The Case for Value-Based Competition in Health Care

The Case for Value-Based Competition in Health Care

By KAIA ORDAL | December 19, 2017

Since the Affordable Care Act passed in 2010, the narrative surrounding health care and the extent of government involvement in its regulation has remained at the core of many political debates. The question of whether health care should be viewed as either a fundamental right or a privilege is largely ideological and it is hard to say if we will ever come to a consensus on the matter. However, there is a less polarizing question one could ask about health care that would perhaps lead to some positive change: what role should the markets play in health care?

Most Americans agree that at least one facet of the American health care system needs to be changed. In fact, a Commonwealth Fund survey shows that 72% of Americans think their health care system needs a “major overhaul.” Yet, the facet of our health care most in need of change is unclear. Some argue that the role of the private health insurance companies needs to be reevaluated. This question became especially pertinent during the formulation of the Affordable Care Act, when Karen Ignagni, the former president of America’s Health Insurance Plans, dissuaded President Obama from providing a public health care option. Others argue that the focus should be on the needs of individual states, rather than on the entire nation.

Certain lawmakers, particularly Lindsay Graham (R-SC) and Bill Cassidy (R-LA), argue that the money spent on the Affordable Care Act should instead be given to the states in the form of block grants. This would give state governments more control over their health care options. Others argue that patient care itself needs the most reform. Better coordinated care, more standardized procedures, less human error, and a broader use of health IT are just a few of the many changes that some people believe need to be made. Despite the validity of each of these concerns, most issues in American health care can be solved with a more specific focus on how we can change the infrastructure of our health care markets.

Currently, our health care markets are controlled by zero-sum competition. The Oxford Dictionary describes zero-sum competition as, “a competition in which one participant wins totally and another loses without gaining any objectives.” Due to this infrastructure within our markets, insurers do not have enough incentives to keep their prices down, hospitals are providing a lower standard of care, patients are not always receiving the right treatment and sometimes, no treatment at all. The markets are in biggest need of reform. But how?

Establishing value-based competition in our health care markets rather than zero-sum competition would not only address America’s biggest health care issues, but would also create lasting change. In Redefining Health Care: Creating Value-based Competition on Results, Michael Porter and Dr. Elizabeth Teisberg pose that value-based competition in health care would be characterized by three features: focus on value for patients (not just lower costs), unrestricted competition based on results, and competition centered on medical conditions over the full cycle of care. This strategy promotes a much higher and more efficient standard of care. It further benefits the providers and incentivizes the achievement of the best medical outcomes for patients.

The method to achieve this complete overhaul of our health care market infrastructure is a concern that many still have at this point. Some may even believe that this change is overambitious or even naive to consider. Still, no real change can be made to the American health care system unless we take a hard look at its foundational and structural aspects. Often the most fundamental aspects of existing structures and institutions can be the best indicators of existing problems. This idea is especially true in the markets. America certainly loves competition, so what better place to start than there?

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