May 13, 2008 8:26AM

Markets Beat Government on Medical Errors

Last year, the federal Medicare program announced that — after 40 years of financially rewarding providers who harm patients — it would no longer pay the added costs of treating patients who fell victim to a list of medical errors known as “never events.” In other words, the providers — doctors, hospitals — will have to eat the costs of their own mistakes. 

As they often do, private health insurance companies are following Medicare’s lead. WellPoint, Cigna, and other fee‐​for‐​service plans have announced that they too will stop paying the added costs that come from “never events.”

In the race to improve health care quality, is government beating the market? Hardly.

As noted health economist Alain Enthoven and I explain in a recent oped, the market long ago developed payment mechanisms that punish medical errors:

If anything, government prevents markets from improving patient safety. A raft of government interventions favor fee‐​for‐​service medicine and inhibit competition by plans with greater incentives to reduce errors. Medicare, the nation’s largest purchaser of medical services, is almost entirely fee‐​for‐​service. Federal and state tax laws give larger tax breaks to people or groups that choose more costly care, and favor employer‐​based coverage, which usually denies workers the ability to choose their health plan.

Government regulation of health insurance and medical professionals further inhibit competition by such plans.

If you want to know why medicine isn’t better, cheaper, and safer, look no further than your own government.