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A couple of the issues that do not seem to be raised very often when considering where the medical system appears to break down in consideration to the Free Market, or Smith's invisible hand are the control of government and the third party payer system. Having been in the medical insurance industry for about 10 years, during which the Clintons changed the face of the industry, I have followed the further destruction of this industry first hand with the passing of laws and the regulation of government and the third party payer system.

Basic economic theory (101) teaches us that a third party payer system does damage to the free market system, and health insurance is no exemption. Behind this is HCFA (The Health Care Financing Administration) who has created a coding system that places a time element on codes. For instance, a code that represents a 15 minute visit vs. a code that represents an hour long visit (comprehensive). Each of these codes is assessed a dollar amount limitation according to the financial demographics of the area of the country that is services by each insurance carrier. The agreements they have with the physicians states that a physician cannot charge above this dollar amount for the given service or they will need to hold the patient harmless for the additional charges, or write them off in other words. This not only restricts the amount of time the physician is able to spend with each patient, but removes much of the financial incentive to being a dr. (this is just a small example of a larger problem).

In addition I have watched as politicians who know nothing about health care pass laws that are ludicrous. For instance, it is required by law for every policy to have a maternity benefit, even if you are a man, or past the age of bearing children, and so everybody who has a policy pays for this "right." Under the old cafeteria plans a person could pay for what they wanted and leave the rest out.

I guess the moral of the story is that our healthcare system is being held somewhat hostage under the current way of doing business because it is over regulated and crippled by a third party payer system that dictates what can and can't be done, as well as removing much of the incentive for being in healthcare. Over the last few years I have had more than one Dr friend leave the profession for these reasons. If we continue down this road free market theory tells us that smart people who would have gone into medicine will go elsewhere because the incentives are greater. If we want to make the healthcare system better we need to remove the burden of regulations, restore the incentives, eliminate the third party payer system (as it now exists) and allow the market to work to set prices. I can say this because I am not currently seeking any votes or running for any offices.

Now, can anybody say Hillary-care?

If you include the value of everything that is produced within the large corporations
the US economy is actually more a command economy then you believe.

But the CEO can't afford to be arbitrary. He has to understand and respond to the market. In effect, he is commanded by customers.

Despite near unanimous agreement that there is a nurses shortage, almost nothing is being done about it.

There is a dire shortage of nursing faculty because the labor market is not working, educational bureaucrats will not pay nursing faculty enough to attract them to be professors (in the hierarchy of higher education nursing professors do not have the prestige and political clout of professors in other departments – most nursing professors have actually done real work in the real world, which makes them second class citizens of academia.)

On another note, in his best year as a malpractice lawyer John Edwards made about the same income as four RNs, that is, the LIFETIME income of 4 RNs.

UK: Don't treat the old and unhealthy say doctors.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2008/01/27/nhs127.xml&CMP=ILC-mostviewedbox

Sorry if I misunderstood. You have been close to the medical care system, and certainly realize how few real mistakes are made.

I think you misunderstand Arnold's post.

He doesn't want someone to make the decisions for him. He wants someone to coordinate the information so that SOMEONE can make an informed decision, ideally, the patient or the patient's family. Without an advocate, either the patient or the patient's family member, tradeoffs don't get taken into account and sometimes mistakes get made.

John Dewey,

My mom's a nurse and I think a fabulous one. I was careful to talk about the importance of care and devotion in creating quality care and I think that goes a long way, especially with dedicated people. But it this issue of coordination is a real issue from my experience.

Ken,

Of course you're right. They're not really analogous. But all of these issues in the firm, in the family and in the industry are about coordinating information. These are issues about what do you buy and sell vs. get via other means. Families and firms generally don't use prices to make allocation decisions. Usually that works out well because families use love and firms use the profit motive to motivate good decisionmaking and the flow of information.

But without enough love and without enough profit incentive, families and firms don't work very well. That's my point.

Two weeks ago, the insurance company hired a consultant physician to investigate the care being provided and make recommendations to the family. As I see it, this consultant is doing what Arnold seems to want done for his father. But make no mistake about it, the consultant physician is acting in the interests of the insurance company. That's why he urged the family to allow a "Do Not Rescue" order for my relative who can still recognize and occasionally communicate with his wife, his mother, and his sister.

This consultant physician, IMO, is a master salesman. Phrases such as "end his life with dignity" rolled off his lips with practiced ease. I'm sure he would confidently assume management of my relative's medical care if the family allowed it.

Someone has to decide how much medical care to provide a dying patient. I don't want that to be a government bureaucrat, but I don't trust an insurance company representative, either.

Russell, this question doesn't even make sense. A hospital is not an entire industry! I'm sure graphite plants have someone in charge.

In every job I've had, someone has been "in charge", but this does not make him in charge of the whole industry. Just his little part of it. In hospitals, someone needs to be in charge of patients. Which does not mean being in charge of the health care industry.

-Ken

Would you get an operation with a 10% mortality rate that has been shown to extend lifespan by 5 years? No doctor can answer that question, only the patient. Still, patients like Arnold King's dad want someone else to make the decision for them. They want someone to tell "here, this is what you want".

In other words, they don't want a doctor, they want a salesman!

I appreciate your post and agree with your points. I think, though, that "overworked nurses" – and overworked physicians – miss far fewer crucial events than is perhaps implied by this sentence. Lawyers are good at finding "evidence" of malpractice in the tiniest variations of patient care. IMO, though, the checks in today's hospitals work remarkably well.

Consider one example of the success rate in modern hospitals. My R.N. wife has assisted in approximately 22,000 surgeries of varying complexity over the past 30 years. Exactly one patient – an 85 year old woman in poor health – has died in her operating room over that period.

Thanks for making this point. Although hospitals and their employees are conscious of markets and costs, the overriding goal for almost all of them is to save lives and reduce sufferring.

Taking my uninsured visiting nephew to see if he had appendicitis which he did not have, lucky me, I was hit a couple of weeks later with six invoices from different subcontractors. Though each one of them, except for one that I never understood and just seemed to be out on a fishing tour, seemed reasonable, together they amounted to something crazy.

You need to be able to get back into the hands of trustworthy contractors (oxymoron?) but letting an uncoordinated runaway happening do the sub-contracting for you does not work. If I hade been a European I guess I would be asking something as… do you not need an ombudsman at each hospital?

Specifically, there's no one allocated to the role of "decision maker" or "manager". An assembly line )the most commonly cited example of a division of labor) still has a line manager. And there's a manager of the line managers for factory-wide decisions.

In a hospital, there's the factory manager (hospital admin), but there seems to be no one filling the role of line manager.

This is true for many consumers in many industries. Many people buy cars based almost entirely upon how they look. Yet the actions of informed consumers and civil tort still punish the lemons and make the automobile market improve every single year.

Its not hard to research one's particular disease and learn what options are available. The fact that some people won't or can't do this wouldn't prevent the rest of the (hypothetical) free market from punishing quacks.

I won't deny that information asymmetry is a problem, and that knowledge, as a public good, is generally under-funded. But those problems are being solved more and more each day. Internet medical websites are a huge business. If they were allowed in medicine, brand names and other voluntary licensing schemes could be used to convey trust just as they are in other industries.

For example, most health care consumers in the USA know they could get cheaper care in Mexico. But how often do they travel to Mexico for care, expecting it to be the same quality as in the USA? Not often; they aren't that stupid. Medical licensing conveys the same information as a voluntary license or brand name. I don't see any reason to suspect patients would purchase health care from irreputable sources when the market would (if it were allowed) undoubtedly provide reputable options.