Surprise, surprise: The problems in system design I wrote about in the financial system meltdown are also at play with the health care system, according to David Goldhill of The Atlantic. Please read his article. No time? Just read this paragraph:

“Indeed, I suspect that our collective search for villains—for someone to blame—has distracted us and our political leaders from addressing the fundamental causes of our nation’s health-care crisis. All of the actors in health care—from doctors to insurers to pharmaceutical companies—work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity, and discourage transparent competition based on price or quality. That result in a generational pyramid scheme rather than sustainable financing. And that—most important—remove consumers from our irreplaceable role as the ultimate ensurer of value.”

If you want a better system, you have to incent people in the system to naturally behave the way you want them to. Any incongruency between system-mandated behaviors and system participants’ inherent self-interest will result in an imperfect system. The more incongruent these things are, the more perverse system outcomes will be. Simple. Why can’t governments and businesses do this better?