Wednesday, November 13, 2013

On Market Based Health Care

Here's Uwe Reinhardt on cost sharing in health care:

"[T]he often advanced idea that American patients should have “more skin in the game” through higher cost sharing, inducing them to shop around for cost-effective health care, so far has been about as sensible as blindfolding shoppers entering a department store in the hope that inside they can and will then shop smartly for the merchandise they seek. So far the application of this idea in practice has been as silly as it has been cruel. "

(Thanks to Austin Frakt for the reference)

This reminds me of something Paul Krugman said a while back:

"There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence."

I can think of a few real world examples of more or less free market (or consumer based) health care:

1.) In the USA, cosmetic type surgeries like Lasik Eye Surgery (look here). Results seem to be fairly positive.

2.) Abroad, Singapore and, to a lesser extent, Switzerland use significant amounts of cost sharing. These systems aren't exactly "market oriented", but consumers have a lot of "skin in the game" compared to other systems (including our own system). The results (here and here). On the whole, results here seem to be fairly positive as well.

Obviously, just because a certain policy is good in cosmetic surgery or small, wealthy, and healthy countries does not mean it is right for an entire nation like the USA for all types of care. However, the limited evidence in "free market" medicine seems to be pretty favorable. The problem is that it is limited.

Still, it's a far cry from "no examples of success", as Krugman claims. 

Granted, there is a lot more evidence from non consumer based health care systems like Canadian single payer, UK socialized medicine, or even USA multi payer because we have a lot more experience with these systems. However, the evidence here seems to be quite negative for all these systems. Indeed, the only way you can paint a remotely positive picture of virtually any health care system in the developed world (excluding Switzerland and Singapore) is by comparing to a more dysfunctional system (typically the USA).

The evidence on free market health care is, admittedly, very limited, but it also is favorable. Compared to the overwhelming evidence of failure in every type of non consumer based health care system, it seems like it may be worth pursuing.
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