Health care is often seen as unique among consumer goods and services: it has a direct impact on life and health, its product is difficult to quantify, many players are motivated by different incentives, and much of it is delivered by non-profit providers. Nevertheless, the industry is no different than others in that consumers and providers respond to incentives just like other markets. In fact, some of the same trends that affect other industries-high prices, increased cost competition, the rise of for-profit enterprises-are affecting the health care industry to an even greater extent.
The recent COVID-19 pandemic has made it more difficult to project future growth in health care spending and prices. New costs associated with vaccination, testing, and treatment of disease could result in pent-up demand and shifts in health utilization that may persist into the future. Furthermore, the sharp price increases observed in the health sector in 2023 have lacked the overall inflation of personal consumption expenditures (PCEs) that characterized earlier years of the current expansionary cycle, implying that these increases are not entirely due to normal economic forces.
In addition to these external factors, the revolution in the organization and financing of health services is a factor that makes it especially challenging to analyze and compare the performance of the industry. For example, prospective payment systems and capitated programs put health care providers at financial risk, causing them to seek market share through overt marketing strategies that may conflict with or disrupt traditional physician-patient relationships.
These developments have led to increasing interest in consumer-directed health care, with the hope that patients who must pay for most health care out of pocket will purchase only that which is deemed essential and will improve their outcomes or quality of life. This approach is expected to reduce overall health care spending by reducing the amount of money paid for unneeded services, as well as to encourage price competition among providers. However, it also raises the question of whether patient satisfaction is an adequate measure of quality, and if a focus on decision making will help to bridge the competing elements of professionalism, regulation, competition, malpractice, and value purchasing. The answer to these questions depends on the quality of information available, which requires an effective and comprehensive system of review and assurance that encompasses the scientific, clinical, technical, interpersonal, manual, cognitive, and organizational aspects of health care delivery.