Consumer-driven Healthcare

By: Murray Sabrin

The fourth annual Sebastian J. Raciti Memorial Lecture was held last Wednesday on the campus of Ramapo College. The event is sponsored by the Center for Business and Public Policy and the Ramapo Business Network.

This year’s guest lecturer was Regina Herzlinger who holds the Nancy R. McPherson Professor of Business Administration Chair at the Harvard Business School. She is the author Who Killed Health Care: America's $2 Trillion Problem - and the Consumer-Driven Cure (McGraw-Hill, June 2007) and Consumer-Driven Health Care (San Francisco: Jossey-Bass, 2004), the best-selling Market-Driven Health Care (Cambridge, Massachusetts: Perseus Paperback, 1999).

In her 70 minute presentation Professor Herzlinger explained how employers have become responsible for the health insurance of their employees. She also explained that our healthcare costs have skyrocketed because of the “iron triangle” of our medical system. According to Herzlinger, insurers, hospitals and Congress have no incentive to keep costs down. Hence, health costs continue to rise despite the promises made by the federal government that costs would be contained by more mandates, controls, regulations, and intervention in medicine.

The bottom line, according to Professor Herzlinger, is that no matter who wins the presidency next year, a consumer driven healthcare model will replace the current system over the next several years. That means employers will no longer be purchasing medical insurance for their employees. It means that individuals will have to educate themselves about medical insurance and health issues so they can determine the best insurance policy for their households. It means that we can achieve universal coverage without a single payer like Canada or England.

In short, Professor Herzlinger’s vision for healthcare will be an entrepreneurial model that has worked so well in other sectors of the economy where innovation, competition, low prices, and high quality serve consumers. Instead of relying on employers to provide us with insurance, we the people will have to become real healthcare shoppers in a more transparent medical sector that for too long has kept consumers in the dark.

Professor Herlzlinger’s new book is must reading for anyone who wants to understand how consumers will finally take charge of their healthcare needs, and how we can have universal coverage without a government takeover of the $2.2 trillion healthcare sector.

Murray Sabrin, Ph.D., is professor of finance in the Anisfield School of Business, Ramapo College of New Jersey, where he is executive director of the Center for Business and Public Policy. He is the author of Tax Free 2000: The Rebirth of American Liberty. Sabrin writes a weekly column for www.usadaily.com and blogs for the Star-Ledger, New Jersey’s largest newspaper, www.njvoices.com.