NEJM’s Fundamentals of U.S. Health Policy, Part 2: How Broken the U.S. Healthcare System Is

Image credit: Karsten Schley

I only vaguely remember the great interest and surprise and bafflement I felt when first reading health policy articles that describe how broken the U.S. healthcare system is. But now, after having seen those sorts of summaries hundreds of times, I kind of just gloss over them. Having said that, I think Dr. Schneider does a great job covering the “our healthcare system is broken” lay of the land fairly succinctly in this article, which is the second in NEJM’s series on the fundamentals of U.S. health policy.

Not only does he cover each of the three main categories of issues (quality, spending, and access), but he makes mention of other important aspects to that that are sometimes forgotten, such as the fact that part of our higher spending relative to other countries is simply attributable to our wealth, the impacts of healthcare overspending on U.S. competitiveness, and that a big unmeasured component of the inconvenience of our healthcare system is how much time is wasted by patients trying to figure out insurance or navigate this system in other ways.

I won’t rehash everything he talks about here, but I did find one small section in this article particularly interesting. He is talking about how private organizations and private markets affect the healthcare system, and then he says, “Functioning private markets can reduce costs and innovate in ways that broaden service availability. But private markets may not restrain costs in health care as they do in other sectors. Patients frequently rely on professionals to decide what services are needed, and costs may not be a consideration for either patients or professionals.”

Translation: Markets don’t work in healthcare. And a couple reasons they don’t work are (1) information asymmetries and (2) costs are not considered.

I remember reading things like this as well from the very beginning. And my question was always, “Why?” Or, if reasons were given, “How does that mean markets don’t work in healthcare?” And there never seemed to be a good answer that contained spelled out causal details. The unsatisfactory answer was always, “Healthcare is different.” And then they’d reference the same landmark article by Kenneth Arrow, Uncertainty and the Welfare Economics of Medical Care. So I read that article carefully, and it is a great and important article, but it never seemed to address the challenges for which people were referencing it.

This is, in big part, what spawned this blog. And thousands of hours of researching and thinking and writing later, I feel like I have answers to those questions. Not every answer to every question, mind you, but the main answers to the most important questions. I’ve found that it’s not that markets don’t work in healthcare–it’s that markets aren’t working in healthcare. And the reasons why are explained in my Healthcare Incentives Framework, which I probably reference in at least 50% of my posts because it’s the foundation of how I have come to understand healthcare markets and our healthcare system specifically.

So, if you do any degree of reading about health policy topics, you are sure to come across similar statements about how markets don’t work in healthcare. Or, just as commonly, that they could work in healthcare but relying on them would cause even worse disparities. Don’t believe either of them.

There is a whole article about markets at the end of this NEJM series, so we will see whether it has worthwhile things to say on the topic!

2 thoughts on “NEJM’s Fundamentals of U.S. Health Policy, Part 2: How Broken the U.S. Healthcare System Is”

  1. Drs. Schneider and Christensen and I all agree that our healthcare system is sick and needs to be “fixed.” My comment is that the healthcare system is so big and so complex that no single framework fully explains its brokenness nor how to fix it. Dr. Christensen approaches it as a ‘marketing’ problem (product, price, place, promotion) primarily. Dr. Schneider looks at it as a policy challenge. For my part, I try to approach it from a ‘multi-disciplinary’ perspective. I especially draw on political philosophy (so does Dr. Christensen!) and — drum roll! — raw politics. Check out, for example: http://fixushealthcare.blog/2018/07/03/healthcare-hits-a-pothole-and-how-to-fix-it/ and http://fixushealthcare.blog/2020/12/31/fixing-u-s-healthcare-annual-review-summary-2020/ . I believe that the various approaches should not be ‘either-or’ (choose one) but rather ‘both-and’ (use every means available, simultaneously and deliberately). I invite discussion, Socratic dialog and policy debate!

    1. Definitely, let’s use every available tool and technique to fix healthcare! I would rather characterize my approach to analyzing the healthcare system as a systems perspective with special attention to incentives (that’s what systems create, after all). Align the incentives properly, the the rest of the necessary changes will follow.

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