Free markets aren't a good match for healthcare

Washington Monthly on the Veterans Health Administration (VHA) healthcare system:

Suppose a private managed-care plan follows the VHA example and invests in a computer program to identify diabetics and keep track of whether they are getting appropriate follow-up care. The costs are all upfront, but the benefits may take 20 years to materialize. And by then, unlike in the VHA system, the patient will likely have moved on to some new health-care plan. As the chief financial officer of one health plan told Casalino: "Why should I spend our money to save money for our competitors?" [...]

For health-care providers outside the VHA system, improving quality rarely makes financial sense.... Investing in any technology that ultimately serves to reduce hospital admissions, like an electronic medical record system that enables more effective disease management and reduces medical errors, is likely to take money straight from the bottom line.