Market-Based Health Care

November 22, 2014

I am not an economist … but I am a sentient being and I buy stuff, so I know something about markets! And when I hear paeans to “market-based health care” I get cranky. Really cranky!

Let’s get some terms straight. Markets exist to buy and sell goods and services. Someone sets a price, and negotiations may or may not occur. At Safeway you pay $3.49 for a box of cookies; at the Ford dealership you expect to pay a negotiated sum for that new F-150.

Fair market value represents the result of a market based exchange. I’ll spare you the fancy definition, which boils down to:   Willing buyer and seller; acting freely; with reasonable knowledge.

Safeway willingly sells cookies, and if you’re like me, you’re a willing buyer. If you are a chemist, you know what’s in them, and if you aren’t, you may not care. You don’t have to have the cookies, either. With the Ford F-150, you have sources to compare it with Dodge Ram and other trucks, and you don’t have to buy a truck. Or maybe you do, in which case you are no longer acting freely and, therefore, the transaction no longer fits the market-based exchange definition perfectly.

Back to health care! Many Republicans, and some who are not, advocate for patient-centered, market-based health care. Sounds good, huh! Not so fast, thought.

No one argues with the notion that healthcare must focus on the patient, but no one can say, honestly, that we had “patient-centered health care” before the Affordable Care Act. If everything was Jim Dandy before 2009, there would have been no reason to “do health care.”

Anyway, let’s talk about “market-based health care,” and we have to assume no ACA for purposes of these hypotheticals. Assume I have chest pain and go to the emergency room. Am I a willing buyer of ER services? Not when dying is my other choice. Is the hospital a willing seller? Sure, because I am insured, I can pay if my insurer won’t, and I take good care of myself, reducing the “bad outcome” risk.

Fact change! I’m uninsured and can’t work or exercise because of physical impairments. I’m still a willing buyer, but the hospital is, now, not a willing seller. Payment will be an issue, and the treatment will cost more because I am not healthy. And I am more likely to die, which increases malpractice suit potential. (Only the law and a mission statement, in the case of nonprofit hospitals, results in this version of me being treated.)

Real me again. Am I acting freely? No. I need the ER services, stat. I can’t shop around for the best price, and even if I prefer Hospital A, the paramedics will decide where I go, based on time, load factors at the local hospitals, etc.

Fact change! The ER doctor tells me I have heartburn. Cool; no heart attack! “See a gastroenterologist,” says she. OK, but who? My insurer has a list, but how do I pick one? My primary care doctor may have an opinion, but it might take weeks to see him, and no one pays him to tell me who I should see for specialty care. I can ask my friends or go to website ratings but … can you spell GIGO (garbage in, garbage out)?

I get to a GI doctor. She tells me about a new procedure that will leave me worry-free. Of course, she developed the procedure, it’s pricey, and insurance won’t pay. What do I do? Who knows, but I know I am not acting with reasonable knowledge. Smart guy that I am, I know I’m no match for any health care professional in his or her field.

Under any of my scenarios do we have a market-based transaction? No!

We like the free market because … well, we like it! It’s positive value phrase, even though many most of our markets really aren’t very free, by anything close to the definition of a free market. What we really like is a market that works for us, and better than it works for the person on the other side! That’s a free market, and I assure you that if you’re in a market involving healthcare, it’ll always work better for the provider! Why (in case my words have not registered)? When you need health care you need it, now, and the provider always knows more than you do!

Now, before I offer you reading assignments, we do have the Affordable Care Act. It’s not perfect, but government had one hand tied behind its back when the law passed, it was a first step, and one of its less-mentioned attributes is a slew of pilot programs to improve outcomes by reducing cost. Recall that we have a system which pays providers for doing stuff, which means “do more/make more” when, often, we can get much better outcomes by incentivizing different, “do less” behaviors. Our system has used a fee-for-service model, modified, for decades. It failed us, ultimately, as we were spending too much for too little, and too many people were getting nothing but emergency care. Time will tell with the ACA, and it won’t likely be what it is today forever, or even for many years, but what it replaced had to go, plain and simple.

Reading assignment:  The Cost Conundrum:  What a Texas Town Can Teach Us About Health Care by Atul Gawande, from the June 1, 2009 New Yorker. And for overachievers, here’s Atul Gawande: The Cost Conundrum Redux, dated June 23, 2009, where Dr. Gawande responds to criticism of the first piece. The pieces demonstrate pretty clearly that higher costs are not an accident, or an outcome we cannot address.

P.S. The House of Representatives finally sued the administration. Here’s a link to the post that includes the suit.

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