Commonwealth Fund President David Blumenthal, MD, Says Market Forces Fail to Control Health Care Quality and Costs

Market forces have failed to keep health care costs under control, and that’s not surprising, according to David Blumenthal, MD, president of the Commonwealth Fund.

Speaking virtually on October 27 to a meeting of the Quality Leaders Forum (QLF), a network of quality leaders committed to improving health care in the greater New York area, Dr. Blumenthal’s comments focused on the role of government in fostering health care quality and health equity.

He started off by stating that the conditions necessary for an effective market—modest barriers of entry, price transparency, and knowledgeable consumers—do not exist in health care. “There are profound asymmetries between providers and purchasers of health care. It is very hard for purchasers to assess the value of what they are purchasing.” 

Dr. Blumenthal noted that even health care professionals have a hard time navigating the complicated and uncoordinated health care delivery system in the United States. In addition, most regions are dominated by large, consolidated health care providers, so there is very little competition. “This situation creates what economists call market failure,” he said. “We can’t expect markets to work in these circumstances because dollars cannot be used efficiently.”

This failure means the United States, the only industrialized nation that relies on market forces to regulate health care, has by far the highest cost of care in the world, and it keeps rising. The average price of health care increased six percent in the 12 months ending September 2022, according to the U.S. Labor Department's Bureau of Labor Statistics. The money spent is not producing results, however—the United States falls short on population health outcomes compared with all other wealthy countries that spend far less.

Dr. Blumenthal has spent much of his career examining the major forces affecting the quality, efficiency, and value of health care. Prior to taking the helm of the Commonwealth Fund, a national philanthropy that researches health and social policy issues, he was chief health information and innovation officer at Partners Healthcare System in Boston (now Mass General Brigham) and served as national coordinator for health information technology from 2009 to 2011, overseeing the buildout of an interoperable, nationwide health information system.

He told the QLF attendees that federal and state governments, through Medicare and Medicaid payment policies, do have some influence on costs and quality. He noted that financial incentives put in place under the Affordable Care Act (ACA) helped mitigate costs and improved quality somewhat. “The ACA was a huge social experiment, but it didn’t change the world,” he said. “Policy makers used the opportunity to put into the mix anything that could affect quality, such as rewarding hospitals for lowering their readmission rate, but these programs did not turn out to be as successful as people had hoped.” 

Programs that held institutions broadly accountable produce better results than those that focused on specific cost and procedure areas, he said. The Medicare Shared Savings Plan, for example, provides organizations flexibility on how to manage care for patients with complex needs. Moving forward, he recommended global payments tied to overall quality and accountability, adding that “transparency is a terrific mechanism for getting institutions to focus on quality.”

He also said that health care’s contribution to health equity is essential, but equity will also not be addressed by market forces. “It is possible to pay for equity the way we pay for quality, but race is not a factor that the market takes into consideration.” Dr. Blumenthal recommended that health care institutions incorporate equity into their quality improvement programs as part of an effort to address the issue. 

The QLF network includes graduates and faculty from the UHF/Greater New York Hospital Association Clinical Quality Fellowship Program and honorees from the UHF Tribute to Excellence in Health Care, representing over 30 health care organizations. Members are invited to network and discuss current issues in health care quality with nationally recognized quality leaders and to pursue opportunities for sharing best practices. 

Past Forum summaries can be found here. The next Forum will be held in January 2023 and the speaker will be Eric Schneider, MD, M.Sc., who leads the National Committee for Quality Assurance’s measurement, research and contracting agenda as executive vice president of its Quality Measurement and Research Group.

UHF is grateful to Elaine and David Gould, whose generosity supports the Quality Leaders Forum. 

Nov. 8, 2022
Focus Area
Quality and Efficiency
Quality Institute