One of the most popular and influential books on business innovation and change in recent decades remains “The Innovator’s Dilemma,” by the late businessman and Harvard professor Clayton Christensen.
The shorthand takeaways include the insights that today’s leading businesses are vulnerable to being displaced by startups that utilize newer technologies and products to attract customers, while seemingly dominant market leaders keep doing what has been successful for them and cannot adapt nimbly to disruptive technologies and innovations.
There are many more layers of sophistication and nuance to Christensen’s work, but the “disruptive innovation” analyses never applied all that well to the Bermuda Triangle of malfunctioning instruments trying to guide health care practice and policy. Leading firms and related interests in the health sector seem to hang on for much longer stretches, while upstarts have more trouble breaking in.
Last week, I hosted an AEI forum examining another mix of health policy proposals promising disruptive innovation through more cash-based patient-centered financing and payment. One of the perennial challenges confronting many would-be health policy innovators is the inherent tension between proposing what is attractive theoretically, what is politically feasible, and what can be implemented and administered practically. Maximizing any one of those competing objectives tends to increase the risk of failure for the other ones. Yet the threshold imperatives of repetition and simplicity in pursuing advocacy for more disruptive change often calls for downplaying those competing tradeoffs and compromises.
If an advocate is too practical and nuanced, the policy proposal may become more limited in scope and scale, while burdened by complexity. Hence, the innovator’s temptation is to hone a more simplified theoretical case that appeals most to friendly supporters (or, in other words, keep selling what seems to work for an initial critical mass of policy customers).
Let’s examine some of these dilemmas that an innovator’s plan for health policy transformation through a switch from a defined benefit/third-party payment system to a defined contribution/first-party payment one must confront (or just ignore?). They center on the limitations of human nature, financialization, history, and administration.
Today, let’s start with the bounds of human nature within the political economy of health care
Our health care politics frequently mouths the rhetoric of deep concern for “the poor” (such as those covered by Medicaid), whether as part of elegant social contract theory, more pragmatic coalition-building calculations, or core personal values. But the dominant rule of distribution for officeholders remains “Feeding the Middle Class,” particularly for health insurance market reform.
Various population cohorts have been added on to the insurance coverage train in incremental stages through the decades, but they usually have to stand out as politically appealing and worthy. Hence, the more limited appeal for public assistance to working-age single adults, let alone undocumented aliens. Moreover, the resource-constrained limits of those next layers of promised benefits hollow them out in practice through inadequate payment for services that are stretched wide but thin. The conflict between giving everyone “a taste” and easing one’s charitable social conscience (“we gave at the office”) reflects the gaps between medical need, political power, and bounded generosity. Nor do we fully trust low-income beneficiaries to receive cash assistance rather than in-kind benefits tied to particular services. But health care politics tends to be satisfied far more with offering an outer shell of those medical inputs than in assessing and ensuring their value in producing improved health outcomes.
Why is health care so different when it comes to ducking personal responsibility and deferring to third parties? We may like to complain and blame others, and we remain skeptical that insurers, health care providers, government program administrators, or employers will carry out our wishes and look after our best interests. But we often do not trust ourselves either to take more of a role in the medical-decision-making space as patients and consumers; particularly if we cannot renege on longer term commitments when our circumstances change. The problem with deferred gratification and longer time horizons is that they defer gratification beyond the next election cycle.
In Part II, I will examine several other dilemmas facing disruptive innovation in health care financing and payment.
The post The Health Policy Disrupter’s Dilemmas: Part I appeared first on American Enterprise Institute – AEI.