The Market for Medical Care: Why You Don’t Know the Price; Why You Don’t Know about Quality; And What Can Be Done about It.

Policy Reports | Health

No. 296
Monday, March 12, 2007
by Devon M. Herrick and John C. Goodman


Data on prices and quality are generally not available to patients in the U.S. health care system.  That is because of the third-party payment system in which providers do not compete for patients based on price or quality. As a result, patients do not benefit from the price-reducing, quality-increasing activities that characterize competitive markets.  To make prices and quality transparent in the health care marketplace, the way Americans pay for health care will have to change, and the health care industry will have to fundamentally change the way it does business.  Some of these changes are already occurring because of the increase in individual self-insurance.  In the prescription drug market, for example, transparency is already a reality for those who use the Internet.  Government can speed the transition to greater transparency by removing obstacles to competition and innovation.  But transparency does not have to be forced upon the health care industry.  It will be the natural product of a market in which patients control their own health care dollars and providers compete for those dollars. 

NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.

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