Clay Chrstenson’s article on this topic while only one page long is the best I have read.
He considers that the cost problem is the result of competition – not lack of competition, but the effects of competition on decision making. He states
Most often innovation and competition drive prices up, not down, because bringing better, higher priced products to market is more profitable. Hospital-vs.-hospital competition causes providers to expand their scope and offer more premium priced services. Drugmakers develop- products that bring the highest prices. It’s because we have such competition, not because we lack it, that health costs are rising by 10% a year.
In the Probate and Family Courts in this state, in order to bring down costs and render legal services accessible, the rules have been changed to “unbundle” legal services. Lawyers can now draft pleadings, without filing appearances as well as appear for just one motion. The proclamation as to unbundling is actually revolutionary. Before this change, an attorney would have lost their license, and attorney services were becoming priced out hurting both the attorney and client who needed help, but not hand holding every step of the way. Such “unbundling” fits the model of what is called “disruptive innovation” in business schools. Disruptive innovation has happened over time, in other fields. For example, the telephone is “disruptive innovation” as regards the telegraph, and I would argue that the cell phone is disruptive innovation as regards land line telephone technology.
As the concept of disruptive innovation would affect health care, Professor Christenson states:
The type of competition that brings prices down is disruptive innovation. Disruption in health care entails moving the simplest procedures now performed in expensive hospitals to outpatient clinics, retail clinics, and patients’ homes. Costs will drop as more of the tasks performed only by doctors shift to nurses and physician’s assistants. Hoping that our hospitals and doctors will become cheap won’t make health care more affordable and accessible, but a move toward lower-cost venues and lower-cost caregivers will.
Accordingly, it is “integrated systems’ that deliver needed care in the least expensive setting rather than paying a perverse premium for hospitalization that reduce costs by 20% – 30%.
Maybe Public Option v. Private Option is the wrong question, and we all should be asking what is the systemic solution to a systemic problem, which is competition run amok and driving up costs. Rather than seeing hospitalization as a revenue opportunity, it should be seen as a failure. The New Zealand system follows the integrated model. Finland’s model is somewhat different, but still integrated. And per my reading, these two systems are controlling costs far better than the competition model has done, while providing excellent care. One example of such an integrated model in the United States is Geisinger Health
Who knew? It is competition, not tort attorneys, driving up costs. Unbundling and avoiding disruptive innovation are not, I think, covered in Obamacare but are critical to reining in the runaway horse of health care costs.