The “Competition Revolution” in Health Care

Prologue: Medical care is widely regarded as a vital ingredient of a decent social minimum that any civilized society should provide or make available to its citizens. As a ride, western industrialized nations incorporate this element in their social contracts, in all cases doing so in ways that uniquely reflect the individual country's culture and economic status. The United States has moved partially down the road of providing equal access to medical care, but it has fallen well short of universal coverage. During the 1980s, the government in power sounded the rhetorical call to change not by broadening access, but through a belief that America's health sphere could position itself best for the future by employing market principles to allocate scarce resources. In this opening essay, Victor Fuchs, professor of economics at Stanford University, examines the role these principles have played in medical care during the 1980s. Fuchs is best known as the author of a short book that still is must reading far anybody who is striving to understand the economics of medical care. Fuchs concluded in his 1974 tract entitled Who Shall Live? that America cannot have all the health and all the medical care it would like to have, but must make tough choices. Fuchs' recommended design of a system that provides “universal comprehensive insurance,” and features decentralized delivery systems that are remunerated by capitation payments, “competition (wherever possible),” “elimination of many of the restrictions on use of health manpower,” “rational physician supply,” and “rational hospital utilization.” Fuchs asserted: “Implementation of these recommendations should have a significant impact on the problems of cost and access. They should not be expected, however, to produce a dramatic improvement in the overall health of the population .. .the greatest potential for improving health lies in what we do and don't do for and to ourselves. The choice is ours.”