Healthcare, Lombardy-style

This Wall Street Journal article discusses the impact of private sector competition on the quality of healthcare in the Lombardy region of Italy.

Italy has a national healthcare system, including long waiting lists for critical care typical of socialized medicine. In 1997, the government decentralized authority to the various Italian regions to allow them to innovate. In Lombardy, the government encouraged private sector hospitals to compete with the public ones, who previously received all of the government funding.

The result? Healthcare quality has increased, while costs have been contained, in Lombardy relative to the rest of Italy. The Wall Street Journal quotes a local surgeon: "Up to 10 years ago my patients had to wait months for heart surgery. Now, in Lombardy, it can be done almost immediately, in both state-run and private hospitals."

The last point, about state-run and private hospitals both not having wait lists, deserves particular attention, because it highlights an often-poorly understand aspect of the free market. The competition and innovation that a private enterprise introduces into the market forces the government-owned enterprise to improve its operations - otherwise patients and customers will flee the government-owned facility for the private one.

This is critical to hospitals (85% of the hospitals in the U.S. are not-for-profits but the for-profit ones provide critical innovation and competition to keep the not-for-profit ones operating efficiently); and insurance (where studies have shown that the for-profit insurers drive innovation in the market that the mutual or not-for-profit insurers then emulate to maintain their competitiveness).

And it would be true in public education if a robust voucher system was implemented, where truly competitive education markets would improve the quality of public schools as they would be forced to be competitive with charter or private schools.

Obama's healthcare reform (and for that matter his efforts on education) are a giant step in the wrong direction. Obama is unleashing the power of government, and controlling private actors, in his healthcare plan. Quality of patient care will suffer.