Healthcare is not a market commodity
With the healthcare debate raging I thought I would address the fundamental flaw that I see in the right’s approach to reform. The argument is that choice will solve all of our problems. If consumers just have the choice of what procedure or medicine to get or what doctor to see, then all will be fixed. For the consumer choice model to bring down costs and ensure quality, healthcare has to be a market commodity.
Healthcare is not a market commodity.
Neither is health insurance. For something to be a market commodity it has to meet a series of criteria.
1. Products must be interchangeable.
Sadly healthcare is not interchangeable. Getting a surgery from one hospital is not the same as getting it from another and one doctors opinion is not interchangeable with another, hence a second opinion.
2. Consumers must be adequately informed
We rely on doctors to inform us as to what medical care we need. Sure WebMD is great but it doesn’t replace an Medical Degree.
3. Consumers must be free to choose supplier
Contrary to popular belief, we do not have free choice over our doctors. Even if you are in a PPO, your choice of doctor is still restricted to ‘in network’ doctors. And if you want to talk about healthcare insurance, consumers have even less of a choice. The majority of people get their health insurance through their employer, meaning it’s their employer who chooses what plan and what network the consumer gets.
4. Sellers must accept all customers
Doctors only accept patients from the health insurance companies they sign up with. Again, as for health insurance, insurance companies do not have to accept everyone who comes through their doors, in fact they attempt to cherry pick only the healthy.
5. Information Symmetry
Both sellers and consumers must have a similar level of knowledge. Doctors know far more then patients.
6. Predictable costs
Healthcare costs are about as unpredictable as anything. Not only are your costs tied to your age, illness, geographic location and doctor, complication is surgery or symptoms based on interfering medication are nearly impossible to predict.
7. Consumers must be responsible for payment
Only a tiny sliver of the American population pay for their healthcare completely out of pocket. Even when it comes to health insurance, most people only pay about a third of their insurance costs while their employers pay for most of it.
For something to be a market commodity it must meet all of the above criteria, healthcare fails to meet, not just one but on all criteria. As such, the ‘free market’ cannot be the solution to our healthcare problems.
By the way, this post is basically a sarcastically annotated version of notes from a healthcare class taught by Todd Eberly. He just wrote a great post outlining the economic case for a single payer system.