Healthy Competition: What's Holding Back Health Care and How to Free It

A well written argument for consumer-driven healthcare and good insights into the excesses caused by government intervention in healthcare financing. Predictably the government run programs that were launched in the Lyndon Johnson "Great Society" programs in the mid-60s have exceeded their spending projections ten-fold from where we were told they would be today. These have made the US more of a welfare state than many welfare states, but it proves that if you give something away, like healthcare, you get to give a lot of it away. The latest massive expansion of Medicare into a drug benefit is the biggest open air theft of the incomes of future generations than any goverment program to date. The authors embrace a free market solution in which healthcare is bought like everything is bought: look at the price, look in your pocketbook, and decide if it's a good value. I recommend reading a companion Cato Institute book by Arnold Kling: Crisis of Abundance.

"Healthy Competition" by Michael F. Cannon and Michael D. Tanner of the Cato Institute is a critically important book for both those interested in health care policy as well as for every American as we all eventually consume health care services. Cannon and Tanner's book starts with a foreword by the Hon. George P. Shultz: "We begin with a riddle. What country's health care system offers the best health services in the world, is consistently criticized for not being accessible enough, and yet is so accessible that overutilization is leading to runaway costs?" The answer is, of course, America. The following 147 pages offers a detailed analysis of what's wrong with American health care (government and insurance industry policies that lead to overuse of medical services) and what's right (the strong remnants of a free market system that encourages innovation, high quality, at an often lower cost). Both detailed and heavily footnoted, but also very readable at the same time, "Healthy Competition" strikes the right balance between a dense academic paper and a clarion call for action. In concluding the book, Cannon and Tanner write: "Despite its marvels, America's health care sector continues to present troubling symptoms: excessive costs, uneven quality, a lack of useful information for patients and providers, extraordinary waste, and enormous burdens for future taxpayers. An accurate diagnosis points to too much government influence and too little choice and competition. Proposals to increase the role of government would aggravate these symptoms. More subsidies or controls would drain from the medical marketplace even more of the dynamics that drive other sectors of the economy toward lower prices and higher quality. The only sure remedy is to restore those dynamics to the health care sector. "Although there are dark clouds on the horizon, we are heartened by the creation and steady growth of health savings accounts. HSAs have already begun to change private-sector health care from within, and will enable a reexamination of the role of government in health care." The last citation in "Healthy Competition" comes from a June 1, 2004 Harvard Business Review article by Michael Porter and Elizabeth Teisberg. It deals with the oft-heard argument that we somehow should not apply free market principles to the health care sector: "It is often argued that health care is different because it is complex; because consumers have limited information; and because services are highly customized. Health care undoubtedly has these characteristics, but so do other industries where competition works well. For example, the business of providing customized software and technical services to corporations is highly complex, yet, when adjusted for quality, the cost of enterprise computing has fallen dramatically over the past decade." Cannon and Tanner accept this argument while also embracing the argument of many of the proponents of government con

I enjoyed the book and found it presented a well organized argument for why it is so critical to allow the markets and consumers to experiment with new methods of controlling health care costs and improving access. I also appreciated the author's acknowledgement that health care is a special service that is critically important in our lives. That is what makes reforming the system so challenging. The book makes clear that market based proposals to reform health care are designed to lower the cost of care and increase coverage. These are proposals that are critical to all Americans.

I was most impressed that Mr. Cannon does not fall prey to the usual America-good/Canada-bad posturing that categorizes most "debate" over fundamental health care reform. In fact, the authors are nearly as critical of America's health care system (and even of Republicans' stewardship of it) as they are of other countries. I do agree, however, with Jonathan Cohn of The New Republic that the authors may have been a little selective in their choice of what data to highlight when comparing the U.S. to other countries. All in all, an insightful and immensely readable assessment of America's health care system.

"We begin with a riddle. What country's health care system offers the best health services in the world, is constantly criticized for not being accessible enough, and yet is so accessible that overuse is leading to runaway costs? The first part of the riddle reveals that the answer could only be America. The remainder gives the contours of a paradox that vexes policymakers year in and year out. Welcome to health care, American-style.... To carry the health care debate on its next lap, America first needs a clear, well-informed, and well-reasoned analysis of the apparent paradox of its health care system. And it needs an agenda for reform that respects the wonders that modern medicine has developed and the creative market processes that deliver them. Cannon and Tanner offer proposals that would further tap the power of markets to make health care more valuable and more affordable. That makes Healthy Competition essential reading." --George P. Shultz, Former Secretary of State, from the foreword "Surprisingly readable, extraordinarily comprehensive, highly persuasive. Read how the key to improving health care in the United States is to convert the patient from a ward of the state to an independent, self-interested customer." --Milton Friedman, Nobel Laureate in Economics