Market Failure, Part 1

Why sustainable, quality care is so hard to find – nutshell version

A fairly routine week here in Nairobi, so it”s a great chance to discuss a major problem I am  trying to navigate here – how to sell high quality health care.*

Not like buying pizza

At first glance, this may seem simple. Those who value their health should be willing to pay for quality. After all, most markets – for pizza, cheeseburgers and cars for example – work this way. Unfortunately, health care does NOT work that way and so exists in a near perpetual state of market failure.

3 interrelated problems explain this failure. [See the next post for more detail.]

Bottom line, consumers (patients) think they want health but buy according to their perceptions, which are at best tangential to and at worst opposite from objective quality. Thus, providers who want to stay in business give the people what they want, and health gets lost in the shuffle.

This is why most all the bloviating about US health care, whether on Fox or MSNBC, is wrong. A classical private market is about as doomed to failure as a single public system. (Before you angrily email me about the wonders enjoyed in the UK or Canada, check out their political debates. Many people are unhappy with their systems and for good reasons. But that”s a discussion for another day.)

For example…

Imagine you are buying a car. You walk onto a used car lot, chosen because you knew you wouldn’t have to wait long. Then you buy a blue car because you blue is your best friend’s favorite color. You don’t even ask about the model, mileage or engine. Even when the specs are in front of you, you ignore them. Taken out of context, it sounds crazy, but that really is how nearly all of us choose our medical providers.

(I say us because I am no different. I still know next to nothing about my doctor except that his appointments are on time and he responds quickly to my occasional calls.)

No surprise then that, the world over, people (or taxpayers) end up paying for a lot of crap, only sometimes with a little actual health mixed in.

A Solution?

Health care is a giant marketing problem. If everyone is buying blue cars, someone needs to make sure the blue cars are awesome. 

The right system is one where providers have 2 powerful incentives. First is to keep patients happy – short waits, pleasant offices, friendly staff, fancy diplomas. Second is to improve their health in some objective way or to adhere to some best practices. Without either, the system crumbles or stagnates.

The beauty of such a system is that anyone with the means will gladly pay for it because they really see the value for their money. The challenge is designing the yoke between patients” desires and healthy outcomes.

A challenge perhaps but a solvable one. Back in the US, Kaiser has been at it for years, and the idea is catching on among the likes of OneMedical and PAMF. Here in Kenya, Jacaranda is working on it.

* Note: This was originally posted Dec 2013 from Nairobi and is now reposted after a technical upgrade in Oct 2017.