Professor Joseph White and Stuart Zechman

Stuart Zechman discusses the policy framework that underlies the US health care system with Joseph White, Luxenberg Family Professor of Public Policy at Case Western Reserve University. Professor White is the author of Competing Solutions: American Health Care Proposals and International Experience.  


SZ: Can you give us a summary of what managed competition is and how the PPACA is related to it?

JW: Managed competition and its similar term managed care are terms that came up really in the 80s and 90s and became prominent in the health policy world then. The idea was that large part of the problem in health care, particularly the cost problem, and to some extent quality problems was that care wasn’t coordinated, care wasn’t integrated enough. And that unnecessary care was being done because of the incentives for doctors and hospitals just to make money by just doing whatever the heck they could get away with charging you for or were charging the insurance companies for.

The idea that was developed by economists who wouldn’t have thought of themselves as conservatives.  The most prominent being Alain Enthoven out at Stanford was that you couldn’t  make a regular market work in health care because the customers at the time they’re sick and need medical care  cant really shop. They don’t know enough to shop, they may not be competent, little problems like that. And so the idea was to try to find some way to simultaneously integrate care , make it more efficient,  (and) get rid of the bad incentives for doctors and hospitals to just do anything they feel like to make money -and at the same time make something resembling a market work.

The idea was then that insurers or somebody like insurers like the existing health maintenance organizations which were a combination of an insurer and a medical network , particularly Kaiser Permanente.  The ideal world would be a world in which organizations like that competed to get contracts to insure people. So people would choose among these integrated medical plans that were both insurers and providers.   They would choose at a time when they were healthy and they had some time to think about it.  They would choose based on some sort of measures of the quality of care and performance, and in choosing among these plans they would maximize value  because the plans in order to be less expensive would not do unnecessary care, because they wouldn’t  be selling to sick people who didn’t know and didn’t care and just wanted to be treated they’d be selling to people while they were healthy to people’s employers.

So the basic idea was to get around some of the reasons for the health care market doesn’t work like a normal market and to get around some of the incentive structures and failures in the organization of health  care delivery by combining health care delivery systems into coherent systems that were managed, and then having them compete  with each other for contracts to take care of people.

So that was the basic idea, and they of course wouldn’t use any of these words in talking about the affordable care act. But the core cost control ideas in the affordable care act are very similar.