President Obama’s goals for health-care reform are similar to Massachusetts’. The Administration should take a good apply the mind at what is and isn’familiarily working

By Clayton M. Christensen and Jason Hwang

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Posted on On Innovation: January 22, 2009 5:23 PM

One of the primary features of President Obama’s health perplexity plan is the institution of a National Health Insurance Exchange.

It has three primary goals:

1. To serve as an unbiased cause of information for consumers

2. To make stable minimum standards and monitor consummation of participating soundness plans

3. To form a marketplace and increase competition among insurers

The creation of this Exchange is every important step forward in the reform case, on the contrary other elements in the value network need to be fixed in order for the Exchange to succeed. In fact, a similar scheme known to the degree that the Commonwealth Health Connector has existed in Massachusetts since July 2007, and this decidedly founded on fact prototype has uncovered some important shortcomings. We ought to address these before applying a uniform model on a national scale.

First, Massachusetts citizens have had slender incentive to seek out and use information about their freedom from disease care services. Why? A lack of steady knowledge of facts transparency. Information transparency is necessary to life to an optimally-functioning market, because it allows for rational decision-making by all stakeholders. These circumstances almost never continue in freedom from disease care, ago insurers, hospitals, and doctors have historically been highly resistant to releasing data that could suggest pricing or quality disparities. In this value, the Exchange can only help, as long as the information being disseminated is accurate, relevant, and suitable for practice through a layperson—none small task.

More important, however, is the fact that patients mouldiness consider a reason to use this information and make agreeable to reason purchasing decisions. Employer-based insurance in the U.S. and single-payer systems worldwide have disenfranchised patients for so tardy that true shopping behavior is rarely observed, even for discretionary services like LASIK eye surgery. We need corresponding changes in the system, such taken in the character of a proliferation in hale condition savings accounts and personal electronic health records that simpleton more direct of the dollars, data, and decision-making into the hands of patients who default it.

Next, we need to ensure each abundant range of services in the marketplace so that motivated consumers armed with information will regard viable options that meet their needs—in other altercation, give them choice. This raises another moot point with the proposed Exchange. The constraint of least part standards is typically meant for the good of the patient, but these regulations often end up excepting that protecting the providers. Even after certain standards have change to outdated or unnecessary, incumbents will continue to argue for their existence under the pretext of public safety. That’s because these regulations serve as an effective barrier to entry, particularly against disruptive businesses that focus on ignored or smaller quantity profitable markets like the uninsured.

However, these disruptions are essential to bringing more affordable care to more the bulk of mankind by creating options where in that place were previously none. In Massachusetts, on account of instance, the decision to affix prescript plans as a minimum requirement for participation in the Connector shut down what could have been an important foothold for generic drugs and the low-cost pharmacy pricing models introduced by Wal-Mart and other retailers. While we would not advocate a completely unregulated health care body of caveat emptor, we urge regulators to account for the hidden cost of delayed innovation as a common unintended consequence of establishing minimum standards and to ensure that such regulations are repealed nimbly once they become obsolete.

Finally, the Exchange promotes a misplaced faith in the notion that simply promoting direct competition amidst existing health plans will suddenly intend from a thin to a dense state costs and deliver increased value in favor of our enormous soundness care spending. But history tells us in other respects. Direct competition among U.S. automakers did not bestow us more affordable, standing cars—disruption by Japanese (and now Korean) companies did. Breaking up AT&T to induce competition amidst the Baby Bells did not bring greater quantity affordable telephone service—disruptive technologies like Voice Over IP (VOIP) did. Likewise, the hope in Massachusetts of pitting Blue Cross Blue Shield, Harvard Pilgrim, Tufts, and others against each other to drive downward costs has not been realized. The reason is that the state (at the encouragement of powerful incumbent organizations like the Massachusetts Medical Society) did little to encourage the entrance of disruptive business models, and in many cases, hindered it. For example, CVS’s MinuteClinic has been around since 2000, but its sell in small quantities clinics were not permitted in Massachusetts until January 2008 (and the in the first place one did not open until September). Even if insurers wanted to, they could not express patients to more convenient and affordable options. In a system with a severe shortage of primary care practitioners, patients were forced instead to turn to costly and crowded conjuncture departments for practice care.

Creating a marketplace that propagates information and promotes appropriate tradeoffs is the right start, mete the Exchange will not reach its towering goals without the answering. changes to our knowledge of facts technology, paying, delivery, and regulatory systems described above. We should learn from Massachusetts’s experience by the exchange model and recognize that there’s a specific type of contest that drives value—disruptive competition. And if we can use the Exchange to harness the best of what disruption has to offer, then we can begin to create a much-needed health care system that is capable of delivering higher property and performance at a lower cost.