Medical Enterprise Zones: A Cure for Sick Health-Care Systems

A consistent theme in the international debate over health-care reform is the call for more government funding and regulation. Compelling evidence from both poor and wealthy countries is ignored, which demonstrates that government health care systems are unsustainable and deliver lower quality care at higher cost than private systems. Reducing government involvement and freeing the health care market is rarely considered.

In their book Patient Power, American health-care researchers John C. Goodman and Gerald L. Musgrave demolish many fallacies about the alleged superiority of government funded, regulated and nationalised health-care systems. They argue that health-care can be made affordable to all, and particularly to the poor and elderly, if power is given back to patients. Government regulation must be reduced that prescribe matters such as: prices, hours of operation, who may provide medical services, what services and medicines medical-aid funds should cover, what medical technologies and services hospitals should have, which medicines may be used, how many hospitals there should be, and how many organ transplants a hospital may undertake. An alternative to such prescriptive regulation is a free-market in health-care. In such a market, patients, health care providers, hospitals and pharmaceutical companies, trade, interact and contract for health-care goods and services on a voluntary basis. Government’s role is limited to protecting patients and providers of health care goods and services against force and fraud in health-care delivery, and ensuring that contracts are honoured.

Goodman and Musgrave propose the establishment of Medical Enterprise Zones (MEZs) as a possible mechanism to free health-care markets. The proposed MEZs would consist of geographical areas in which providers of health-care products and services are exempted from regulations that reduce access to health-care, increase costs, or regulate it out of existence. In a MEZ any person, organisation or business would be entitled to offer health-care goods and services provided they adhere to the rules applicable in the MEZ. Such rules would, for example, include a requirement that patients be given information regarding the qualifications and experience of their health-care providers prior to the commencement of treatment.

In MEZs patients would be allowed to purchase medical products and services from providers of their choice and anybody wishing to do so would be allowed to provide health services and products. Government would fund the cost of health-care for the poor by providing them with vouchers that would enable to purchase health-care from competitive suppliers – a more cost-effective and efficient method than having government provide hospitals, clinics, medical personnel and medicines.

If the Goodman and Musgrave proposals were to be adopted: medical control councils would be barred, for instance, from prohibiting nurses and paramedical personnel from performing services as doctor substitutes in MEZs. Non-pharmacists would be allowed to open pharmacies and dispense prescription drugs provided the prescribed accounting and record keeping procedures for addictive drugs were maintained. Pharmaceutical companies and medical researchers would freely conduct research without prior government approval. Any prescription drug approved for use in any western country would be prescribed without prior government approval being required. Licensed health-care professionals, doctors, specialists, nurses, and the like would practice in an MEZ without having to register or pay licensing fees. Non-profit or private medical schools would be free to establish in MEZs without having to obtain prior approval. No department of national or provincial government would be entitled to require a certificate of need for the establishment of any facility in an MEZ, and no certificate of need would be required for the installation of any equipment or the application of any technology or procedure. And finally, no restrictions would be placed on the establishment or ownership of medical laboratories.

The MEZ concept would be especially suited to under-served rural areas of South Africa. Instead of compelling newly graduated doctors to work there, government could allow more comprehensive voluntary services to be provided in such areas by utilising the MEZ concept. Health professionals may argue against the idea in order to protect their turf but the interests of patients, especially poor patients, should be decisive.

Source: Adapted by Johan Biermann from John C. Goodman and Gerald L Musgrave, “Patient Power”, Cato Institute, Washington D.C., 19

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