Krugman first. He argues that a traditional free market won't work well for health care:
[Y]ou don’t know when or whether you’ll need care — but if you do, the care can be extremely expensive. The big bucks are in triple coronary bypass surgery, not routine visits to the doctor’s office; and very, very few people can afford to pay major medical costs out of pocket.
This tells you right away that health care can’t be sold like bread. It must be largely paid for by some kind of insurance.
I generally agree. We mandate car insurance, because if you hit me, and you don't have insurance, you probably don't have the cash to buy me a new car either; I'll have to pick up the tab for your actions. The same applies to health care: if you need to be admitted to the hospital, and you can't pay for it, the hospital is going to treat you anyway, and it will shift those costs onto me.
We should favor systems that move costs closer to those responsible for incurring them. Since almost no one has the means to foot the bill for catastrophic care out-of-pocket, I would argue that mandating that people carry a certain level of health insurance is actually more market-based than the model we have for the uninsured today. At least the person incurring the cost of the care would be responsible for the cost of the insurance, if not the cost of the care itself.
I think Krugman takes his point a bit too far, though, and here's where Goldhill makes an important distinction, between comprehensive care and catastrophic care. (I find Goldhill's perspective very interesting; he's both a Democrat and an entrepreneur, and his proposal at the end of his article does a good job of blending what I think are good ideas from both perspectives. This is the creativity and leadership we've been lacking in Washington.) Goldhill:
[H]ealth insurance is different from every other type of insurance. Health insurance is the primary payment mechanism not just for expenses that are unexpected and large, but for nearly all health-care expenses. ... We can’t imagine paying for gas with our auto-insurance policy, or for our electric bills with our homeowners insurance, but we all assume that our regular checkups and dental cleanings will be covered at least partially by insurance. Most pregnancies are planned, and deliveries are predictable many months in advance, yet they’re financed the same way we finance fixing a car after a wreck—through an insurance claim.
I would take this idea further, and argue that not only should we get used to footing our own bills for routine care, but that even in the case of catastrophic care, we should receive the bills, and work with our insurance companies, ourselves. If my car gets wrecked, the shop sends me the bill, not my insurance company, whether I'm in a position to pay it or not. Yes, this is likely to be a bill for hundreds or thousands of dollars, not hundreds of thousands of dollars, but I suspect that the simple act of forcing me to confront the bill, and accept the transfer of funds through my own metaphorical hands, will encourage me to consider my health care choices more carefully even when those funds are not my own in the final accounting.
Krugman:
The second thing about health care is that it’s complicated, and you can’t rely on experience or comparison shopping.
This statement I completely disagree with. I don't know a thing about cars, but I know when mine is running and when it isn't. I expect someone trying to sell me a car, or offering to service my car, to explain my problem in language I understand and to make their case about why they're the one to fix it. I also don't know a thing about cancers of the eye and face, but I know people who've been affected by them, what their prognosis was, what methods were used to treat them, and what the outcomes were. Why can't I expect the same from a doctor as I would from a mechanic: that she would share her track record with my condition and compare her prices with those of other physicians having a similar track record? Sure, I'd be even more confident in my pick of a mechanic or a doctor if I had the judgement of someone actually in their field, but then I wouldn't need to hire them, would I?
Goldhill:
[C]onsider LASIK surgery. ... The surgery is seldom covered by insurance, and exists in the competitive economy typical of most other industries. So people who get LASIK surgery ... act like consumers. If you do an Internet search today, you can find LASIK procedures quoted as low as $499 per eye—a decline of roughly 80 percent since the procedure was introduced. You’ll also find sites where doctors advertise their own higher-priced surgeries (which more typically cost about $2,000 per eye) and warn against the dangers of discount LASIK. Many ads specify the quality of equipment being used and the performance record of the doctor, in addition to price. In other words, there’s been an active, competitive market for LASIK surgery of the same sort we’re used to seeing for most goods and services.Precisely.
(Unfortunately, Goldhill then embarks on a faulty analogy, in which he compares MRIs with DVD players and relates how the latter went from being premium items to commodities due to robust competition. What he fails to consider is that the DVD player was at the same time replaced at the high end by the Blu-ray player. There will always be a premium product, and in the world of health care, for better or worse, we all believe that we're entitled to that one. I argued recently that we probably aren't, in fact, so entitled. Nevertheless, the way to make us all start realizing that, and start acting on it, is to confront us with more of the financial ramifications of our choices, not fewer.)
Krugman's final point, and my next-to-final point:
There are, however, no examples of successful health care based on the principles of the free market....
I greatly respect Mr. Krugman, and he is not typically wont to be glib, but I had to raise an eyebrow at that one. He is, in fact, correct, but not because (a) the American system is based on free-market principles and is failing or because (b) other large developed countries have tried free-market health-care financing and failed or even because (c) most other countries with non-free-market health care financing systems are doing a great job at containing costs.
Indeed, a market-based approach to health care financing has not really been tried: most of America's health care bills are already paid for by tax dollars [Journal of the American Medical Association, which unfortunately requires a subscription to access articles -- but quoted here and here]. The rest of the developed world finances health care in a way that is even less market-based than our own*. Their costs are rising too -- in the UK, faster than in the US.
The "free market" is not a black-or-white state that exists or not, and I agree with Mr. Krugman that there is no panacea to be found there. But I think we can do better than we are doing today, and this brings me to my final point. I learned about the Mr. Goldhill's article while I was listening to NPR. I get most of my news from NPR, and I help pay for NPR, because I appreciate being the customer of my news outlet. I think I get a better result than if I'm merely the product, fattened on cheap titillation for sale to advertisers. I suspect the same thing holds true when it comes to health care.
* I can't help but think that this situation is not unrelated to the fact that 12 of the 20 largest biotech companies are based in the US, while no other country has more than two. Is the health care industry one in which we more value the steady application of proven techniques or one in which we hope for rapid innovation? If the latter, what kind of pressures and incentives do we believe will most effectively drive those innovations?
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