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You don't think people respond to prices? Consumers are not perfectly rational, but that's a bit of a straw man argument. On average, in the aggregate, they do

You don't think people respond to prices? Consumers are not perfectly rational, but that's a bit of a straw man argument. On average, in the aggregate, they do respond to incentives. On average, in the aggregate, a first-party consumer payer is more likely to be price sensitive than a consumer purchasing medical care by way of a third-party employer health plan. The fact that most consumers don't fit some perfect model doesn't seem particularly relevant. Finally you say: "Health purchases are not rationally economic. They are made on other considerations like trust in the doctor and increasingly on patient evaluations of treatment options." Purchasing based on quality is not "rationally economic"? Have you studied any economics at all? That's just ignorant. You don't know the meaning of the words you are using. This is why I stopped arguing with people on the internet. Edit: Yes, this is a little mean and not within the style guidelines of Hacker News, but you will have to excuse me if I am not impressed by yet another person "disproving" the entire discipline of economics with the pseudo-intellectual observation that people make decisions on considerations other than price, as if that fact had been overlooked by every economist for the last three centuries.

GHFigs 17y ago
You put the word disproving in quotes, but the parent post did not use that word or claim to be disproving the entire discipline of economics. Your knee-jerk reaction here typifies why so many avoid studying the subject at all. Also, that "psuedo-intellectual observation" won Herbert Simon a Nobel Prize (in Economics) in 1978. I don't see how it's far-fetched or "ignorant" to suggest that healthcare decisions are made by boundedly rational satisficers rather than perfectly rational optimizers.
russell 17y ago
Actually my degree is in economics. When I got it, the arguments were in terms of "utiles" instead of dollars. A utile would encompass quality, but was such a nebulous concept that it was of very little practical use. So when I said "rationally economic" I was speaking in terms of dollars, which you can measure and not utiles or feelies which you cannot. I dont think that giving everyone an HSA is going to give Friedman's desired result of lowering health care costs, because it depends on people making dollar based decisions. I think improvements in the cost structure will be made the monopolistic components of health care, including drug pricing, and reactions to insurance optimizations like factory medicine. I made the decision to switch from economics to programming a long time ago, pretty much for the reasons I gave above. I WAS expecting a scientific approach and pretty much got mumbo jumbo like Friedman's essay. And if you think things are very much better, how come Greenspan and the quants and politicians lead us into this economic disaster we have now. I will admit that my attention to theories economic since then have been superficial, and great strides in understanding may have been made, but I dont see it yet.
mellis 17y ago
Health insurance is a difficult thing to price. Do you know the probabilities that you will need treatment for any particular condition? Can judge how much more you should pay for a policy with a million dollar limit on total reimbursement than one with a $500,000 limit? Unlike most goods, we don't get lots of chances to evaluate the quality of the product and then switch providers if we're not satisfied. Once you realize your health insurance isn't good enough, you're probably already in trouble. There are a lot of factors required to ensure the proper performance of a free market, and health insurance fails to satisfy many of them.
- mhb 17y ago
  You don't know any of these things for car insurance either. That's what Consumer Reports and their ilk are for.
  - mellis 17y ago
    Car insurance is simpler than health insurance. There are fewer types of covered conditions, and it's easier to make direct comparisons. Health conditions are more numerous and vary more depending on the individual in question. It's also easier for car insurance companies to make predictions about the expected costs for a customer. People buying health insurance individually face increased costs because of an assumption that those seeking coverage are more likely to need it. In general, this is an area in which the conditions required for an efficient free market do not exist. And, this is one reason why, as Friedman notes, those countries with universal single payer systems spend less than the United States, which is closer to a market system (however imperfectly). For more information, see, for example: http://www.americanprogressaction.org/issues/2009/03/administrative_costs.html http://www.americanprogressaction.org/issues/2009/03/adminis...
    - mhb 17y ago
      I find it hard to believe that the government can make a decision that is better on any metric than the consumer whom it directly affects. There is a fundamental problem with medical insurance though. Insurance only works because of uncertainty about the future. As information about individuals' medical conditions becomes more detailed, this uncertainty is reduced. For that reason, it seems like, ultimately, this has to lead to the distasteful prospect of some kind of universal insurance that people acquire at birth. As knowledge increases, every condition becomes a preexisting one. (Except for injuries due to accidents)

GHFigs 17y ago

You put the word disproving in quotes, but the parent post did not use that word or claim to be disproving the entire discipline of economics. Your knee-jerk reaction here typifies why so many avoid studying the subject at all. Also, that "psuedo-intellectual observation" won Herbert Simon a Nobel Prize (in Economics) in 1978. I don't see how it's far-fetched or "ignorant" to suggest that healthcare decisions are made by boundedly rational satisficers rather than perfectly rational optimizers.

russell 17y ago

Actually my degree is in economics. When I got it, the arguments were in terms of "utiles" instead of dollars. A utile would encompass quality, but was such a nebulous concept that it was of very little practical use. So when I said "rationally economic" I was speaking in terms of dollars, which you can measure and not utiles or feelies which you cannot. I dont think that giving everyone an HSA is going to give Friedman's desired result of lowering health care costs, because it depends on people making dollar based decisions. I think improvements in the cost structure will be made the monopolistic components of health care, including drug pricing, and reactions to insurance optimizations like factory medicine. I made the decision to switch from economics to programming a long time ago, pretty much for the reasons I gave above. I WAS expecting a scientific approach and pretty much got mumbo jumbo like Friedman's essay. And if you think things are very much better, how come Greenspan and the quants and politicians lead us into this economic disaster we have now. I will admit that my attention to theories economic since then have been superficial, and great strides in understanding may have been made, but I dont see it yet.

mellis 17y ago

Health insurance is a difficult thing to price. Do you know the probabilities that you will need treatment for any particular condition? Can judge how much more you should pay for a policy with a million dollar limit on total reimbursement than one with a $500,000 limit? Unlike most goods, we don't get lots of chances to evaluate the quality of the product and then switch providers if we're not satisfied. Once you realize your health insurance isn't good enough, you're probably already in trouble. There are a lot of factors required to ensure the proper performance of a free market, and health insurance fails to satisfy many of them.

mhb 17y ago
You don't know any of these things for car insurance either. That's what Consumer Reports and their ilk are for.
- mellis 17y ago
  Car insurance is simpler than health insurance. There are fewer types of covered conditions, and it's easier to make direct comparisons. Health conditions are more numerous and vary more depending on the individual in question. It's also easier for car insurance companies to make predictions about the expected costs for a customer. People buying health insurance individually face increased costs because of an assumption that those seeking coverage are more likely to need it. In general, this is an area in which the conditions required for an efficient free market do not exist. And, this is one reason why, as Friedman notes, those countries with universal single payer systems spend less than the United States, which is closer to a market system (however imperfectly). For more information, see, for example: http://www.americanprogressaction.org/issues/2009/03/administrative_costs.html http://www.americanprogressaction.org/issues/2009/03/adminis...
  - mhb 17y ago
    I find it hard to believe that the government can make a decision that is better on any metric than the consumer whom it directly affects. There is a fundamental problem with medical insurance though. Insurance only works because of uncertainty about the future. As information about individuals' medical conditions becomes more detailed, this uncertainty is reduced. For that reason, it seems like, ultimately, this has to lead to the distasteful prospect of some kind of universal insurance that people acquire at birth. As knowledge increases, every condition becomes a preexisting one. (Except for injuries due to accidents)