role that competition plays in U.S. healthcare This paper presents a detailed examination of the role that competition plays in U.S. healthcare. The writer explores the impact that the ability to compete for consumers has on the health care industry in America. The writer also looks at the behavior of private and public organizations throughout the nation in the health care industry and speculates both negative and positive conclusions about the long-term impact health care competition will have on the industry. There were five sources used to complete this paper.

The biggest issue in the health care debate today is the financing of the industry. Millions of people are going without insurance or care because they cannot afford the cost. Those who do have insurance are paying premiums that threaten to break the bank, and the companies who are trying to cover the cost for the workers are having a difficult time. The cost of health care continues to rise with no seeming end in sight and Americans are demanding some changes.

Health care issues have been at the forefront of political, social and economic debates for many years. Americans are clamoring for changes but the nation stands divided on what type of changes should occur. There is a faction of the public that wants the nation to move toward socialized medicine such as is implemented in Canada, while others want the current system revamped. America has been built on the concept of competition. Competition is what makes capitalism the success that it is today. Competition in the health care industry is in theory supposed to keep cost down and service up, but in recent years that has not been the case. Health care costs are skyrocketing and service not standard or consistent anywhere in the nation. Competition in the health care industry for Americans provides both negative and positive results.

Before one can understand the various impacts of competition in the health care industry one must first have a grasp on the health care issues themselves.

A recent survey demonstrated exactly how divided the nation is on what should be done to correct the problem of health care.

Only about four in 10 favor allowing Americans to set up tax-free medical savings accounts. ' ' On the State Journal survey, 63.1% of the respondents favor limits on malpractice awards. Many apparently agree with proponents of such limits, who blame multimillion-dollar judgments as driving up the cost of malpractice insurance and in turn driving up the cost of health care without adding to the quality. Two other health care principles received support from bare majorities of the readers who responded:

52.6% favors allowing middle- and low-income families to deduct yearly health care costs from their taxable income. (Among the GOP presidential candidates, Dole, Dornan and Gramm supported this idea.

51.3% support tax incentives for small businesses to help provide health care to their employees. On the NPAT, Dole and Gramm sup ported this one. Here are responses to the other listed principles:

41.1% favor a universal health care program to guarantee coverage to all Americans regardless of income. None of the GOP candidates support this.

27.5% support a managed competition health care plan to contain costs and improve access that does not include mandated health alliances, government cost control powers, or employer/employee mandates. This appears to be a watered down version of the Clinton plan. Among the GOP candidates, only Lugar supports this one.

29% favor implementing a government-financed, single-payer national health care system similar to that of Canada. According to reports, Canada has had mixed results with its system. Sentiment has remained strong in the United States against a government-run system. None of the Republican candidates support this.

20.2% support provid ing vouchers to the working poor so they can buy into a private health care plan. Gramm supports this idea. Proponents argue that the inability of the working poor to purchase insurance provides an incentive to stay on welfare and rely on Medicaid."

Through it all the underlying support is for the competition of health care services for the consumer dollar. Competition in the health care field has been both successful and unsuccessful depending on what aspect of the health care system is being measured.

Health care costs in the U.S. are the most expensive in the nation:

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The USA is one of the few Western nations that spend more than 10% of its GDP...

Legend for Chart:
A - Country [all except U.S. have universal healthcare]

B - Per Capita Expenditures [1990 dollars]

C - As a Percent of Gross Domestic Product (GDP)

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SOURCE: Schieber, G.J., Poullier, J.-P., and Greenwald, L.:

U.S. Health Expenditure Performance: An International

Comparison and Data Update. Health Care Financing

Review 13(4): 1-88, Summer 1992.

Many experts believe that competition in the health care field will be the only way to bring the costs of health care down while providing the quality that American health care is known for worldwide. Several other methods have been tried and while at first they appeared to be successful it was not long before they would begin falling apart from the inside out. One such program was the New Jersey DRG system. The system started out with success as it moved to control rising costs to heath care through the Diagnositc Related Group. At the time it provided the most government enforced program in the nation.

The DRG aimed to control medical costs through strict controls. For a while, it worked and was touted as a model nationwide. Then, the program began to fall apart. Some major players, like Medicare, pulled out. Costs were shifted from one payer to another, and so began the dramatic increases the nation had seen at that point."

The nation has been through many changes as it has built the competitive system that the industry uses today. "Billions were spent in a 1950s supply-side splurge to build hospitals, expand medical schools and train physicians. The '60s brought a switch to a demand-enrichment strategy - Medicare, Medicaid and tax incentives for private health insurance. Then came the medical technology explosion of the '70s - organ transplants, CT scans, MRIs, chemotherapy and lasers."

Because of these changes the American health care system became world renowned for its service and competence. The competition factor in care helped to boost the health care industry to today's heights as both private and public sectors moved to improve their delivery and lure in the consumers.

As the competition became intense it began to backfire for society. Those who provided the best care and the most up-to-date services began to charge more for their service. Those who could afford it paid for that care thereby driving up the cost even more. Those who could not afford it were left to go to the less advanced facilities which began the divide between the insured and the health poor of the nation. The competition was not only between private providers but also began to appear from hospital to hospital and facility to facility as they worked to edge out the others in the quest for consumers. Insurance companies began to play into the competition game when they began to designate which providers they would and would not allow their participants to go to. What this did was shift the tide of competition to stop competing for consumers and instead begin competing for the approval of the insurance companies. With the focus of competition being placed at the feet of the insurance companies the health care industry began to take backward steps. Gone were the personal and lengthy visits in the examination office with the doctor and it their place was a hard pressed short five-minute session with a nurse practitioner. The entire concept of an insurance company is to save money and the insurance industry was naturally going to recommend their policy holders go to the doctors who saved the insurance company money. The way that was done was doctors rushing their patients through as fast as they could so that they could see more patients than ever before. It was not long before the insurance companies began to affect the test being ordered and the treatments being suggested. The competition in the health care industry has grown intense and it has grown to be a business of money more than a business of healing in the eyes and opinions of many Americans. However, some experts still believe the healthy promotion of competition in the private and public sector is the answer, with the key being the management of the competition.

One of the things that might improve the ability for competition to work is if the consumer receives more clout and say so in the system with the insurance company having to work with the consumer for their premiums.

Moving the power to the consumer would again bring about a successful combination to the health care industry.

Successful reform must begin with a clear understanding of how the current system creates incentives for unproductive competition. Payers' Incentives Make Payers Adversaries of Patients and Providers In most industries, the consumer makes the purchasing decision and pays for…