Slate: Sicko-nomics [View All]

[supernova]

Health care reformers should look to the banking collapse as a cautionary tale.
By Zachary F. Meisel and Jesse M. Pines
Posted Tuesday, Jan. 27, 2009, at 6:58 AM ET

The condition of the U.S. economy can be described generously as bleak. But while unemployment is on the rise and the Big Three automakers struggle to remain afloat, the business of making people well seems relatively insulated. While some discretionary health care sectors are not growing, such as LASIK eye procedures and plastic surgery that patients pay for out of pocket, most health care workers still have jobs and can afford the occasional $4 latte.

But the health care industry is no oasis. The very problems that brought our country to its financial knees are still at work today in health care. It comes down to the disordered competition that exists in both the mortgage and health care industries.
If you pick up your college econ textbook, you'll read all about Adam Smith and how competition is fundamentally good. When companies compete, it results in a better product for the consumer: McDonald's competes with Burger King to make a better, cheaper hamburger. Problem is, in both the old, defunct mortgage business and current health care industry, the "invisible hand" fails to produce low-cost, high-quality, sustainable products.

In the mortgage industry, this competition failure produced the banking crisis. During the housing bubble, banks competed with one another to sell risky mortgages that had a high likelihood of default. Now, entire neighborhoods have been left nearly deserted because of waves of foreclosures. In health care, competition similarly fails to produce better community health. Instead of competing with one another for the best outcomes, providers compete for patients with the most profitable diseases. Hospital care for cancer and heart surgery makes more money than hospital care for diabetes, pneumonia, or mental health. While all these services get reimbursed, some bring in more cash than others—in effect, cancer care is like gold while diabetes is like silver.

GD Thread: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4930440&mesg_id=4930440

Original article: http://www.slate.com/id/2209602/pagenum/all/#p2