NCPA - National Center for Policy Analysis


February 2, 2006

Like President Bush, Harvard Business School professor Michael Porter believes that competition can solve much of what ails the U.S. health-care industry. However, Porter believes the president is making a big mistake by focusing mostly on cost. The real problem in health care, he argues, is a lack of good information on quality and outcomes. And without that information any effort to drive down costs through competition will backfire.

According to Porter:

  • People who use the president's favored Health Savings Accounts might try to save money by avoiding cost-effective drugs or preventive treatments, while spending money on costly but ineffective procedures.
  • Much of the effort to drive up value needs to happen in the private sector; health-care providers, insurers, and employers on have to do their part to make the system work.
  • Government should take the lead in measuring health-care quality and outcomes; the government can establish standards for good, risk-adjusted measurements, and then require providers to report them.

For President Bush, there's an opportunity in this, says Alan Murray of the Wall Street Journal. The health-care system seems ripe, not for a grand fix, but for a governmental push in the right direction. If competition is going to rescue the U.S. health-care system, it will have to be competition on price and quality.

Source: Alan Murray, "Health-Care Fixes Should Focus on Quality," Wall Street Journal, February 1, 2006; and Michael E. Porter and Elizabeth Olmsted Teisberg, "Redefining Health Care: Creating Value-Based Competition on Results," Harvard Business School Press, May 25, 2006.

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