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Archive for March 8th, 2010

Sometimes you get an article that is simply refreshing.  The problem with most political economic debate is that it is being done by amateurs to an audience that has no idea what is being discussed.  It is far easier to simply give the mantra “private competition is better!” without actually looking to see if that’s true.

Newsweek published an article by Clayton Christensen, Professor at HBS, which actually lays out some of these misconceptions.  (BTW, Newsweek website actually stinks at finding articles, I found it much easier to find the article, after getting an excerpt forwarded to me by email, by using Google News.  kinda sad).

Those who debate insurance reform in Washington and pit public against privately funded care are framing the problem incorrectly. Here’s a better way to think about it: Economists are wrong in asserting that competition controls costs. 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. Equipment suppliers boost the capability and cost of their machines and devices. 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.

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 physicians’ 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.

via Health Care: The Simple Solution – BusinessWeek.

Complete article copied, in link below, in case it gets deleted or paywalled:

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