The political scientists Paul Sabatier and Hank Jenkins-Smith explain much policy-making as a conflict between rival advocacy coalitions, comprised of not just politicians and organized interests, but also of members of the media and academics. Within a policy community, each coalition is united by core beliefs that are extremely resistant to change. Deep core beliefs about the world support policy beliefs about particular issues.

This framework is especially relevant to proposals for controlling health care costs. Conflicting views about markets as a way of life inform alternative views about health care reform. Republicans equate competition with choice and responsibility and assume it must control costs. Liberals see market competition as rigged to favor corporate and provider interests and so as increasing costs. In the center, many analysts seek ways to make competition work without the problems perceived by liberals – but without much evidence this can be done.

For supporters of competition in principle, hardly any evidence against it will change their minds. The pro-competition advocacy coalition dominates health policy because its premises dominate American policy discourse more generally.

The fact that its measures never work, however, does occasionally allow for more regulatory initiatives. These tend to win support when budget pressures force legislatures to adopt measures that offer immediate savings, and especially if those measures can be described as in some sense competitive rather than regulatory.

Both happened, for example, with the adoption of the Prospective Payment System (PPS) for hospital services in Medicare in the early 1980s. Congress and the Reagan administration were desperate for savings, and some conservatives concluded that bundling payments by diagnosis would provide incentives for hospitals to be more efficient, and so indirectly save through competition.  It worked.

Three factors currently weaken the advocates of competition. First, the need for health care savings in the short run is immense, both for businesses that are charged most of the bill for care for the working-age population and for a government facing massive deficits and possible bills for health insurance expansion. Second, the failure of market forces to control costs after the brief glimmer of hope in the mid-1990s creates some doubt about the core belief in market forces for health care. Third, the deep core belief that pursuit of profit by competing firms or individuals naturally leads to social optima is rather less credible after the financial market meltdowns.

Nevertheless, the alternative view of cost control has been advocated only quietly and indirectly. It says that health care costs are too high in the U.S. mainly because we pay too much for individual services and overhead. This argument is supported by a wide range of studies that have investigated why costs are higher here than in other countries.

Prices are so high mainly because the competing and therefore fragmented payers in the U.S. do not have the market power to negotiate or impose lower prices. In other countries, either having a single payer for most services or a way to coordinate most payers (an “all-payer” system) concentrates payer market power.

Overhead costs burgeon because the competition among insurers in the U.S. generates extra expenses for marketing, profit, and underwriting. In addition, each insurer’s effort to save by selective contracting on different terms with providers leads to extremely complex billing arrangements.

Other countries with multiple insurers have lower direct overhead costs and their billing systems are much less complex and expensive because most or all payers follow the same terms. Even in the U.S., Medicare’s market power has for most of the past 30 years helped it restrain spending more successfully than private insurers.

Advocates for a public plan option, as originally proposed by President Obama’s campaign, hope that it would, indirectly, yield some of the benefits of a single-payer system. Ironically, even they have framed this as a matter of competition! Supporters and opponents both suspect that the public plan, with greater market power and lower administrative costs, could provide better value than the private insurers do.

Defenders of private insurance then suggest eliminating either the public plan or its bargaining power. There has been little discussion of eliminating the competition itself, by coordinating the rates paid by both the public plan and the private insurers. Stuart Altman has testified for some form of all-payer regulation to the Senate Finance Committee, and I have written two papers that have been informally circulated and posted to the Institute for America’s Future website.

Much more prominent in current debate is a set of ideas about reforming the delivery of care.

These measures presume, first, that the problem is not prices but volume. They presume, second, that the volume of services can be reduced by making care more appropriate, through some combination of information, guidelines, and management. Finally, they presume that the system can be structured to give providers incentives to compete by providing more appropriate (and, by assumption, lower volume and lower cost) care.

In short, “managed care” has been renamed, or split into a series of names. Ideas for savings include chronic care case management (which requires some sort of management organization); medical homes (cozy HMOs); research on comparative cost effectiveness (which then requires some way to manage providers to get them to follow the guidelines); and more health information technology (to do profiling or research or direct management).

There are two main problems with these ideas. First, we don’t know how to save money through any of them. Anyone who believes differently should check out the Congressional Budget Office’s December, 2008 report on Key Issues in Analyzing Major Health Insurance Proposals. Second, none of them will save money unless supplemented by better control of prices.

“Medical homes,” for example, will require extra payments for services that integrate care, and as CBO has noted, those payments could exceed any savings from reduced utilization of care. Moreover, competition per se does not resolve these problems: it cannot tell providers how to reorganize to increase value, and payers at present do not know how to measure value anyway.

All-payer regulation is far more likely to gain savings. It is more promising, first, because it would be more effective on both prices and overhead costs. These are major aspects of the high costs in the U.S., and they can be more easily affected than volume of care provided.

Standard objections such as that providers will raise volume to counter price limits, or that increased costs are not due to increasing prices so that prices can’t be the real problem, at best misunderstand the evidence, as I explain in a recent paper.

Even periods of better cost control within the U.S. private sector, as in the mid-1990s, came about because of better control of prices. Both competing payers and all-payer systems try to drive down prices. The difference is that competing payers have to do so by having limited networks.

The threat to exclude a hospital or physician practice is the chip that Aetna or Cigna or the Blues have to use to get better rates from them. But that means patients have to deal with network restrictions in order to get lower prices; in an all-payer system network restrictions are unnecessary, which is much easier for everybody. It also, as experience shows, is a much more reliable way of limiting prices.

Many of the proposed delivery reforms would also be encouraged by creating an all-payer rate-setting system. For example, a standard set of categories of services and payments would encourage the standard platforms needed for interoperable information systems.

There should still be room for virtuous competition in any reform. For example, truly integrated delivery systems should be able to compete with regulated fee-for-service insurance. If the restricted choice in those models is accompanied by perceived better value, they should thrive. If an insurer can sponsor chronic care case management for a given disease, and so increase the value of its product compared to other insurers, that case management should be encouraged (and protected by adequate risk adjustment).

But current competition largely takes other forms. It involves competition by insurers to avoid risks, through underwriting and proliferation of plan designs. It involves competition by insurers to restrain payment rates through selective contracting, which doesn’t restrain rates much but adds major billing costs and makes the system much more confusing for sick people. It involves competition by providers to grab enough market share to set rates when negotiating with fragmented insurers – which would not work if the payers were united in the rate negotiations. It involves providers purchasing excess equipment because rates are so high that underused equipment can still be profitable – which would not work if the payers had the power to lower excessive prices.

I’m not naïve enough to think members of the competition advocacy coalition will be convinced by any arguments I make. But perhaps some people who are neutral will look some more at the issues, and come down in favor of more effective reform.

Joseph White is Chair of Political Science, Luxenberg Family Professor of Public Policy, and Director of the Center for Policy Studies at Case Western Reserve University. His most recent book is False Alarm: Why the Greatest Threat to Social Security and Medicare is the Campaign to “Save” Them. joseph.white@case.edu; 216-514-8337