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Healthcare Competition Policy Needs a Makeover, Says Policy Analyst

John Commins, for HealthLeaders Media, June 9, 2014

Competition within the healthcare sector will improve only when providers offer products that have "intuitive and measurable value" to consumers, says a healthcare policy expert.

The healthcare system features a unique blending of subsidies and regulations that make it difficult to fabricate a comprehensive and effective competition policy, says William M. Sage, MD, JD, a healthcare policy expert at the University of Texas at Austin.


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William M. Sage, MD, JD
Healthcare Policy Expert
University of Texas at Austin

As a result, Sage says, antitrust watchdogs and regulators should place more attention on whether or not the goods and services created by healthcare providers are valuable to consumers.

In a recent paper published last month in Health Affairs, Sage suggests that competition in the healthcare sector will improve when providers offer products that have "intuitive and measurable value" to consumers.

That could include bundled payments for a particular course of treatment, or maintenance for chronic conditions, or diagnostic workups. Sage says some products could even come with a guarantee and a warranty that would incentivize providers to improve care quality and safety.

Sage, whose paper was supported by the Commonwealth Fund, expanded on his ideas in a recent interview. The following is an edited transcript.

HLM: What is driving healthcare inflation?

WMS: It is a combination of technology, lack of price sensitivity, subsidies of various sorts—all of the things that have been culprits forever. I don't think there is a new set of villains or even age-related demographics.

But we've gotten to a point in American healthcare where we have run out of money. Originally we seemed to be running only out of public money, but now I think we are even running out of private money with the squeeze on general economic growth and at a practical level salary increases for working Americans is being seriously jeopardized.

The numbers about what is happening with medical inflation over one year or another I always take with a large grain of salt because there are many things that go into those calculations and we've never been talking about cost decreases.

What we have been talking about are changes in the upward trajectory of healthcare costs. As long as we are doing that, given the baseline we are working from, we are spending too much.

HLM: How is healthcare competition policy flawed?

WMS: We have a very tentative competition policy toward healthcare. We encouraged the generation of new healthcare stuff in this country for decades. There was a very nice analytic essay written about 20 years ago by Lawrence Jacobs, who is a political scientist at the University of Minnesota, that while European countries tend to prioritize access to healthcare and then accept the supply of healthcare stuff that is consistent with relatively universal access, the United State has always prioritized the supply and then tried to give as many people as could afford it access to the stuff that we created.

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