Healthcare: A Business, a Right, or Both?

The debate over whether healthcare should be treated as a business or a right has gone on for decades. Both sides have a similar end goal, and that is for our nation to boast a healthy population of generally productive individuals without bankrupting itself in the process. The disagreement is mostly in how to achieve the goal.

As is the case for any question involving the allocation of scarce resources, exploring the issue within its broader context is critical. We are living in a period that has seen steep rises in income inequality; a middle class increasingly unable to cover basic expenses in the face of anything unexpected. Across all age group brackets, there has been a steady decline in average life expectancy. These declines across the board have been attributed to factors as varied as they are numerous.

It can be challenging to try and learn more about the arguments made for each side of the coin when our political environment is marked by such vitriol. Challenging does not mean impossible, however, and improving understanding of these arguments in the voting population is critical for empowering the democratic process to make any meaningful change in our lifetimes.

Do the Dollars Make Sense?

The U.S. healthcare system is undoubtedly massive. It accounts for an astonishing 20 percent of our nation’s total GDP. At the same time, healthcare debt is the leading cause of personal bankruptcy and health outcomes metrics rank near last. How can it be that we pour so many resources into our healthcare sector than comparably developed nations throughout the world, only to find ourselves ranking near last in just about every related success metric?

With such a historically innovative sector recognized for developing treatments and cures for so many different diseases and conditions, it seems absurd that we are living increasingly unhealthy, shorter, and unhappier lives than we were decades earlier.

There are some theories that try to explain this paradox. Consider the workflow process—scope, timelines, expertise, licensure, equipment and facilities, investment sources, and so forth—for developing new disease treatments. Then consider a local primary care clinic, located in a small town for the practice of family medicine.

Beyond both involving some form of a trained medical provider (such as a physician) at one or more points in the process, developing new drugs and running a small outpatient clinic have almost nothing in common. Yet both activities are grouped under the larger umbrella we call our healthcare sector.

When anyone is arguing for or against handling healthcare as a business, and they are referencing the size of the healthcare sector to make whatever point they are trying to make, just keep in mind how many different activities this total covers.

Market Incentives Driving Innovation

One of the most commonly made arguments in support of treating healthcare as a business is the potential for powerful market incentives driving innovation in a way that supposedly nothing else can—the incentive to win over one’s competition while playing the game of capitalism is indeed a powerful drug.

Prices of goods and services are set at the intersection of the demand and supply curves. This incentivizes businesses to provide the best widget for the lowest possible price because if they don’t, someone else will. That time lag between the initial innovator and the rest of the competition learning and figuring out how to imitate is when the profit for the winner(s) is generated. We can extend that with patents and other regulatory tools.

The evidence is quite strong that this profit motive does effectively encourage pharmaceutical companies, medical device manufacturers, and more recently, technology companies, to invest in the research and development required to innovate breakthrough treatments and therapies. Research institutions and their healthcare providers also participate but for relatively much smaller financial incentives. The therapeutic interventions developed from these combined efforts can save lives and improve patient outcomes. Such contributions affect meaningful change throughout not just the U.S., but the entire world.

Incentives for Therapeutics Development Versus Value-Based-Care Provision

Free market incentives align far more closely with the R&D activities in life sciences companies (e.g., drug and medical device development) than with the process of providing the basics of clinical care. This is particularly so in preventative medicine, in which generic medications and behavior interventions tend to be front-line recommendations to stop many chronic conditions and diseases before they start. It’s neither exciting nor instantaneous, and it usually requires patient behavior change, which patients dislike—but it tends to work.

That’s not to say that clinical care delivery doesn’t respond to financial incentives. In fact, value-based care (VBC) has successfully reduced financial resource use within a large and growing number of research studies and pilots. And this occurs while simultaneously achieving equivalent, or even improved health outcomes.

The challenge to making VBC work on a larger scale may be that it requires establishing a single-payer system to achieve the same experimental conditions of leveraging the “closed loop” necessary to align the financial incentives.

A single-payer system, however, is still seen as an extremely left-leaning policy, and as such, is opposed by many conservative voters for that reason alone. In contrast, the financial incentives that effectively motivate R&D activities don’t require a single-payer set-up and are already in play—much to the benefit of those companies.

Competition and Cost Reduction Claims

Treating healthcare as a business can promote operating methods that hold efficiency and cost control at the forefront of decision-making. In theory, market competition should force medical providers to find ways to deliver high-quality care at a lower cost, benefiting patients and healthcare systems. In reality, these incentives are not directly aligned outside participation in the VBC healthcare reimbursement model.

Outside of a VBC bubble, the arguments that treating healthcare as a business will enhance its efficiency tend to fall into one of two buckets. The first and most overly optimistic one is that market competition among healthcare providers promotes price transparency, which in turn enables patients to choose more affordable options. This can incentivize providers to reduce their prices to meet more consumer demand. In reality, this simply doesn’t happen. Pricing transparency is nowhere near shop-around levels of ease despite the introduction of targeted legislation with financial penalties for non-compliance. Furthermore, health insurance fundamentally limits patient choice—even when plan choice itself is less limited (with dozens of marketplace plans, versus the handful of options generally available through one’s employer).

Furthermore, contracts for health insurance plans, healthcare organizations, and their providers (as well as patients) are written to eliminate opportunities for out-of-pocket price savings or circumvent plan rules in any way that would result in net cost savings for anyone (except the insurance payer). Contract verbiage specifically prevents consumers from leveraging any information upon which these efficiency assumptions rely: if one has active health insurance coverage, choosing self-pay is simply verboten in most scenarios. To claim any reality to the contrary is simply disingenuous—we are nowhere near patients being able to choose as though they were consumers.

The other commonly cited argument for the efficiency point is that businesses are often more adept at streamlining processes, reducing waste, and adopting cost-effective practices to optimize resource utilization. But again, this relies on an assumption of consumer choice—which the sector critically lacks.

Healthcare as a Right

There is undoubtedly an important distinction between the economics and the humanist arguments within the greater debate of how best to run the healthcare sector. Frustratingly, this distinction—despite its being so fundamental to the issue—is rarely recognized at any level of discourse, let alone intentionally and thoughtfully incorporated. Overlooking this all but eliminates hope of effecting any semblance of meaningful change.

Arguments against healthcare as a business are more than just disputing the economics arguments of the other side. Many of these arguments are built upon the belief that access to medical care should be an inalienable right of all citizens—much like the right to freedom of speech, for example.

While this belief is more commonly held by those against a business approach to the healthcare sector, it is not solely held by that group. Some proponents argue that the best way to ensure this right is upheld for citizens is to allow free markets to optimize scarce resource allocation. Those who support healthcare as a right but oppose the free market system to make it happen often point to the current state of affairs as the strongest evidence that it does not work.

The point is that access to care as a right and support of a free market approach to healthcare services are not necessarily opposite ends of the same concept.

The Future of American Healthcare

The U.S. healthcare sector is undoubtedly as complex as it is unique. On one hand, a profit-driven motive should be able to drive innovation, and efficiency, and promote the development of cutting-edge medical technologies.

On the other hand, the commodification of healthcare can lead to unequal access, inconsistent quality of care, and many challenging ethical considerations that seem at odds with our supposed meritocracy.

While a business-oriented approach can drive innovation and efficiency in theory, many of the assumptions these arguments require are simply not the case within the healthcare sector. The traditional consumer—in this case, the patient—does not access the market for healthcare services in the same way as they might in purchasing other goods and services. Significant distortions seem to substantially reduce many of the touted benefits accompanying a free market approach in resource allocation.

Decision-making that aims to optimize how healthcare services are accessed and provided is not easily solved by a democratic vote. Balancing profit and patient welfare remains an ongoing challenge as societies strive to provide accessible, affordable, and high-quality healthcare.

Elizabeth Bradford Kneeland, MBA
Elizabeth Bradford Kneeland, MBA

Elizabeth Kneeland is a writer and entrepreneur living in Philadelphia. As a small business owner, she spends much of her time creating content, researching markets, and refining financial models. Her career has straddled novel operational and financial modeling, and traditional academic research within the healthcare sector, providing her with a unique perspective on programmatic development. She built the first for-profit telemedicine program for the University of Pennsylvania Health System in 2015. She also has helped build and scale sleep medicine startups in the U.S., China, and Taiwan.

Kneeland has co-authored publications in peer-reviewed journals on topics ranging from device validation to clinician-level educational interventions and has been an invited speaker at medical conferences throughout the U.S., China, and Taiwan. She has most recently contributed to discussions on healthcare technology as a research analyst focused on analytics, real-world data, and patient privacy legislation.

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