A Wisconsin Primer
For the last 100 years, a health care regulatory project enthusiastically endorsed by generations of health policy experts has been encrusting U.S. health care with layer upon layer of increasingly intrusive regulation. Though each regulation may be innocuous in its own right, taken together they have had the unfortunate effect of divorcing patients from spending on their health, creating explosive growth in Wisconsin’s Medicaid budget, and making Wisconsin’s market for hospital services one of the least competitive in the United States.
In hindsight, the regulatory program had had three major achievements. It has excluded consumers from health care decisions, consistently moving the power to make decisions about the shape and substance of health care and health care financing from individuals to central planners. It has increased the number of health services that individuals could receive and have paid for by other people’s money. Finally, it has perpetuated and refined a payment system that was originally intended to protect hospital incomes during the Great Depression. With the addition of price controls, that system now threatens to afflict Americans with the same health services problems that plague Canada, Britain, New Zealand, and the European systems.
With its focus on cost and third-party payment, the regulatory program has also managed to shift the public debate. The historical focus on caring for an individual patient has been subsumed in discussions of pricing, cost control, and the merits of using a variety of delivery systems for expanding the third-party payments system to an ever-increasing fraction of the population, legal or not. The collateral damage has been high. People have lost sight of the important role that involved consumers spending their own money play in controlling system costs and quality. They also have scant appreciation for the fact that the private health care delivery system that evolved in the United States was unique in its ability to produce superior health care at lower cost for all income levels.
The regulations removing consumers from direct decisions about health care expenditures have contributed a great deal to Wisconsin’s exploding health care costs. The good news is that judicious deregulation has the potential to put consumers back in charge Doing this requires a clear understanding how injudicious regulation has short-circuited normal market mechanisms for controlling expenditure, and an appreciation for the enormous benefits to be gained from meaningful consumer involvement. This paper examines why the reforms of the regulatory project backfired, why many current proposals have the potential to do the same, and why the new initiatives in consumer-directed care have such promise.
