health policy

Name your price

This morning, I spread out all my first-year textbooks and started assigning prices to them for the book sale.  I couldn’t remember how much I had paid for them (too much), and so coming up with a “fair” price was mostly a matter of halving the price on Amazon.  Kind of a silly way to do it, but thanks to the Internet, at least I have some sense of what they would otherwise cost.  A book sale is an up-front marketplace: buyers decide what books they want, sellers decide what price they want, and the two do the age-old Dance of the Hagglers until both parties are satisfied.  From what I’ve seen, it’s just the opposite in the medical marketplace.

Musings of a Distractible Mind has a very well written post on the mess that is medical insurance.  One of my very good friends outside of medical school has an economics background, and he and I have argued many times on why the free market model doesn’t really work for medicine.  With prices artificially set by for-profit insurance companies (usually following Medicare’s example), no one really has any clue how much things would actually cost if brought to a true free market.

For instance, my insurance and co-pay together reimburse about 50% of the bill for an office visit.  So my doctor, like all doctors, has inflated the price of an office visit to about 200% of what he actually wants/needs to stay in business.  Since no one but the idle rich actually has that kind of money for a 15 minute office visit, pretty much everyone becomes dependent on the insurance their employer provides.  Insurance companies, sensing a de facto monopoly, feel free to lower reimbursements even further. (Premiums, on the other hand, seem to keep increasing.) And so it goes, until some doctors have had enough and refuse to accept insurance altogether. (Like most dentists, with the important difference that dental care is rarely life-threatening, while medical care often is.) Those who can’t afford insurance or upfront costs go to the emergency department, where they will be seen, eventually, “for free.”  Hospitals recuperate that cost by inflating the prices they charge everyone else. And in the end, it is the patients — in other words, everyone — who gets screwed.

I hate criticizing without suggesting a solution, but I just spent all summer looking into this problem (specifically from the POV of pediatric care), and can’t come up with a decent solution.  Although a single-payer system would reduce the inequity inherent in ours, the real issue of artificial prices would remain.  It would be awesome to scrap the hodgepodge entirely and go back to whatever people did in the pre-insurance turn of the last century: pay reasonable prices upfront or barter with chickens.  But then, the quality and price of medical technology have skyrocketed since the days of poultices and quinine, and people are so used to the current system, where their costs are hidden in the form of employer-subsidized insurance premiums, that telling them they would have to actually pay for their care would probably make most people avoid going to the doctor at all.  Moreover, there are a number of powerful interest groups in Washington that will lobby long and hard to maintain the status quo. (You think pharmaceutical pen-giving is bad?  You should take a look at Sen. Stevens’ house in Alaska after the oil companies got at it.)

So as much as I’d like to see meaningful health reform in the next administration, I am skeptical that it can actually get done.  Our political system is, after all, intentionally designed to come to a lumbering halt whenever possible.  As well-intentioned as some Members of Congress are, the majority respond to the vote. My high school government teacher used to emphasize that “people vote their pocketbook.” And since no one knows what’s going on in the health care pocketbook, no one knows what to do with it.


2 thoughts on “Name your price

  1. Very true. It also doesn’t help that dental (and vision) insurance usually aren’t including in the more basic plans. That’s part of the reason I’m wary of an insurance-free solution for medicine, because it would only worsen the rich/poor inequality we currently face.

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