Monday, June 15, 2015

Insight into Health-Care Supply and the Price of Health-Care

‘For over a century, we've regarded health care as qualitatively different from other goods and services – an economic Oz, where the normal rules of nature don't apply. In doing so, we waste resources, keep prices artificially high and delay life-saving and life-improving technologies. But this will soon pass.’

‘In December, Dr. Naoki Ikegami told The New York Times: "[T]he U.S. health care system … defies the laws of economics, and of gravity. Once the price is high, it just stays there."’

‘Prices don't fall because we spend resources (via regulations, subsidies, cartels) to combat downward pressure.’

‘And yet, following the 1910 Flexner Report when health care was not much better than a coin toss, America feverishly paralyzed nascent medical markets. Medical school curriculum became rigidly standardized and for-profit schools were banished until 2007. Medical licensing emerged as medieval guild, giving doctors exclusive domain over work formerly performed by nurses and others. Laws forbade doctors from working for nondoctors. Blue Cross reinvented health insurance to serve hospitals more than patients. The Food and Drug Administration and other agencies relentlessly broadened control over products and services. Given medicine's primitive state during this period, the strictures laid down were more faith and ideology than science and economics.’

‘Over a half-century later, Arrow's "Uncertainty and the Welfare Economics of Health Care" became the proof text of "health care is different." Arrow enumerated the differences: domination by nonprofits, insurers as intermediaries, consumer ignorance and so forth. His essay was brilliant and correctly described the artificial world constructed over the previous several generations.

Thus, health care markets were hamstrung before useful medicine appeared, and the hamstringing continues today. As David Goldhill, author of " Catastrophic Care: Why Everything We Think We Know About Health Care Is Wrong," has put it: "[H]ealth care is indeed different ... but primarily because we insist on treating it as different."‘ - Defying Gravity, Robert F. Graboyes, US News and World Report, 06/12/2015

Link to the entire article appears below:

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