Friday, November 8, 2013

The downside of upside

I know that medicine in the US is heinously more expensive than medicine in other nations that have national healthcare.  What I didn't know is exactly why.  There are lots of things that contribute to the discrepancy between the unparalleled spending in the US on healthcare and the mediocre returns but it turns out the biggest one is the very thing people so often trumpet as its greatest attribute:  Competition.  I read a fascinating article that gives numbers to the other things that are often blamed for the cost of healthcare like malpractice suits, reimported drugs and uninsured care.  Those things only make up a small fraction of the cost though, and it becomes clear that the real cost is that hospitals make up prices and people end up paying them.

There is a broad assumption that many people make and which underpins right wing economic philosophy that letting corporations do what they want without restriction will automatically bring about low prices and good results.  It is a veneration of the free market as a source of good in essence; almost a religious belief in the power of unrestricted exchange.  There is no denying the power of exchange as it is a massive force in the improvement our lives have seen in the modern day.  The trouble comes when people follow that fact with the incorrect assumption that the freedom for corporations to do whatever they want will somehow tap into the well of goodness that exchange brings and generate good outcomes for people.  It *can*, but often it does the exact opposite.

In the case of health care people simply can't or don't make rational economic decisions.  They end up paying enormous sums for relatively insignificant procedures because they only find out the price after the procedure.  They make poor decisions on which health insurance plan actually provides value for them because they don't understand medicine or the medical system.  There simply isn't room for practical and effective comparison of prices and benefits when it comes to medicine (especially emergency medicine!) in people's lives.

In the case of health care the only rational choice to maximize the greater good of people is for the government to provide a default option.  They keep prices in line and avoids people making catastrophic mistakes with their health which the government ends up paying for anyway.  Simply put, free competition is a fine thing (and there isn't enough of it in many, many sectors).  However, it doesn't always work and worshiping it as a universal source of goodness is not appropriate or effective.


  1. So I assume you are pro-Obamacare.

  2. Not exactly? I think a full nationalized healthcare system would be best. There are all kinds of terrible things about Obamacare though and honestly I can't figure out if it is actually a good thing or not. I like giving everyone coverage but this particular method is such a mess.

    So I suppose my answer is that I think that Obamacare is a trainwreck but that it might well be a better trainwreck than the system before it.