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Five Reasons WellPoint's $10M Healthcare Competition Won't Work

So now the health-insurance provider WellPoint has put up $10 million for a new X Prize -- one that promises the money to anyone who can figure out a new way to fix the healthcare system. The X Prize Foundation is the same organization that created similar prize competitions in order to encourage entrepreneurs to build a private manned spacecraft (which one did, sort of), vastly speed up genome sequencing (not yet), land a robot on the Moon (ditto), and build a car that gets 100 miles to the gallon (ditto).

As you'd expect, the company and the foundation have enlisted an array of luminaries who rave about the "profound" "innovation" involved in setting up a big prize for new healthcare ideas. The only problem is that the odds of this sort of contest really turning up useful reforms are virtually nonexistent. Here are five reasons:

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  1. Healthcare reform isn't an engineering problem. If it were, one of the simplest changes would simply be to encourage the use of electronic health records. Unfortunately, the bigger problem there is that under today's system, doctors and hospitals would put up much of the cost but reap little of the (financial) benefit. How are would-be innovators supposed to get around that problem?
  2. Healthcare reform involves systemic, not episodic, change. Which reform will WellPoint and the foundation deem most important? Covering the uninsured? Slowing the rise in healthcare costs, or even reducing them? Improving general health and life expectancy? Bringing some true economic incentives to the sprawling, fragmented and constantly cost-shifting U.S. healthcare system? Encourage transparent pricing by doctors, hospitals and insurers? I could go on, but I suspect you get the point.
  3. "Success" is going to be all but impossible to define. Other X Prizes have relatively straightforward, if technically daunting, goals: Fly the spaceship, sequence the genome, drive the car. How, exactly, do WellPoint and the Foundation intend to define whether a given idea actually works or not? They can't say because they haven't written the competition rules yet. And they likely won't be able to say later, because drawing up those rules is going to be exceptionally difficult -- not least because they haven't even really defined the problem yet.
  4. "Success" may well cut against WellPoint's interests. According to the release, "WellPoint has committed to test the selected finalists' entries in its state markets, in order to test their ability to result in viable, creative and achievable health care system changes." How well is that likely to work if a given idea works directly against WellPoint's economic interests? Don't forget that many health reformers see insurers like WellPoint as a big part of the problem, not the solution.
  5. "Success" is going to be intrinsically difficult to measure. One major problem with the U.S. healthcare system is that its pathologies tend to be self-reinforcing, such that any well-intentioned reform is usually opposed by other arms of the system who stand to lose money as a result. So WellPoint is going to find it pretty difficult to measure such effects, given that it's part of that feedback system (see point #4). More important, if you're going to hand out $10 million, you'd presumably want to have a good handle on the lasting value of any reform -- which again, given feedback effects, may mean watching for quite a while. Just how many tests does WellPoint plan to run, and over what period of time?
Of course, all these objections assume that the whole healthcare X Prize isn't simply a PR stunt designed to burnish WellPoint's reformist image much like Humana's phony "grassroots" reform effort ChangeNow4Health. To be sure, X Prize Foundation president Peter Diamandis insists that the foundation never would have become involved if PR was the main goal. On the other hand, given that favorable PR seems to be one of the primary objectives of the X Prize Foundation, you might be forgiven for finding Diamandis' demurral less than convincing.
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