He assumes that, if people have to pay their own money, they are going to make rational economic decisions about health care purchases and will shop around for

He assumes that, if people have to pay their own money, they are going to make rational economic decisions about health care purchases and will shop around for the best price. This is such utter crap that it is hard to believe that an open minded economist would utter it. 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. If you have a kid with a high fever, you dont start googling for the best price. You could reasonably compress "rational economic decisions" to be ones considering two factors: price and quality. It sounds like you're arguing that people are often willing to pay a lot for high quality healthcare. I think you're correct that people seek high quality healthcare, especially for their children, but I disagree that this implies the consumer isn't making a rational economic decision. The economic term you're looking for is elasticity. It sounds like you're claiming that demand for high-quality healthcare is inelastic. Inelasticity is a well-understood concept, not one that destroys economic analysis. My impression is that people are cost-conscious when purchasing healthcare. I myself have shopped around for various services. A friend of mine shopped between services in Panama and India for surrogate pregnancy services, and cost was a factor. I've heard that there is a lot of traffic across the Mexico-USA border, and the Canada-USA border, of people seeking cheaper prices. My decisions to purchase from online pharmacies have been driven by price comparisons, and online pharmacies are very popular so I doubt I'm unusual. These things indicate that cost is a factor at least for some people, when considering healthcare expenditures. I think that Milton Friedman's perception of cost-conscious health consumers was correct.