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Letters to health-care Santa: Fix the exchanges!

1883-small_enthoven_logo.jpgOver the course of this week, I'll be asking some health-care experts what they'd like Santa to add to the bill during conference committee and publishing their responses on the blog. Next up is Alain Enthoven, the Marriner S. Eccles Professor of Public and Private Management, emeritus, at Stanford University. Known as the "father of managed competition," his ideas were central to the Clinton process in the early '90s, and his research on the financing and delivery of health care in the United States and other industrialized nations, and cost-benefit analysis in medical care, have influenced a generation of policymakers and academics.

I would say that there ought to be a serious attempt to introduce competition of delivery systems to serve cost conscious consumers -- something that works well at a small scale for State employees in CA and WI -- extending the concept to all individuals and also employees of groups up to 100 employees. The exchanges through which these consumers would choose need to be large enough to have market impact, and also a strong design to prevent adverse selection against the exchanges. One way would be to require all insurers to practice community rating (same price for everyone buying the same coverage) for the whole market from individuals up to groups of 100. That would make the market work the way it did when it was dominated by nonprofit Blue Cross and plans like Kaiser and Group Health Cooperative. Within rules, let consumer choice drive the important tradeoffs in system design.

Enthoven also recommends people read this memo (pdf) he authored on the design of the exchanges. The current Senate exchanges will fail, he believes, but with some modest changes, they could succeed.

Earlier in this series, Diane Archer called for Congress to create national exchanges rather than state exchanges.

By Ezra Klein  |  December 22, 2009; 10:39 AM ET
Categories:  Health Reform  
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Next: Size matters


I agree that this is the right type of approach.

The essence of consumers trading off costs and benefits vis a vis benefit design is critical. Other Western European countries are increasingly struggling with this balance, and a consumer-driven approach is likely to be more sustainable in the long-run.

Wyden-Bennett is of course along those dimensions, and I'm still mystified why this wasn't given any consideration. It was hands down a better bill.

Posted by: wisewon | December 22, 2009 11:09 AM | Report abuse


thank you for opening your blog to these highly knowledgeable people.
these interviews are a real service.
in the midst of this ratcheted environment, where there now seems to be more heat than light, it is good to read these interviews, that are neither shrill or strident.
thank you for everything.

thank you.

Posted by: jkaren | December 22, 2009 11:11 AM | Report abuse


We just spent all of this time building insurance systems to further insulate more people from the cost of care without significantly addressing the cost of care.

I'll say this again (and again). People spend a lot of time clipping coupons, getting food on sale, and chasing deals on TVs. They don't have the information to decide between a $300 and $800 MRI, they probably can't even ask how much it costs.

The consumer mechanism can work in health care if we allow competition between providers on value. Right now they just compete on providing more services to the consumer, and then the insurers have to figure out how to pay for the excesses.

Posted by: staticvars | December 22, 2009 1:11 PM | Report abuse

I'm not sure what the point of this series is. Do you seriously think anything of substance is going to change in committee? Do you think any other health care legislation is going to see the light of day for the next twenty years?

Posted by: petermilley | December 22, 2009 3:57 PM | Report abuse

If the regulated exchanges don't succeed (due to lacking good design such as suggested above), then the already-significant black market in health care will continue to grow.

Posted by: HalHorvath | December 23, 2009 3:52 PM | Report abuse

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