Healthy Markets

by Don Boudreaux on July 19, 2006

in Health

I think of the market as an institution not for achieving every available ounce of utility or efficiency but, instead, as a never-ending process of mutual accommodation — for enabling individuals to figure out how to help each other overcome problems they confront.

One big problem confronting almost every American today is the high cost of physician services, hospital services, and pharmaceuticals.  I blame much of this high cost on government interference in these markets — including, but not limited to, restrictive occupational licensing, the FDA, and the Medicare/Medicaid collectivization of high-end health-care resources.  (Not all health care is expensive; not all health-care provision is infected with the poison of government intrusions.)

So — the market responds.  Here are the opening lines of a story that appears in yesterday’s Los Angeles Times:

Coming soon to a store near you: health clinics.

Seeking to capitalize on the country’s costly and often slow healthcare
delivery system, a number of start-ups are building storefront clinics
that offer quick and cheap medical services inside chain pharmacies and
large retailers such as Wal-Mart Stores Inc. and Target Corp.

Will these retail clinics solve all health-care problems, real and imaginary?  No.  Will they improve matters more than Hillary Clinton can ever hope to do?  Absolutely yes.

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{ 26 comments }

Constant July 19, 2006 at 7:11 pm

But the problem, you said, was government intrusion. Opening up shop in a Walmart isn't going to change that. Even Walmart is subject to the government.

Kevin O'Reilly July 19, 2006 at 8:24 pm

Docs don't like these clinics. Wonder why?

Check it: http://tinyurl.com/pbux3

save_the_rustbelt July 19, 2006 at 10:50 pm

The impact of Medicare on the entire healthcare system is begging for a book, both major phases (pre-1983 and 1983-forward) caused major structural problems.

Medicaid to a much lesser degree (except in nursing homes).

I do get a little puzzled with complaints about professional licensing, just how would we modify that system and have any quality controls? Just curious.

Constant July 20, 2006 at 4:03 am

"just how would we modify that system and have any quality controls"

The market controls quality. Take cars for example. I know nothing about cars. Most people know nothing. But somehow I managed to buy a car that is extremely reliable (a Toyota Corolla). How was I, who know nothing about cars, able to discover that the Corolla is a very reliable car? Maybe cars are licensed? Could that be it?

John Dewey July 20, 2006 at 9:56 am

With respect to licensing, I think I agree with save_the_rustbelt, and probably disagree with Professor Bourdreaux and most libertarians. Most Americans would be fearful of any system that allowed anyone to practice medecine. I understand how the AMA may be restricting the supply of physicians. But I just cannot accept the risks of uncontrolled medical practice.

If health insurance companies controlled the licensing, would the supply of physicians increase?

Having minimum standards for physicians seems similar to having standards for building construction. Would die-hard libertarians wish to do away with building standards as well? Surely there is nothing wrong with a community or a nation deciding to delegate safety standards to government or to government-licensed organizations, is there?

spencer July 20, 2006 at 10:32 am

I have been looking for years for data on how many people who complete all the years of schooling needed to become a doctor are unable to practice because they are unable to pass the licencing exam.

Does anybody know where I could find such data?

John Dewey July 20, 2006 at 11:12 am

Spencer,

Here's a link to 2005 performance scores for the United States medical Licensing Exam:

http://www.usmle.org/scores/2005perf.htm

Note the large difference in pass rate between those educated in U.S. schools and those educated in foreign schools.

scott clark July 20, 2006 at 11:36 am

As far as licensing of medical practicioners and being a libertarian goes, what does it mean that John Dewey "cannot accept the risks of uncontrolled medical practice?"

Does that mean that you should use force and perhaps cause bodily injury, even if indirectly, to people who might prefer to get medical treatment from someone who is not licensed by the government? And what medical treatments are you referring to? Most medical treatments that people get are prescribtion drugs, right? Doctors get a license to prescibe drugs. But aren't there times in your life when you know you just need an antihistomine or an antibiotic? Why should you have to pay someone to sign a piece of paper when you already know what you want? And if you have a more complicated problem, or you want to make sure that it is not something more serious, then go pay someone who you think has the knowledge and experience to give you solid advise, regardless of whether the government certified that advise giver or not. Perhaps John Dewey will want to patronize a government certified advise giver, and pay the premium price that would be associated, but even John Dewey would benefit from lower prices if non-certified advise givers were competing.
Similarly you should be able to choose to go to a world renowed surgeon, and pay his or her price, to get a couple of stitches, but you should also be free to go to Manny's Stitch 'Em Up, and pay his posted price.
The way I see it is that alot of the doctors power comes from the fact that they have been given monopoly power to grant access to life improving pharmaceuticals. But what mother of a few kids who grew up with frequent ear infections doesn't know which antibiotic to give their kid and in what dose and for how long? Doctors who get tons of education, and learn tons of biology, and anatomy, and chemistry will always be in demand, they will always have a role to play. But there is no reason that they need or deserve special government protections and privilages.

spencer July 20, 2006 at 12:04 pm

John Dewey — thank you.

Am I reading the footnote correctly that even though the pass rate for US/Canadian schools first time test takers is 92% their experience is that the ones who fail the first time successfully pass when they retake the test so that the ultimate pass rate is 99%? So the test restricts the supply of doctors from US/Canadian schools by 1%.

faultolerant July 20, 2006 at 12:04 pm

Constant & Scott:

The problem both of you fail to recognize is that doctors are not a commodity, like Toyotas.

Each Toyota is fundamentally identical to the last one, so there is the ability for a large component of the marketplace to evaluate said Toyota and pass along information that is relevant for the other, comparable Toyotas (e.g. same year, model, etc.) That is not the case for physicians.

Doctors are truly individuals and no meaningful method exists to say that Doc A is great while Doc B is egregiously bad. The AMA (awful as it may be) and conference of minimum levels of knowledge (by the MD label) is what offers the general public some security that a doctor has met minimum standards.

I know the pure libertarian will say that a new mechanism will arise that will permit easy and quick access to information about each physician such that the general community can make an educated decision about the quality of a provider. There are a number of websites which do provide limited information about physicials – and smart consumers use these tools before making a long-term care decision.

However, there's not such an opportunity to do so in an emergency condition – you take who's available. There is never an "emergency situation" when it comes to the purcahase of a Toyota, so the comparisons are fundamentally flawed.

While the libertarian philosphy has many, many valid points as to why government should get out of the way – sometimes this whole anarchy perspective is taken to ridiculous extremes. Here's one of them.

Of course, if you wanna go to "Manny's Stitch-em-up" you should have that right. For the AMA to prevent you from doing so is criminal. That's the downside to regulating providers. The upsides seem, at least to me, to have equal (if not greater) merit.

Lastly, this hoary argument you provide about using "force and bodily injury" is just a libertarian abrogation of having a real and meaningful discussion. That whole argument rings false and canned. If you can't make your point without those cliches then your point isn't worth making.

bbartlog July 20, 2006 at 2:02 pm

John Dewey writes:
…I just cannot accept the risks of uncontrolled medical practice.

But no one is asking you, personally, to stop using AMA-certified doctors. Even if other doctors were permitted to practice, you could still achieve the same safety as before (and likely at much reduced cost). Others could place their own value on AMA certification or indeed any other certification that sprang up. For example, chiropractors and I believe homeopaths have their own certifying bodies separate from the AMA. Midwives also.

Lisa Casanova July 20, 2006 at 2:10 pm

In a market where hospitals are in business to handle emergencies, why would they hire doctors who aren't competent? The lawsuits and loss of business (plenty of people use the ER when they aren't at death's door) would drive them out of business. There are incentives for hospitals to make sure their doctors meet certain standards of quality. As for the question of delegating regulation of doctors to the government, go ahead and only patronize doctors approved by the government. Just don't say that I have to do the same.

save_the_rustbelt July 20, 2006 at 2:11 pm

"…But aren't there times in your life when you know you just need an antihistomine or an antibiotic?…"

You can buy an antihistimine OTC at any grocery store.

And how do you know you need an antibiotic?
Is your problem viral or bacterial? And how do you know which one? Cipro? Keflex? Zithromax?

IM or oral? If oral, liquid or tablets?

Which works better for a urinary tract infection, Cipro or Zithromax? Which works better for an upper respiratory infection?
Which ones contra-indicates with beta blockers or birth control pills?

That is why I want my physician to have a license, and lots of schooling. And a rigorous internship and residency. And plenty of continuing education.

scott clark July 20, 2006 at 2:41 pm

save the rustbelt,

i know full well that there are a lot of different types of pills, with all kinds of different applications, indications, and contraindications. I also know that your average general practioner just plays the odds when you express certain symptoms, that the diaignosis is x. You can do that too. You can buy a good drug guide, use the internet, ask for help when you aren't sure. Doctors don't have any certainty, either. They'll prescibe Lipitor first, if that doesn't work, or gives you a rash, have some Tricor. And after you've had an infection once, you pretty much know what to do if you happen to get that again. You shouldn't have to ask permission of the tribal medicine man to get your remedy. And if you screw yourself up with all your self-medicating, the doctors can stand at the ready to try and patch you up and charge you whatever prices they like.

To faultolerant:

It is force and the threat of force that is used today to prevent someone from getting access to potentially ameliorating care, and it does cause bodily harm. Everyday that the FDA blocks what may one day be life saving drugs from being on the market, they are using force and they are killing the people who die of that disease. Even when your disease is hopeless, you have to go through layers and layers of pharmacrats to use experimental drugs. It is not a cliche and it is not false.
I might resort to stock phraseology as a conversation shortcut, but I am certainly not trying to decieve.

faultolerant July 20, 2006 at 5:37 pm

Scott,

You make two points with which I have issue:

First, the "force and threat of force" canard is one that libertarians throw out at every opportunity. Let's approach this from the opposite perspective: Presume that ALL interactions are voluntary and contractual and Big-G Government is totally benign (Yeah, that's a leap of faith…but stick with me).

Let's say you and I have a disagreement and we cannot resolve it – a purely contractual and private disagreement. The libertarian says that a court of competent jurisdiction should render a decision. So, a decision is rendered. Let's say that the "loser" refuses to comply with said ruling. Aren't we back to your hoary "force and threat of force". Except in THIS case, you, the libertarian, approve of it.

Sounds like "force and threat of force" are OK when libertarians want it to be OK, but not OK when libs don't want it to be. I'm sorry, but the distinctions between "good" and "bad" "force and threat of force" just don't add up.

Secondly, the lib perspective that the FDA (And in this thread the AMA) are inherently evil and accomplish no good whatsoever flies in the face of reality. In your world you may rely on "the market" to tell you a good drug from a bad one, a good doctor from a bad one, but that's an awfully big risk.

The problem with this perspective (as evidenced by Lisa's assertion that "the market" would cause hospitals to hire only competent physicians, as if they purposefully do not do so now) is that on an atomic level (which is what EVERY medical interaction is) the group-perspective is irrelevent.

The argument about Toyotas has merit because "the market" can evaluate a number of functionally identical copies. That's not possible with a single doctor/patient interaction. You may want to have totally unfettered, unregulated pharma and medical treatment, many folks don't. Me among them.

So on that basis, we'll have to agree to disagree.

Lastly, I don't think you're being intentionally deceitful, not at all. However this whole "force and threat of force" thing is dishonest on its face.

save_the_rustbelt July 20, 2006 at 8:27 pm

"…I also know that your average general practioner just plays the odds when you express certain symptoms, that the diaignosis is x…."

Having workled with 100+ family practice physicians, I can tell you, that is a bizarre view of the practice of medicine.

save_the_rustbelt July 20, 2006 at 8:32 pm

"…AMA-certified doctors…."

The AMA neither certifies doctors or determines the suppy of doctors, in fact, the clout of the AMA is nowhere near where is used to be.

Physicians are licensed by the states and board certified by their specialty associations.

scott clark July 20, 2006 at 9:29 pm

hi faultolerant,

trying not to stray too far off the health market topic of the original post, I'd like to answer out hypothetical contractual dispute.
"The libertarian says that a court of competent jurisdiction should render a decision. So, a decision is rendered. Let's say that the "loser" refuses to comply with said ruling. Aren't we back to your hoary "force and threat of force". Except in THIS case, you, the libertarian, approve of it.

If we had a contract, most likely the contract would make a provision for how to resolve disputes. If we followed the procedure and a decision was rendered and one of us still refused to comply, we would have shown ourselves to be outlaws, liars, and theives, as one of us would have taken resources from the other against their will. Force is an appropriate response to force.
If i want to buy medicine that you want to sell, and a third person puts one of us in jail because of that voluntary transaction, that third person is drunk with power.

save the rustbelt, it may be a bizarre view of the practice of medicine, saying that they often rely on probabilites for diagnosis, but what else would you call it? Sure they have tests to run to increase their levels of certainty, but they rely on their experiences and judgement, which are probabilites.

Russell Nelson July 21, 2006 at 3:01 am

faulttolerant: You're forgetting Nelson's Dictum: "There is no such thing as a problem; there are only unmet business opportunities."

Apply the dictum to health care. How might markets solve the problems you think only a government can solve?

Constant July 21, 2006 at 4:05 am

"Doctors are truly individuals and no meaningful method exists to say that Doc A is great while Doc B is egregiously bad. The AMA (awful as it may be) and conference of minimum levels of knowledge (by the MD label) is what offers the general public some security that a doctor has met minimum standards."

Well, guess what, you just contradicted yourself. If no meaningful method exists to say that Doc A is great while Doc B is egregiously bad then this applies also to the AMA's methods. If you are correct in your first sentence then your second sentence is false.

Yes, of course there are meaningful methods, and so your first sentence is wrong. And those meaningful methods do not require the force of government to back them up – why should they?

save_the_rustbelt July 21, 2006 at 8:58 am

"…but they rely on their experiences and judgement, which are probabilites…."

By that standard I suppose you are correct, very few judgments by any of us are 100%.

John Dewey July 21, 2006 at 9:29 am

To the "true libertarians" who would substitute free markets for medical licenses and the FDA:

Why don't you fight battles you have a chance of winning? The problem I have with libertarians and the Libertarian Party is that they take extreme positions on issues based on principle, and ignore political realities. The American public is not going to accept unlicensed medical practice any time soon, if ever. Quite frankly, suggesting that anyone should be allowed to practice medicine makes you guys look a little kooky, and undermines some of your more acceptable argument.

I believe society has a right and an obligation to protect children from truly stupid, life-threatening actions by parents. You libertarians probably disagree. I guess I'm not one of you, though we agree on many issues.

John Dewey July 21, 2006 at 9:36 am

spencer: "So the test restricts the supply of doctors from US/Canadian schools by 1%."

I think that's correct. At least that's the way I interpreted the footnote.

The restriction on physician supply that libertarians seem to dislike is the medical school admission limits. To me, the extreme filtering by medical schools, and the very tough training regimen they impose, is exactly what gives me confidence I'm receiving quality medical care.

John Dewey July 21, 2006 at 10:17 am

Does the AMA have a monopoly on medical schools? I'm pretty sure the American Osteopathy Association is not affiliated with the AMA. There are 56,000 osteopathic physicians in the United States. Almost all of them were trained at AOA certified schools.

Does the AMA control medical licensing? I'm not sure about all state boards, but the Texas Medical Board contains Doctors of Osteopathy as well as MD's.

My guess is that two separate certification organizations will not be enough competition to satisfy most libertarians. I think the American public would be more likely to accept additional certification organizations before they would allow children to be treated by physicians who did not receive certified training.

Albert July 21, 2006 at 11:45 am

John Dewey said: "I believe society has a right and an obligation to protect children from truly stupid, life-threatening actions by parents."

I somewhat agree with this. Certainly some drugs should not be regulated (i.e. birth control), but I'm not so sure I agree about antiobiotics. This is an issue of harm coming to someone besides just the drug-taker. If antiobiotic use was left up to individuals, they would be even more overused than they are now, leading to mutated bacteria and eventually (in the not too distant future) all antiobiotics would be ineffective. Then those who actually needed the antibiotic would have no available treatment.

save_the_rustbelt July 21, 2006 at 11:58 am

Back to the original issue in the post, I think more clinics in more places with more hours are a fine idea.

It has worked well with pharmacy and eye care, all within the current regulatory and licensing framework.

So if Wal-Mart wants a doc-in-the-box type of clinic, more power to them.

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