3 Billion Decisions
by John Goodman
 Close your eyes and try to think of every health reform plan you've
ever heard of beginning with Hillary Clinton's plan about 15 years
ago right up through Arnold Schwarzenegger's plan today. Think left
and right. Think big and small. Don't overlook the self-serving plans
devised by hospital, insurance and drug company trade groups. And
don't overlook Len Nichol's plan, which is supposed to be rooted in
the Old and New Testaments and the Koran.
Yes, I know. No one should have to do this on a full stomach. So you
may want to put this exercise aside for a few hours and then come back
to it. But if you really concentrate, at least three or four dozen
plans should easily spring to mind.
As I have argued before, there are three important questions to
be asked of one and all:
1. Does the plan force anyone--any patient, any doctor, any nurse,
any hospital, any insurer, any employer, any government agency, any
anybody anywhere--to choose between health care and other uses of
money?
2. Does the plan force any provider of care--any doctor, any nurse,
any hospital, any anybody on the provider-side--to compete for
patients based on price and/or quality of care?
3. Does the plan allow patients now trapped in schemes that ration
care by waiting--Medicaid, S-CHIP, Medicare, emergency room free
care, VA system, CHAMPUS, Indian Health Service (Indian Health? yeah,
why not?)--to have the same access to doctors, hospitals, clinics,
etc., that privately insured patients have?
If the answer to the first question is "no," the plan will
not control costs. If the answer to the second question is
"no," the plan will not improve quality. If the answer to
the third question is "no," the plan will not increase
access to care. If the answer to the full set is "no, no and
no" (and I believe in almost all cases it is "no, no and
no"), the plan is hardly worth talking about.
Two hundred years from now, anthropologists will look back on our era
and wonder why there was so much sound and fury over plans that from
the get-go could not possibly succeed. To help them out, I plan to
entomb this article in a cornerstone somewhere.
Health care is a complex system. It may be the most complex of any
social system. Complex systems cannot be managed, planned, controlled,
etc., from above. If they are functional, it is only because the
people down below face good incentives and feedback loops. If 300
million potential patients make just 10 health care decisions every
year, that's 3 billion decisions on the demand side of the market
alone. No one can manage, plan, control, etc., 3 billion decisions, to
say nothing of the supply side of the market. The problem with
all of the plans you have been thinking about is that they all violate
this principle.
How do we know if the participants in a complex system face good
incentives and good feedback loops? We can begin by asking whether
they have the power to make things better. Although the three
questions above are very good questions, here are three that are even
more fundamental:
4. Does the plan allow doctors and patients to freely recontract, so
that a better, higher-quality bundle of care can be provided for the
same or less money?
5. Does the plan allow providers to freely contract with each other to
reduce costs or raise quality?
6. Does the plan allow the insured and the insurers to freely
recontract in order to change the boundaries between self-insurance
and third-party insurance and arrive at more desirable allocations of
risk?
The really disconcerting thing is not that the answer is "no, no
and no" for all of the plans. I'm sure you already anticipated
that. The really troublesome thing is that the answer is "no, no
and no" for the current system.
Sorry if I ruined your day.
John Goodman is president of the National Center for Policy Analysis.
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