Tuesday, December 27, 2011

Competition and costs of health care

Here is CNN special report by Professor Amitai Etzioni explaining why strategies to control rising healthcare spending are not likely to be constrained by plans based on competition.


For all the reasons he cites, patients are not in a position to constrain healthcare spending. And even if they/we could, we would likely engage in cutting back on preventive care, driving up costs in the long term. It seems to me that every good policy initiative intended to save money has been turned in a way that contributes to continuing increases in costs. The reality is a very complex network of incentives. Whatever new policy is initiated, people are going to find ways to exploit the new system in unintended ways. Here in Albany, Georgia our largest hospital system has just acquired the other local hospital despite concerns by the Department of Justice and others that the acquisition will reduce competition and lead to higher costs. I suppose one approach to creating an Accountable Care Organization is to own all the necessary parts of one. I can imagine that the recent Patient Protection and Affirdable Care Act may encourage hospital system administrators to buy up their competitors to avoid the legal and other challenges of participating in the creation of an ACO.

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