Friday, January 30, 2015
The Health Care Market
We’ve long had trouble deciding whether the health care
establishment can legitimately be considered a market and, if so, how the
market should be organized.
Apparently, the White House staff had the same difficulty
during the run-up to passage of the Affordable Care Act, aka Obamacare. According to a lengthy review of Steven
Brill’s book “America’s Bitter Pill” by Malcolm Gladwell in the January issue
of The New Yorker, the White House health care people and its economics people
contested mightily and at length over the issue. The health care people seemed to think that
health care was a special economic case and that its costs could only be
controlled by a hefty dose of regulation.
The economics people thought competition was the best way to do it.
The kind of competition being visualized involved patients
having a financial incentive to shop around for services. The argument against that is that when one is
sick or injured, finances are the farthest thing from the mind.
Apparently, no consideration was given to a possible role
for HMOs and insurance companies. Those
organizations can assemble panels of providers with which they have negotiated
prices. Patients can then choose among
competing companies based on what they consider to be the best value in terms
of price and quality. An insurance
company can actually assemble more than one panel with different premiums
associated with each.
The advantage of that arrangement is that patients make economic
decisions relating to health care by choosing an insurance company and a panel
of providers when they are well rather than when they are ill or injured..
