1. Big spender, mediocre performer. The U.S. spends 150% more per capita on health care than the OECD average and 50% more than the next highest spender (Norway), standing as a glaring outlier even after adjusting for GDP. This generosity with health care spending wouldn’t be so bad if we were getting value for our money, but we’re not, with below average scores on life expectancy, infant mortality, primary care, and preventing avoidable admissions (Source: OECD).
Having heard this embarrassing statistic during many a discussion about the U.S. health care system, I naturally perked up when I heard my friend mention a similar statistic—but this time in the education industry. A little research confirmed his assertion: Compared to 11 countries (both high and middle income), the U.S. is the clear leader when it comes to education spending but ranks 9th in Science performance and 10th in Math. It was this striking parallel that sent me on a pursuit for other parallels between the health care and education industries, and I came up with two additional similarities:
2. Lack of competition. There’s a joke that goes: “What do you call a doctor who graduated bottom of his class?”
In a traditional market place, competition works because consumers are well informed about two things: quality of the product they are receiving and the price they are paying for it. For medical services, price can be reasonably easy to gauge, but quality is another story, especially given the confusion even among experts about what “good quality” care should look like. Indeed, apart from that framed board certification gathering dust over your doctor’s office and hearsay from friends, how can you accurately judge how high of quality care you are getting? Dr. Arnold Relman of Harvard Medical School sums it up succinctly in this interview when he says, “You’re not a doctor, you have haven’t been to medical school, and you can’t evaluate what you’re going to get for the money…so there just can’t be price competition in health care.”
Similarly, based on my (admittedly limited) understanding of the education industry, I believe that competition may also be largely missing. At the base of this hypothesis is the recognition that we don’t have a good sense of how to measure educational quality. The two most commonly used indicators of quality—average class size and school spending per student—are process measures rather than true outcome measures (a striking parallel to most current methods of evaluating health care quality). And as we saw with the controversy over No Child Left Behind, standardized test scores are at best only a rough indicator of academic performance, analogous to using of blood pressure measurements to predict the next heart attack. Apart from the ambiguity regarding quality, most public education systems effectively have local monopolies over the provision of education with few competitors to benchmark against, and unless you subscribe to the Tiebout model notion that families can just costlessly pack up and “vote with their feet” whenever they want to attend a better education system, there is likely less consumer-exerted accountability than we would like.
3. Competition over selection rather than price or quality. Given the lack of price or quality competition in health care, what do providers compete over? I’d like to shift over to the health insurance industry, where insurance companies engage in a widespread practice known as “patient selection”, “risk selection”, or more bluntly, “cherry picking”. Insurers do not compete for members by increasing quality or lowering premiums. Rather, they invest tremendous resources into attracting healthier segments of the population. If they can attract the healthier segments of the population (e.g. with more bare bones plans, catering to healthier segments such as young college students, etc.), they can capture a low-cost segment of the population with the added bonus of leaving the sicker, more expensive segments of the population for their competitors. (More on this here.)
It appears that similar phenomenon may be at play in the field of education. Much of our fascination with increased competition among schools is our belief that school administrators and teachers could improve their quality of teaching if only they wanted to, and that the injection of some healthy competition and performance-based incentives into the system could shake them out of their bureaucratic complacency. However, to what extent is educational performance dependent on factors which schools have control over, rather than on factors intrinsic to the students (e.g. motivation, class mix, family environment, etc.) is a question that I believe is still up in the air. I’m not well versed in the literature, but according to a student in my class whose mother is studying this very question, something like 90% of student performance is determined by factors beyond the immediate control of teachers and administrators. (Reliable citation, I know—please do share your own references and knowledge on this question.) If such is the case, then we can draw two conclusions: first, that exerting more competitive pressure on schools may not actually lead to much improvement in quality, and may instead exacerbate the second conclusion: schools are trying real hard to attract smarter, harder-working, good-family-background students and avoid costly or underperforming ones (Source: Ladd, 2002).