"Health care is a commodity best allocated by markets"
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Zippyjuan
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In order for a true free market to work, consumers need complete information to make an informed choice- including treatment options, success rates, costs, provider choices, insurance options. Healthcare is very complicated and it is impossible for consumers to be knowlegable on it. Not only that, they need access to all providers- which can be geographically limited. Maybe Bethesda is the best but they aren't in your state. Maybe Kaiser offers better services for what you need but aren't available to you. And no single provider will be best at everything so to have perfect choices one would have to look at different places for different problems. Nobody has the time and knowlege to do all of that.
It is perhaps ironic that our having many choices in insurance coverage in this country (selection may be zero or limited for the individual though) has led to higher medical costs. In the US, up to 40% of medical care costs are due to administration costs- processing all the different forms for all of the different insurance plans offered by all of the different insurance companies. In Canada, by comparison, administration costs only run about 16% of medical costs. Why? Single payer. One form to send to one location and not hundreds of different ones which require different documentation sent to different locations. http://www.businessweek.com/article...alth-care-is-so-expensive-insurance-companies
It is perhaps ironic that our having many choices in insurance coverage in this country (selection may be zero or limited for the individual though) has led to higher medical costs. In the US, up to 40% of medical care costs are due to administration costs- processing all the different forms for all of the different insurance plans offered by all of the different insurance companies. In Canada, by comparison, administration costs only run about 16% of medical costs. Why? Single payer. One form to send to one location and not hundreds of different ones which require different documentation sent to different locations. http://www.businessweek.com/article...alth-care-is-so-expensive-insurance-companies
GregSarnowski
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Funny how consumers are hardly ever completely informed yet the market works in every other industry.
Oh and Canada is so much cheaper because of centralized administration, it doesn't have to do with them sponging off U.S. bought-and-paid for innovation or anything.
The free-market works when the person consuming the good or service pays, when a "third party" pays it doesn't and it isn't a free-market. Imagine that.
Oh and Canada is so much cheaper because of centralized administration, it doesn't have to do with them sponging off U.S. bought-and-paid for innovation or anything.
The free-market works when the person consuming the good or service pays, when a "third party" pays it doesn't and it isn't a free-market. Imagine that.
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Zippyjuan
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You are absolutely right that having a third party pay also screws up the free market. It changes decisions people make- leading to over consumption of the good or service. If I want a car and somebody else is going to buy me one, I will likely pick a fancier car with more options (and a higher sticker price) than if I had to pay for it out of my own pocket. That is why if you do have some sort of insurance program (private or public) you want higher copayments so that users have more skin in the game.
Who has the incentive to control costs? The doctor? The more patients he sees, the more treatments he gives, the more money he makes. He has plenty of demand- he doesn't have to fear they will go to somebody else. The patient? If they are insured, they only care about getting taken care of. They are unaware of what it is really costing. The insurance company? If they pay out more to doctors and hospitals, they just raise their rates they charge and keep making profits.
So you need to first increase what the consumer actually pays. That reduces demand. Some would argue that is also reduces preventive care- short term medical costs- and means people go to the doctor when they are sicker- which in the long run can mean higher total medical costs. We see this problem with uninsured people using emergency rooms for medical care which is more expensive than if they went to a doctor (emergency rooms are not allowed to refuse patients- imagine the backlash if they did allow people to die while waiting for service).
Can we increase competition among medical care providers? As I mentioned earlier, the problem here is getting the information out- quality of care combined with costs of the actual treatment. Would you check MedPriceline before you went in for a heart attack? How far away from you home would you be willing to go to seek a better deal?
What about insurance companies? Again, more competition means more paperwork and forms. If you had some limits on what they could charge and how much profit they could take in, that would lower that cost somewhat but would not be a free market.
Who has the incentive to control costs? The doctor? The more patients he sees, the more treatments he gives, the more money he makes. He has plenty of demand- he doesn't have to fear they will go to somebody else. The patient? If they are insured, they only care about getting taken care of. They are unaware of what it is really costing. The insurance company? If they pay out more to doctors and hospitals, they just raise their rates they charge and keep making profits.
So you need to first increase what the consumer actually pays. That reduces demand. Some would argue that is also reduces preventive care- short term medical costs- and means people go to the doctor when they are sicker- which in the long run can mean higher total medical costs. We see this problem with uninsured people using emergency rooms for medical care which is more expensive than if they went to a doctor (emergency rooms are not allowed to refuse patients- imagine the backlash if they did allow people to die while waiting for service).
Can we increase competition among medical care providers? As I mentioned earlier, the problem here is getting the information out- quality of care combined with costs of the actual treatment. Would you check MedPriceline before you went in for a heart attack? How far away from you home would you be willing to go to seek a better deal?
What about insurance companies? Again, more competition means more paperwork and forms. If you had some limits on what they could charge and how much profit they could take in, that would lower that cost somewhat but would not be a free market.
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Bolded is backwards.
It is a free market that allows for information to spread so these market participants can get the information they require/desire.
It's also fallacious to believe that only COMPLETE information can allow a free market to work. COMPLETE information is nearly impossible, if not impossible.
It is a free market that allows for information to spread so these market participants can get the information they require/desire.
It's also fallacious to believe that only COMPLETE information can allow a free market to work. COMPLETE information is nearly impossible, if not impossible.
dannno
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Bullshit.
Barely anybody chooses their insurance. You choose your job, your HR director chooses your insurance.
CanadaBoy
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Aside from comments, are there any published, peer-reviewed, papers that show health care should be controlled by the free market, and not by the government?
All I can find are papers that show otherwise:
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3210041/#b1-squmj-11-328
A common argument in the health policy debate is that market forces allocate resources efficiently in health care, and that government intervention distorts such allocation. Rarely do those making such claims state explicitly that the market they refer to is an ideal in economic theory which can only exist under very strict conditions. This paper explores the strict conditions necessary for that ideal market in the context of health care as a means of examining the claim that market forces do allocate resources efficiently in health care.
All I can find are papers that show otherwise:
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3210041/#b1-squmj-11-328
A common argument in the health policy debate is that market forces allocate resources efficiently in health care, and that government intervention distorts such allocation. Rarely do those making such claims state explicitly that the market they refer to is an ideal in economic theory which can only exist under very strict conditions. This paper explores the strict conditions necessary for that ideal market in the context of health care as a means of examining the claim that market forces do allocate resources efficiently in health care.
You need a study to convince you that people have a moral right to their hard earned money and to determine the way in which they procure their medical services?
Acala
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The problem with healthcare is simple: it costs too much. So what causes health care to be so expensive? It isn't the lack of insurance or the lack of consumer information or excessive administrative costs. It is supply and demand a la econ 101.
If demand increases against a stable supply, prices go up. If supply decreases against a stable demand, prices go up. If demand goes up while supply goes down, the price goes through the roof and that is what happened to health care in the USA.
Health care is almost certainly the most heavily-regulated industry in the country. You can't fart while wearing a white coat without a permit or license of some kind. Virtually every health care service, product, and business has a gauntlet of regulations to run. Most health care professions have education and licensing requirments. Even the schools that teach the professions have licensing requirements. Getting to be a provider can cost hundreds of thousands of dollars and getting drugs and treatments approved costs millions. And major health care facilities can often not be built without government permission above and beyond the usual zoning, building codes, etc. etc. etc. It's crony-capitalism designed to increase insider profits. This is how government crimps the supply.
On the other hand, government gooses the demand through direct subsidy at every level to the tune of hundreds of billions. Then they push employers to offer health "insurance" to employees so that works like a different kind of subsidy as described above. So demand goes on government steroids.
So government restricts supply, gooses demand, and when health care prices shoot to the moon, the solution they offer is: more regulations and more subsidy on a massive scale.
Think it will work?
If demand increases against a stable supply, prices go up. If supply decreases against a stable demand, prices go up. If demand goes up while supply goes down, the price goes through the roof and that is what happened to health care in the USA.
Health care is almost certainly the most heavily-regulated industry in the country. You can't fart while wearing a white coat without a permit or license of some kind. Virtually every health care service, product, and business has a gauntlet of regulations to run. Most health care professions have education and licensing requirments. Even the schools that teach the professions have licensing requirements. Getting to be a provider can cost hundreds of thousands of dollars and getting drugs and treatments approved costs millions. And major health care facilities can often not be built without government permission above and beyond the usual zoning, building codes, etc. etc. etc. It's crony-capitalism designed to increase insider profits. This is how government crimps the supply.
On the other hand, government gooses the demand through direct subsidy at every level to the tune of hundreds of billions. Then they push employers to offer health "insurance" to employees so that works like a different kind of subsidy as described above. So demand goes on government steroids.
So government restricts supply, gooses demand, and when health care prices shoot to the moon, the solution they offer is: more regulations and more subsidy on a massive scale.
Think it will work?
Acala nailed it.
It might seem fantastic that people who understand the basic principles of economics can't seem to apply these principles to "health care". I think this has a lot to do with the widespread failure for people to understand how hobbled is the free market process. We are so far removed from a free market that we have no basis for comparison. Furthermore, many of us are led to believe that the U.S. has a "capitalist" economy (often considered synonymous with a "free market"). I don't necessarily believe that "Health care is a commodity best allocated by markets". I do believe that health care is a commodity best allocated by FREE markets. Clearly there exist markets in the U.S. and elsewhere, but they are anything but free.
It might seem fantastic that people who understand the basic principles of economics can't seem to apply these principles to "health care". I think this has a lot to do with the widespread failure for people to understand how hobbled is the free market process. We are so far removed from a free market that we have no basis for comparison. Furthermore, many of us are led to believe that the U.S. has a "capitalist" economy (often considered synonymous with a "free market"). I don't necessarily believe that "Health care is a commodity best allocated by markets". I do believe that health care is a commodity best allocated by FREE markets. Clearly there exist markets in the U.S. and elsewhere, but they are anything but free.
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