impersonal bureaucracies. The individual physician has virtually no opportunity to offer a different bundle of services for a different price. As a result, very little entrepreneurship is possible.



Project FDA.
  
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