America's health care economy is a paradox of excess and deprivation. We spend more than 11 percent of the gross national product on health care, yet roughly 35 million Americans have no financial protection from medical expenses. To an increasing degree, the present financing system is inflationary, unfair, and wasteful. In its place we need a strategy that addresses the whole system, offers financial protection from health care expenses to all, and promotes the development of economical financing and delivery arrangements. Such a strategy must be designed to be broadly acceptable in our society. To remedy the deprivation, we propose that everyone not covered by Medicare, Medicaid, or some other public program be enabled to buy affordable coverage, either through their employers or through a "public sponsor." To attack the excess, we propose a strategy of managed competition in which collective agents, called sponsors, such as the Health Care Financing Administration and large employers, contract with competing health plans and manage a process of informed cost-conscious consumer choice that rewards providers who deliver high-quality care economically.
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Graduate School of Business, Stanford University, CA 94305.
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