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Is The Healthcare System A True Marketplace?

The difference between the healthcare system and the medical care system is very clear to me. The stakeholders in the healthcare system are patients, physicians, government, hospital systems, pharmaceutical companies, pharmacies, pharmacy middlemen, and healthcare insurance companies.

Government, hospital systems, pharmaceutical companies, pharmacies, pharmacy middlemen, and healthcare insurance companies are secondary stakeholders in the healthcare system.

The primary stakeholders are patients and physicians. They also comprise the medical care system. Without the primary stakeholders there would be no need for a healthcare system.

The secondary stakeholders have long ago taken over the healthcare system. All businesses and the government deal with the hand they are dealt using their best judgment. The people running the business or government pursue their vested interest. The difference between businesses and government is businesses work to make as big a profit as possible. Government, depending on the political party in power, pursues fulfillment of its ideology.

Since 1942 and the Economic Stabilization Act of President Roosevelt Read more »

*This blog post was originally published at Repairing the Healthcare System*

Will A Market Driven Healthcare System Be Most Effective?

Mechanism Design has demonstrated that the most efficient systems are created when everyone’s vested interests are aligned.

“An example is defense contracting. If you agree to pay on a cost plus basis you have created incentive for the contractor to be inefficient.

The defense contractor will build enough extra into a fixed price system to account for cost overruns.  The cost overrun would be permitted in the rules if the price was transparent. If there were no cost overruns the contractor’s profit would be increased. It would provide incentive to be efficient.

“If you agree to pay a fixed price, you can come close to an efficient price if you have all the truthful information.”

A reader wrote,


History has proven over and over again that only the market mechanism of willing sellers and willing buyers is the optimal way to allocate economic resources. This presumes an informed buyer, and a willingness of sellers to compete for buyers. Adam Smith was clear on this in the Wealth of Nations.

If incentives are aligned and truthful price information is available an efficient system is created.  Most stakeholders think they can do better by not sharing truthful information. If the rules of the game require truthful information the system can become an efficient market driven solution.

The healthcare system must become market driven. At present Read more »

*This blog post was originally published at Repairing the Healthcare System*

Can The Healthcare “Consumers” Drive The Waste Out Of The System

Patients are first. Patients are the reason for the existence of the healthcare system. Physicians are second. They are trained to understand the pathophysiology of illness and to treat patients for their disease. Everyone else is a secondary stakeholder (provider).

All the stakeholders create waste in the healthcare system. If an accurate analysis were performed, most of the waste and the resulting profits would be attributed to the secondary stakeholders. Patient and physicians drive this waste and profits into the hands of the secondary stakeholders. Neither patients nor physicians are aware of driving the waste and profit into these stakeholders’ coffers.

The patient-physician relationship should be a one on one transaction. Patients and physicians are frustrated and many have accepted the disappearance of this human-to-human interaction.

Healthcare insurance companies and hospital systems think they own the patients and the physicians. This will turnout to be a fatal misperception.

To many observers of the healthcare system Read more »

*This blog post was originally published at Repairing the Healthcare System*

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