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by Yaneer Bar-Yam
Step II: Empower Workgroup Competition

The current use of “managed care” to improve medical performance and reduce costs is inherently flawed. To understand where the flaws lie, it’s useful to ask: What roles should government, management and practitioners play in healthcare and in healthcare decision-making? Today, they often serve in the wrong roles. That’s because they serve within the wrong system structures. Neither traditional centralized management nor free market competition scenarios work for healthcare and yet those settings are perceived as the only two options.

Whether by government or by insurer, efforts to control healthcare costs are typically deployed within a setting of centralized management to dictate how to allocate limited funds. Yet healthcare is a highly complex system, and, as we see in the failure of the USSR and other centralized economies, centralized control doesn’t work for complex systems.

At the same time, free-market competition, which may result in rapid improvements for, say, the electronics industry, is ill-suited for managing healthcare. After all, patients generally can’t shop around for the best hospital.

Are these the only two options?

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