Fragmented Medical Care I: America’s Problem

Copyright 2008 Newstex LLCAll Rights ReservedNewstex Web BlogsCopyright 2008 Healthcare Economist Healthcare Economist September 8, 2008 Monday 11:49 AM EST LENGTH: 500 words HEADLINE: Fragmented Medical Care I: America's Problem BYLINE: Jason Shafrin Sep. 8, 2008 ( delivered by Newstex) -- The U.S. healthcare system is one of the more fragmented systems in the world. Traditionally, economists believe that a splash of decentralized planning with a heap of free markets is a recipe for efficient outcomes. In the case of health care coordination, however, information sharing, and collaborative work are needed if quality is to improve and decentralization may not be the best option. describe some of the problems with America's fragmented system. For instance: Health insurance is a high turnover product. About one-fifth of health insurance policyholders cancel their plans in any given year. Most of these changes are due to i) employees switching jobs and ii) employers cancelling their group plans in favor of other plans. When insurers have short term relationships with their customers, it likely does not pay for them to invest in preventive care or . Having a fragmented insurance market can give insurers an incentive to lower quality. When adverse selection is present, offering high quality medical care will attract sicker individuals which will drive up insurance premiums. Thus, insurers often do not have an incentive to provide high quality care. The fragmented insurance system means that hospitals must spend more money paying administrators to collect claims. finds that hospitals in the U.S. spend $315 per capita on administration compared with $103 in Canada. The fact that physicians are rarely employed by the hospitals has lead to some perverse behavior by nurses. For instance at Stanford Hospital, "Nurses were harshly blamed by surgeons for instrumentation failures, but nurses who delivered clean instruments on time achieved 'star status' among surgeons. In this setting, some operating room staff shared instruments between surgical suites. Some nurses kept critical instruments in their personal lockers. Some surgeons also took instruments with them when they left the hospital." Further, physician heterogeneity hurts efficiency by making standard operating procedures nearly impossible to implement. Generally, hospitals allow doctor to gets what they want in order to attract physicians with large patient bases to their hospital. However, this creates an incredible amount of complexity and possibility for error in the health care system. When providers do consolidate, it is often not done in the best interest of the patient. While vertical integration could improve quality, consolidation is often done with the purpose of locking-in profitable referrals or increasing bargaining power. "[Medicare] patients with diabetes see a median of eight physicians in five distinct medical practices." In future posts, I will give some examples of organizations that have been able to overcome these problems, as well as policy prescriptions to improve the health of America's medical system. Cebul RD, Reibitzer JB, Taylor LJ, Votruba M (2008) "" NBER WP 14212. Newstex ID: HCEC-0001-27957684 NOTES: The views expressed on blogs distributed by Newstex and its re-distributors ("Blogs on Demand®") are solely the author's and not necessarily the views of Newstex or its re-distributors. Posts from such authors are provided "AS IS", with no warranties, and confer no rights. The material and information provided in Blogs on Demand® are for general information only and should not, in any respect, be relied on as professional advice. 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