Abstract

Managed Care Organizations (MCOs) are frequently criticized for their marketing mistakes. Often that criticism is leveled against an implicit benchmark of an ideal competitive market or an ideal system of government provision. But any accurate assessment in the choice of health care organizations always requires a comparative measure of error rates. These are high in the provision of health care, given the inherent uncertainties in both the cost and effectiveness of treatment. But the continuous and rapid evolution of private health care mechanisms is, in the absence of regulation, more likely to secure access and contain costs than any system of government regulation. State regulation is subject to the risk of capture and to the sluggish and acquisitive behavior of state run monopolies. The proposed fixes for the MCOs (rights to specialists, access to physicians outside the network, guaranteed emergency room access) are likely, when imposed from without, to cost more than they are worth. The long-term risk is that markets will fail under regulation, paving the way for greater losses from massive government control of the health care delivery system.