NCPA - National Center for Policy Analysis


January 19, 2009

The traditional model of medical delivery, in which the doctor is trained, respected and compensated as an independent craftsman, is anachronistic.  When a patient has multiple ailments, there is no longer a simple doctor-patient or doctor-patient-specialist relationship.  Instead, there are multiple specialists who have an impact on the patient, and those patients require someone who can organize the effects of multiple medical professionals.  Therefore, it's not unreasonable to imagine that delivering health care effectively, particularly for complex patients, could require a corporate model of organization, say Arnold Kling and Michael F. Cannon, of the Cato Institute. 

However, at least two forces stand in the way of robust competition from corporate health care providers:

  • First, the regime of third-party fee-for-service payment tilts private health insurance in the same direction; consumers should control the money that purchases their health insurance, and should be free to choose their insurer and health care providers.
  • Second, state licensing regulations make it difficult for corporations to design optimal work flows for health care delivery; under institutional licensing, regulators would instead evaluate how well a corporation treats its patients, not the credentials of the corporation's employees.

There are better ways of delivering medical care, such as having states recognize clinician licenses issued by other states letting corporations operate in multiple states under a single set of rules and put pressure on states to eliminate unnecessarily restrictive regulations.  

But without entrepreneurial mechanisms, market incentives and vigorous competition, these approaches tend to remain isolated exceptions, rather than general practice.  To improve health care quality and to reduce its cost, we need to eliminate barriers to competition by corporations, conclude Kling and Cannon.

Source: Arnold Kling and Michael F. Cannon, "Does the Doctor Need a Boss?" Cato Institute, Briefing Paper, No. 111, January 13, 2009.

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