Today, I went to the doctor for the first time in several years. I’m young, I’m generally pretty healthy, and I’m capable of dealing with most routine minor ailments on my own. My employer offers a Health Savings Account plan — there’s $1200 deductable which applies to almost everything, but the premiums are correspondingly lower, and my employer passes most of the savings along to me in the form of a deposit to a savings account I can use to pay out-of-pocket medical expenses. It’s a great deal for people like me, and I’m enrolled in it.
Among supporters of socialized and semi-socialized medicine, it’s taken as a given that our current health care system is a free market solution. It isn’t — not even close. Between Medicare, Medicaid, SCHIP, and subsidy for employer-purchased health care, our government spends more per capita subsidizing health care than most other first-world countries. The entire structure of our health care system is driven by the weight of these subsidies. And on top of everything, the regulations put in place to protect us against fraudulant or incompetent health care have had the side effect of enforcing a cartel to restrict the supply of health care as the same time the subsidies have driven up demand (see many of Dave Schuler’s posts on the subject for more detail).
There is a free market health care system in the United States, however. It’s just not available to humans. A DVM requires the same talents and gets very similar training to an MD. In some ways, a veterenarian’s job is harder than a human doctor’s, since doctors who treat humans specialize on a single species, and their patients can talk to them and tell then where and how it hurts. But there are no government subsidies for vets (apart from second-order effects of educational subsidies), and most people pay vet bills out of pocket.
Medicine for your pet is expensive, yes, but it’s expensive like getting your car repaired is expensive. There are no horror stories of $11,000 bills for overnight hospital stays. It’s a lot easier to understand what the costs are and where they’re coming from, and most importantly you’re in the loop when deciding whether a marginal test or procedure is worth the cost.
One of my pet birds has been seriously ill twice. Both times, I took him to a vet who examined him, recommended some tests, and explained what each test would do and how much it would cost. Some of them were no-brainers, and some were unlikely to turn up anything useful but were just covering all the bases, and some were somewhere in between. It was my decision where to cut off the tradeoffs, which is as it should be since I’m the one paying, and the vet gave me all the information necessary to make an informed decision.
Today, I went to the doctor with a nasty, lingering sore throat which I thought might have been strep. First, I couldn’t figure out whether I was better off going to the urgent care clinic or trying to find a doctor who had an open appointment slot today — the clinic is much more convenient, but I have no idea what the price difference is and in what direction.
When I did go to the clinic and get examined, the quick strep test came back negative, but based on my symptoms she wanted to do a strep culture as well. It was a marginal, bases-covering test, so I asked how much it would cost. I could tell this isn’t a question they get very often. I had to explain that I have an HSA plan and this would almost certainly come out of my deductable before she stopped being incredulous that I cared how much it cost, and then it took her almost ten minutes to go find out that it would cost $80.
The heart of the free market is price. Price give you the freedom to make decisions because you’re the one who will bear the costs. Price tells you what the tradeoffs are. When the key decisions makers (patient and doctor both) have no idea how much their decisions will cost, you do not have a functioning free market.
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i think higher deductibles are huge in general for helping to reduce demand for unnecessary procedures, and to get people invested and informed in their own health care decisions.
the market is more messed up than just medicare/medicaid/SCHIP/etc. most insurance companies operate in competition free markets, which means that most people pony up for one of the 2 or 3 options either their employer-provided insurance or their private insurer offers, and then turn off their curiosity because it’s out of their hands.
As Dave S. has said many times, though, the consumer side is only part of the equation – and maybe not even the biggest part. What can be done to increase health care access, competition, and supply? I don’t think that health care necessarily can or should operate in a laissez-faire free market environment though I am willing to explore the possibility that solutions exist that might make the market freer, less free, or even both at once. But I think we all should be starting at the statement that the current market, if not broken, is breaking.
On the supply side, we can:
1. Uncap H1B visas for medical professionals. This will immediately increase the supply of doctors and nurses.
2. Reduce the AMA’s role in licensing doctors and accrediting medical schools. They have too many incentives to artificially restrict supply.
3. Move government regulation of the health care industry from a licensing model to a certification model. Let people judge for themselves if the government’s judgement of who’s qualified to practice medicine is good.
Ok, I’m a little hazy on your recomendations here.
1. You want anyone certified by another country’s medical system to be able to practice here? Yes, this will increase supply and likely drive down costs, but combined with the others, you have a very serious problem with quality.
2. You don’t want the American Medical Association to certify that doctors know things or that schools teach them things. I understand that they have a biased viewpoint on several issues including possibly stiffiling (sp) as “it wasn’t like that in my day”, but who better than doctors to know what a doctor should know?
3. You don’t want the government to license doctors. What differences are there with a certification model? I assume that the difference is that a doctor may practice without a certification, but not a license.
All together, you’d prefer that any random guy from any third world country who wanted a new start can come here claiming to be a doctor and get in with no restrictions, no license tests, and it’s up to the ever-perfect “market” to decide that he’s a quack after he’s killed three people?
As always, you place way too much power in market forces for my liking.
1. They’d still need to get licensed or certified or whatever system we wind up having. Just letting foreigners who’ve graduated from US medical schools on student visas stay in the US after graduation would make a difference. We already allow foreign doctors and nurses to immigrate; the only change from this proposal would be to let everyone qualified who wants to come here to come here, rather than cutting off immigration when the quota is filled.
2. The AMA’s first job is to look after the professional interests of its members, and it’s done an excellent job of driving up wages by limiting competition. The biggest bottleneck on the number of doctors is the number of seats available in medical school, and the AMA has been very reluctant to certify new medical schools.
3. Certification means there’s still a government seal of approval you get for meeting the current licensing standards. The difference between certification and licensing is that it would no longer be illegal to practice without the seal of approval. Anyone can claim to be a doctor, but you can’t claim to be a Government Certified Doctor unless you meet the government qualifications (similar to the Certified Professional Engineer standards that many states have). If you don’t trust anyone but the government to identify who’s a competent doctor, then you’re free to only patronize Government Certified Doctors.
The big advantage of a certification model is that it allows private certifying authorities to rise up and compete with the government standards if the government standards turn out to be wrong in either direction. Suppose we divorce the government standards from the AMA standards, and it turns out the AMA was right all along — people will still be able to seek out doctors who are specifically AMA certified. Alternately, if the government standards are too strict or arbitrary, then competing private certifiers will fill the gap. We might see someone like Kaiser Permenente coming up with its own program for training and certifying its own doctors, and they’ll be very careful to do a good job or it will wreck their brand image.
You’ll also have outfits like Doctor Nick’s School of Doctorology springing up and certifying “doctors”, but I think people are smart enough not to take that sort of thing seriously.
All together, you’d prefer that any random guy from any third world country who wanted a new start can come here claiming to be a doctor and get in with no restrictions, no license tests, and it’s up to the ever-perfect “market” to decide that he’s a quack after he’s killed three people?
That’s already the case for a wide range of other professions, including several (most notably our own line of work) which are quite capable of killing people if they screw up. The market seems to sort that out just fine.
Also, don’t forget that American-born, government licensed doctors screw up and kill people all the time. Quite often, they do so because they’re working 20-hour shifts in order to try to keep up with the sheer volume of people needing medical care despite the artificial shortage of available doctors created by the current AMA licensing regime.
it’s taken as a given that our current health care system is a free market solution. It isn’t — not even close.
That is so true, and only scratches the surface. 50 individual state markets reduce competition, mandatory minimum coverage levels inflates premiums, inflated malpractice insurance… There are so many cheap, “non-invasive” steps government could take to reduce health care costs that the current plan seems otherworldly.
I think people are smart enough not to take that sort of thing seriously
There is where we always disagree. People are dumb.
I think that doctors would hate such a system as it would be unbelievably confusing and expensive to get all of the top 10 certifications. Each insurance companies would have their own. You’re right that Kaiser and such would have ones, the government would have one. Something you’re possibly overlooking: we have lots of certifications now. There is just ALSO a minimum certification (license) with which a doctor has to start.
I remember the ethics class as well and know quite well that our profession can kill people. It would be impossible to certify everyone who might ever be in a position to kill someone by their profession.
If we did adopt some of your market driven medicine ideas, I’d be at least a little comforted by the fact that the net makes such market forces faster and easier for most of us to access.
I don’t much care where a doctor is from so long as s/he’s gone through a recognized medical program. Letting all doctors who wanted to stay practice here is fine with me. I like your idea of uncapping imigration of professionals in which we are in short supply. Who decides what professions fall in that category would be an interesting political debate.
Something you’re possibly overlooking: we have lots of certifications now. There is just ALSO a minimum certification (license) with which a doctor has to start.
I’m not overlooking that. My concern is that the minimum certification might be too restrictive, with the result that we have too few doctors, which winds up killing people because the doctors we do have are overworked and because some people who need doctors are priced out of the market due to the scarcity of doctors.
My proposals are intended to be seperable. Uncapping immigration by qualified medical professionals is a baseline I think we can all agree on. Proposal 2 is an attempt to fix the licensing system by having the government review the AMA requirements to make sure they’re not overly restrictive. Proposal 3 is the radical libertarian plan to actually trust private individuals to make reasonable decisions.
Who decides what professions fall in that category would be an interesting political debate.
Actually, I’m in favor of uncapping immigration for all professions. Let anyone with a clean criminal background and the willingness and ability to earn a living come here legally. But that’s a different debate.
And you actually think that the government isn’t?
Riiiiight, because insurance companies lurve to spend a bunch of money reinventing the wheel. Getting the license now is a pain. The difference is, the certification groups would have an incentive to get doctors certified — a cert that isn’t widespread has no advantage because it isn’t recognizable.
I’ve outraged some of my commenters by remarking that I’d rather be treated by my vet than by my MD. I’m generally treated with more respect and our relationship is more collaborative.
BTW, Eric, vets are not people who couldn’t make it into med school although that notion seems to have gotten around. They actually may be smarter than their higher paid MD equivalents. Veterinary schools are more selective than med schools not less. There are fewer of them with fewer billets per school. Most vets are people who’ve always wanted to be vets.
Something to remember about U. S. med schools: each and every year each and every med school has a waiting list that’s typically about 40% as long as the total number of admissions. What that means is that they admitted 2/3′s of the applicants they found qualified.
Over the period of the last forty years med school admissions as a proportion of the total population have dropped substantially. Unless you believe that the applicants are getting dumber, that means that med schools are getting more selective every year. I’m not certain how that’s rationalized without arguing that some of the docs currently practicing should be dumped.
Makellen,
First, long time no see! :-)
Second: “and it’s up to the ever-perfect “market” to decide that he’s a quack after he’s killed three people?”
I’m curious how you feel about naturopaths, homeopaths, chiropractors (speaking here of the “I can cure diabetes” types, not the “I can help your backache” types) , and all the other new-agey “alternative” medicines. Since the AMA doesn’t certify them, should they be forbidden from practicing?
In general (and I’m asking your opinion here) , should people be forbidden (by force of government) from making decisions if making the “wrong” decision could prove fatal?
— DW
P.S.: I think you probably know the disdain I have for the various “alternative” medicines. I’m not asking how you feel about the efficacy of the treatements… I’m asking if you feel these people should be forced by the government to discontinue their practice because people might inwisely trust their services.
You know, for 90% of things, I couldn’t care less if I was treated by a vet or an MD. Most of the time, I go into the office just looking for a “mother may I” on a prescription.
BTW, Eric, vets are not people who couldn’t make it into med school although that notion seems to have gotten around.
I’m very much aware of that, from personal experience. I’ve known several vets and vet students as well as several med students, and the vets are at least as bright as the med students.
That’s been my experience, too.
It’s refreshing to see that someone recognizes that we don’t have a free market in health care and we really haven’t had one in a very, very long time. The truth is the insurance companies have worked hand in hand with government to create the system we do have, and that’s been going on for decades.
It also seems unlikely that most people are going to want to go back to paying out of pocket for most routine medical things; most people don’t think of their health care in those terms and I think it’s going to be very difficult to get them thinking that way. Plenty of doctors don’t want to think that way either, they think there’s something more sacred going on in their mission as doctors.
Still, the point is, government had a huge hand in designing the current system. It’s foolish to think it’s ever been a free market, because it hasn’t been one in my lifetime or the lives of just about anyone reading this.
There is no disagreement that medicine is not a free market.
The only disagreement is whether medicine should be a free market.
Dean, you’re absolutely right that doctors (and vets) don’t want to think about price and don’t want the patients to think about it either. The ones that I’ve known socially all say that price totally distracts from the practice of medicine. They want to make their patients healthy.
There are good things about competing on price. Most of them revolve around increased efficiency. If Eric’s test had cost $5, even for a marginally useful test, it would likely have been worth while. Efficiency also involves having the doctor (or vet) see as many patients in a hour as possible so there are downsides there as well.
I think medical facilities should compete on standards of care rathr than price.
Vets also don’t have $30k/year malpractice insurance premiums. They don’t have to practice defensive medicine for fear of being sued either.
The ones that I’ve known socially all say that price totally distracts from the practice of medicine. They want to make their patients healthy.
Every professional in every line of work would say that if they could get away with it. We’d all love to give our customers/clients/patients everything they could possibly want without having to worry about price (providing we still get paid, of course). Price distracts us from that by reminding us that we live in a world of limited resources and unlimited desires. Price tells us that we can only have some of what we want, and it helps us make resonable decisions about which subset of our wants we should satisfy. Hiding the price doesn’t make the cost go away; it just makes it harder to evaluate the tradeoffs.
If Eric’s test had cost $5, even for a marginally useful test, it would likely have been worth while.
The strep culture cost $80. As it happens it turned out to be quite useful in this case — it turned up positive, revealing the earlier rabid strep antigen test to be a false negative. As a result, the doctor prescribed me a course of antibiotics which costs $12 before insurance. If it weren’t for the social cost of overprescribing antibiotics, this would be a textbook case of a silly outcome resulting from price being hidden.
Every professional in every line of work would say that if they could get away with it. We’d all love to give our customers/clients/patients everything they could possibly want without having to worry about price (providing we still get paid, of course).
Unless they had thought about it. I work in litigation, and the idea of our customers having the sort of ability to demand what we demand of doctors is frightening. We already go to great lengths, and justifiably so. When we screw up, we do as much damage as a doctor — I can screw up and cost a company so much money that they start laying people off and closing plants. I have honestly been in situations where I wonder if suicide is in store for people involved in litigation.
But that’s just doing what is cost effective. If we were able to indulge the emotional involvement that our client have with litigation — and people get very involved with being “right” and winning the endorsement of a jury — then we would be full steam ahead on every single case.
People are very emotionally invested in living as long as possible. The further we remove that from the reality of limited resources, the more outrageous our behavior will become.
Vets also don’t have $30k/year malpractice insurance premiums.
The OB/GYN that delivered my first son would LOVE to have malpractice insurance premiums that low. His were approaching $200,000 in 2003.
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