No Market Possible for Health Care?

I agree that the assertion responded to is silly but it is hardly the case at its strongest.

One of the challenges/issues in health care is the (in)ability of consumers to make decisions & make good decisions in this market relative to others.

One reason for this is deferral to expert (doctor) opinions. Decision are largely handled by doctors and in most scenarios personal preferences, finances, etc. do not weigh as heavily on a given decision as they do in the consumer market for televisions or laptops. While in the latter market many consumers also defer to ‘experts’ (eg the vendor), there is a group of sophisticated users that make very informed decisions. Consumers become sophisticated in response to a need. In laptops this could mean hobbyists or professionals. In health care, this will usually mean the ill (eg cancer patients & their families often develop a deep understanding of oncology). However, by this stage, their consumption decisions (in practice, choice of insurance policy) has already been made.

The related issue is that fact that almost all healthcare goes via insurance. It may be useful to think about decisions made by consumers, but in any foreseeable future, consumers’ decisions are boiled down to a choice of insurers. This abstracts away a lot of free market mechanics that usually add up to good decisions: consumer sophistication, feedback loops, etc. A policy holder may might have effectively made decisions about his care years in advance and without much conscious consideration. This is an unusual situation. I am not making this argument as well as I hoped, but what I mean to suggest is that consumers capacity to make good decisions is reduced.

For example, a “normal” consumer decision about treating his cancer via expensive experimental therapies would involve knowing about the advantages and disadvantages. A normal treatment might cost $a while providing an x% chance of survival, an experimental treatment might mean an (x+y)% chance of survival while costing $(a+b). These are the kind of hard decisions where it would be great to have consumer input and economic voting. Regrettably, all we have is these decisions made through the filter of insurance by consumers in their unsophisticated sense.

I’m sure there are parallels a & analogies that can be found in other markets. In fact, it’s pretty easy to find other markets where insurance exists. I’m not trying to establish a rock hard principle. I am not saying that insurance kills markets. I am trying to put forward the reasons why I am sympathetic to the idea that the free market does not work as well for medicine as it does for laptops.

Thinking about it again, the problem is not as Neil Billings describes it at all. He is quite wrong. It is the opposite. One cannot say ‘No. I won’t buy that.’ about rebuilding a burned house or fixing damage caused (to others) by a car accident. Insurance & free markets work well in those cases. What we have in health care is a market where many & complex decisions about scenarios with a low likelihood of occurring are made in one choice. Without much feedback. In some senses, this is like choosing government.

A third cause for concern is the coupling of insurance & employment. to me, this suggests that this market is behaving strangely. It is another example of consumers not being very active, educated or sophisticated; Not exhibiting the qualities that make markets work well.