The Consumer Market for Health Care

Republicans are believe that market forces can bring down the cost of heath care. Their argument, if their litany of self serving sentiment and half baked ideas can be characterized as an argument, is that markets are efficient which must be good since efficiency means less waste.

Here are three problems for Republicans to consider when they stop pontificating and start thinking.

First, there may be no waste, but that's not the same as perfect competition. Buyer power is low so profits move to the more concentrated sellers.  Consumer surplus declines;  producer surplus increases. Individuals and companies (which are both numerous) buy from a few large insurance companies.

While waste is problematic, I'd rather have inefficiencies than a lean and mean delivery system, high prices and one in which private equity pockets all the created value.

Second, profit motives distort decision making at the point of delivery; despite the rhetoric about the primacy of quality care, data demonstrate clearly that profitable procedures are often used when less profitable ones may be more effective.     

Third, choosing between providers requires information - and there isn't any.  How many people died under your GP's care last year? How many surgical procedures when wrong at the hospital you use? Currently there's no way of knowing.

Forth, just because money changes hands doesn't make something a market. A protection racket involves an exchange money, but you are unlikely to get away with telling the local crime boss that you would like to look around in the market for another supplier for protection services. Perhaps the local Triad gang does a better job for less money and you'd like to check out their protection terms... 

When you've just had your teeth pulled and the dental practice sales manager (seriously - that's her title) offers you a "great deal" on dentures and a finance plan, you not really in a great position to say, "I'll get back to you". Extend the market logic, as Republicans suggest,  to health care more generally. Do you really want to have to deal with used car sales tactics when you are wondering if you are going die? When you're in the ER, hoe much choice do you really have?