Leveraging Market Forces in Health Care

Meredith Rosenthal has an excellent commentary in the current NEJM on supply vs. demand side interventions in health care.  (Available without subscription).  She reviews interventions on the demand side, especially benefit design changes, and points out that raising consumer financial exposure leads to decreases in both discretionary and evidence-based genuinely beneficial care.  Rosenthal also notes that efforts to improve consumer information have fallen short, saying “patients frequently do not understand, trust, or rely on … reviews in selecting providers.    


Interventions on the supply side also have some downsides.  For instance, providers might shun tougher patients. (Of course, for all intents and purposes providers in the current system shun patients who require low-margin services now).  Providers also respond to fee schedule cuts by increasing the number of units of service delivered.     Rosenthal notes that information deficit is less of a problem for providers – and suggests that this might be a reason why incentives focused on providers are more likely to be effective at controlling costs with fewer unintended consequences.


We’ll probably need to leverage both demand (patient) and supply (provider) market forces in health care reform.  What’s most critical is that these market forces cause change in the delivery system and decrease not just the price for health care – but the resource cost as well.