Health Care’s Market Bureaucracy


The last several decades of health law and policy have been built on a foundation of economic theory. This theory supported the proliferation of market-based policies that promised maximum efficiency and minimal bureaucracy. Neither of these promises has been realized. A mounting body of empirical research discussed in this Article makes clear that leading market-based health care policies are not efficient—they fail to capture what people want. People struggle when making choices, and they often choose poorly. Even more, this Article describes how the failed struggle to bolster these policies—through constant regulatory, technocratic tinkering that aims to improve the market and the  decisionmaking of consumers in it—has produced a massive market bureaucracy.

To illustrate the growth of the market bureaucracy, this Article traces the origin and development of several market-based theories that have been central to the modern era of health policy and law. The first, called managed competition, looks to consumerism in insurance markets and contends that people will choose wisely among health plan options, and their choices will drive higher value health care. The second, sometimes called consumer-driven health care, relies on  consumerism when using medical care. The notion is that when people are subject to a share of the costs, they will more selectively choose when and where to use medical care and will avoid low-value products or services. The final example considers the application of antitrust to health care mergers, ostensibly to create a competitive field on which consumerism can flourish.

This Article shows that, in application, these ideas have not, nor will ever, deliver as imagined in a world that deviates irreconcilably from theory. Nonetheless, these ideas continue to spawn a vast web of health law and regulation in their support. The cost of this market bureaucracy includes the scaffolding to hold up an ineffective market-based structure and, more importantly, the opportunity cost of foregone alternatives to solve important health care system challenges.

Health care’s market bureaucracy endures in light of repeated failure in part, as others have discussed, due to politics and political economy. Yet, this Article suggests that it persists equally because of its role in the sanctification of values of individualism and choice. Choice seems especially appealing when it comes to decisions about our health. We want to believe
we are in control. Yet, choice as translated into market-based policies has proven empty. Understanding that markets do not actually enhance meaningful choice—and are as bureaucratic as any other approach—can clear the way to ask how to design better health law and policy.

About the Author

Professor of Law, University of Pennsylvania Carey Law School; Senior Fellow, Leonard Davis Institute for Health Economics, University of Pennsylvania. I