Video Excerpt: Allison Hoffman - Health Care's Marketing Bureaucracy

Video Excerpt: Allison Hoffman - Health Care's Marketing Bureaucracy

Years of Market-Based Solutions Are Not Achieving the Predicted Result

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Speaking at the 2018 Penn Health Policy Retreat, Penn Law School Professor and LDI Senior Fellow Allison Hoffman, JD, questioned the national strategy of applying traditional market principles to the health care business.

In her presentation at the 2018 Penn Health Policy Retreat, University of Pennsylvania Law School Professor Allison Hoffman said the widely held assumption that traditional market principles could be effectively applied to the business of health care has proven itself unfounded.

"In the last few decades, health policy has been dominated by economic thinking and by market-based solutions for the system's biggest problems, including low-value health spending," she told an audience of health economists and health services researchers. "With market based policies leading the way, the goal of law and regulations has been to lubricate markets to get them to work and to help people make good choices in them. So the promise of market-based solutions compared to direct regulations was that market-based solutions would be more responsive to individual preferences and they would be less bureaucratic. But in the health care space, market approaches are predictably not producing either of these results."

Hoffman, JD, a co-editor of the Oxford Handbook of U.S. Law and an expert in the field of health insurance regulation, pointed out that "none of the conditions for well functioning markets exist in health care as Ken Arrow warned five decades ago." Arrow, a winner of the Nobel Prize in Economic Science, was one of the pioneers of the modern field of health economics.

"A wealth of research since then has illuminated why people are not good consumers in this space," Hoffman continued. "People don't have stable preferences about things like health insurance plans and medical care in many instances. And when they do, they can't translate them well into decisions." 

"We've seen a ton of research showing that health literacy and numeracy is low among the population and health insurance and medical care decisions are notoriously complex, technical and hard," Hoffman said. "So, in response to struggling markets and struggling consumers, we've created a massive regulatory scaffolding to try to bolster market-based policies, often with little success."