5 ms·
Kenneth Arrow did a great analysis on efficient markets and the US healthcare industry. Basically it doesn't work the way it works in most free markets because
by hangonhn 7y ago
Kenneth Arrow did a great analysis on efficient markets and the US healthcare industry. Basically it doesn't work the way it works in most free markets because of information asymmetry (he got the Nobel for it). Even if you had price transparency, you aren't in a position to decide what treatment to buy because you're not the doctor and don't have the necessary knowledge to make that decision. The whole process is misaligned because the recipient is not knowledgable enough to make the decision, the decision maker (doctor) is not the payor, and the actual payor (insurance) is often neither of those. Efficient markets require certain preconditions to be met to work. It's true in many situations but there are some well known edge cases.
- conanbatt 7y agoI would welcome a link to the analysis you point if you wish, but this is very reductive. There are a million markets with information asymmetry and work just fine, and there are plenty of examples of cash-pay systems that work reasonably well for healthcare. I disagree with OP that the problem is price transparency, but the healthcare market in the us is intervened in ways that prevent the classic workings of a market.
- Ididntdothis 7y agoI think you are right but I still think two steps would make the system much saner: - Price transparency - One price for the same service. The practice of charging $500 to the insurance but $10000 to the uninsured needs to stop. Maybe it's fine to vary by a few percent but there is no other market where the same product costs 20x more depending on who pays. If the excuse is that this is to compensate for non payers then let's pay for this from a separate pot.
- SolaceQuantum 7y agoNone of this addresses the point- even if you have price transparency and one price for the same service, you are not educated enough to select services you need. Doubly so if an emergency happens.
- Ididntdothis 7y agoThere are plenty of situations where you know what you need and you could shop for prices if it was possible to get any reliable prices. At a minimum transparency would make it obvious to the public how crazy the pricing practices are. I agree about emergency situations.
- SolaceQuantum 7y agoIf I go for routine bloodwork do I know exactly what bloodwork to order for, or the codes to request? Do I know when to discern between MRI, Xray, or ultrasound diagnostic? I find this hard to believe.
- Ididntdothis 7y agoOften your doctor tells you what tests they want and then you go to some center where they perform the tests. It's pretty predictable in many cases.
- SolaceQuantum 7y ago"Often your doctor tells you what tests they want" This is the exact point- you do not have the education to shop because you don't even know what you need to be shopping for.