Medicine and the market

There are politicians and economists, mostly Republicans, who claim that the "market" is the solution for our current health care cost crisis. They neglect important characteristics of a market.

The first problem is the fact that we have a semi-socialized system where a third party insurance company, rather than the customer, pays. We have prepaid medical services plans rather than insurance plans.

For those who have good coverage, the price of medical care is essentially zero. Economics 101 is clear: as the price of a good or service declines to zero, demand rises uncontrollably.

Another major problem is asymmetry of information. I have a degree in agricultural science and, for various reasons, far too much experience as a customer of the medical profession. Notwithstanding the fact that my understanding of anatomy, physiology and pharmacology is far superior to that of the average patient, I am still woefully unqualified to negotiate the details of my care with a physician or hospital.

Up until 15 years ago, the trade of Used Car Salesman used to be highly profitable. While buyers knew that they had been taken, they did not know how badly and had no effective way of fighting back. Now the information that is available online has largely negated - at least for those who do their homework - the information asymmetry that used to be exploited by used car salesmen. The market is working much better. In medicine, there has been little progress in reducing the assymetry of information problem.

Then there are the advertisements designed to generate consumer demand:

Ask your doctor if [this expensive and highly profitable pill] is right for you.

The customers duly appear, demanding [this expensive and highly profitable pill], and the doctor, pressed for time and desiring to satisfy a customer - at least in the short term, duly writes a prescription.

Unfortunately, the amount of information and education needed to perform a proper evaluation of the treatment options offered is more than the vast majority of us can acquire. And medical professionals have biases: surgeons propose surgery while internists (and pharmaceutical companies) propose medication.

Few patients will ever be qualified to suggest a treatment plan but in all dealings with the medical profession, scepticism is a major asset.