The competitive revolution

HEADNOTE

Recent efforts to rationalize health care are now facing a political backlash.

IN THE LAST 25 YEARS, U.S. HEALTH CARE AND health policy have evolved in surprising and fascinating ways. The main surprise

was the competitive revolution in health care markets, stimulated by subtle, unrelated policy changes and the rapid growth of managed care. The grand health care reform plans, such as the health planning initiatives of the 1960s and the Clinton administration's attempt at national health insurance, turned out to be surprising failures.

The grand reform plans were motivated partly by a belief that people consume so much medical care that a significant fraction has no real benefit. From that perspective, substantial reductions in health care could enhance efficiency, even if done in a fairly crude way. But there is increasing evidence that recent technological progress, especially for pharmaceuticals, has cost-effectively increased life expectancy. Even though the United States spends a lot on health care, spending more may not be nearly so inefficient as was once thought.