Entrepreneurship to change US healthcare market

UNITED STATES: Entrepreneurship to change US healthcare market

The US healthcare market does not work like other markets. Because health care costs are usually paid for by a third party – either by the insurance provider or by the government, patients are not price-sensitive and providers don't feel the need to compete for their business.

“Lack of competition results in a highly artificial market plagued by problems of high costs, inconsistent quality and poor access,” said Devon Herrick, senior fellow with the National Center for Policy Analysis (NCPA).

Herrick is the author of the report entitled Health Care Entrepreneurs: The Changing Nature of Providers published by the NCPA last month.

But in healthcare markets where patients pay directly for all or most of their care, providers almost always compete on the basis of price and quality.

Herrick cited the following:

• Cosmetic surgery: Since it is rarely covered by insurance, patients pay out of pocket and are sensitive to prices. They typically compare prices before surgery and pay a price that has been falling over time in real terms.

• Laser eye surgery: Competition is holding prices in check and improving quality in vision correction surgery, including accurate correction, faster healing, fewer side effects and an expanded range of conditions that can be treated.

• Medical tourism provides cash-paying patients healthcare outside of the US in high-quality facilities that rival domestic facilities. Patients can save 30 to 50 percent by going abroad.

What lessons can be learned from these examples of entrepreneurship in healthcare?

“The most important is that entrepreneurs can solve many of the healthcare problems that critics condemn,” said Herrick, adding that Public policy should encourage, not discourage, these efforts.

NCPA is a non-profit, non-partisan public policy research organization established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector.

According to the latest official statistics, 7 million Americans have their own annual individual health insurance, four million more buy short-term cover, 83 million are covered by government schemes and 45.7 million have no health insurance at all. The figures for employer health insurance are confusing as they integrate policies paid fully by the employer with policies paid for only by the employee under a group offering.

www.ncpa.org