Thursday, October 25, 2012

The Health Care Paradox and Information Asymmetry


Let me begin to respond to your elegant query with (yet another) story. I have a job opening in my little operation and yesterday I interviewed an outstanding young man to fill the post. During his training he's stopped at all the right places and got himself a fancy spot with a big practice group on our gold coast. He's making money hand over fist but he can't stand the corruption of private practice, the endless testing and billing and churning. Practice is a business, and the purpose of a business is to maximize its profits yes? Now you will say, perhaps, that all we need to do is to get rid of the perverse incentives of insured fee-for-service and this order of things will go away as consumers make rational decisions and drive down costs. But the doctor-patient transaction is a archetype of information assymetry in a market transaction between principles. If I, the provider, tell you, the consumer, that you need a $1200 picture of your heart every 6 months when you've just (G-d forbid!) had a big heart attack , or $100,000 cancer drug when you're dying (double G-d forbid!)of cancer , you do not have the wherewithal at any level to decide I am wrong. So this is not a market that has much chance of working efficiently. I ask you, respectfully, to show me any example of a  free market health care model has been tried and shown to be effective. If you answer, cogently, that it hasn't been tried, then I respond, inevitably, that there is a reason why.

I, by contrast, can present multiple examples of regulated healthcare models that do a pretty good job of providing care that meet basic metrics and are not bankrupting their nations' economies. What all of those systems have in common is that they ration. They ration because left to their own devices, doctors will sell all  the healthcare they can and patients will buy whatever doctors tell them to.  The specifics of rationing vary widely, but they are ubiquitously present. We are no exception. We ration by determining that certain classes of our citizens receive either inadequate or no healthcare, or do so at the cost of economic ruin. A return to the status quo will surely accelerate these circumstances.

I don't much like Obamacare. Perhaps I am naive to think it will morph into something better, especially with the endless, vile pandering to older voters that both political parties engage in. But to repeal it without a well thought out alternative in place (and there may be some out there), is, IMO, a form of national suicide.

Sorry if I'm touchy. I'm getting nervous about the outcome a week from Tuesday. I'm not nervous about who the winner will be. I'm nervous there will be no clear winner at all...



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