Market Based Health Care Patent Reform

This is from an earlier Medicynic (Jan 4, 2009). It’s here because of Reinhardt’s continuing discussion in economix of market based health care.

George Will and Mike Leavitt think buying health care should be like buying a car:

“Leavitt says that until health care recipients of common procedures can get, up front, prices they can understand and compare, there will be little accountability or discipline in the system: “In the auto industry, if the steering-wheel maker charges an exorbitant price, the car company finds a more competitive supplier. In health care, if the medical equipment supplier charges an exorbitant price, none of the other medical participants care.””

Price should be part of the health care equation. The cost of everything should be up front and open to scrutiny. Insurers should bargain for the best deal for their customers. These negotiated prices should be common knowledge so that all needing health care can benefit.

What’s missing from Mr. Will’s analysis is an understanding that patients are not in a position to shop health care. Finding the “best price” for emergency care and most other health care needs is simply not possible and the patient has to take whatever is available from the local supplier at the demanded price. Furthermore, health care is not like other commodities that people can take or leave as they wish. Buying a car or even a new home is an optional expenditure, health care is not. Yet health care costs/year for an individual can now approach and exceed these large expenditures.

Patient’s health care decisions reflect their anxiety, personal bias, financial status and understanding of the situation. This last factor should not be underestimated. Patients in the majority of instances cannot fully understand the risks and/or benefits of treatments and the alternatives, much less concern themselves with cost efficiency data. He/she is thus greatly influenced by physicians, manufacturers, insurers, etc. all with superior knowledge of the situation. All these advisors have extreme conflicts of interest that interfere with unbiased advice and undermine the notion of a “free health care market”–it doesn’t exist.

Our health care market doesn’t encourage efficiency, but rather it promotes over utilization. Providers and suppliers make more when there is consumption of health care services and products. One only has to experience inaccurate and highly deceptive TV ads for pharmaceuticals and procedures to understand that consumption is the name of the game, not cost efficiency.The failure of free market forces in health care is graphically demonstrated in the insurance market. Insurers, in the U.S., spend an estimated 30% of revenue on administrative costs while other industrialized countries manage with between 7 and 15% for administrative costs–that’s over 100 billion dollars wasted. Our expenditures/capita are similarly elevated. Even with these excess expenditures, 50 million of our citizens are uninsured. CEO’s of insurance companies understand they are in business to make money and not deliver and/or pay for quality economical care. Much less provide health care for all.

There is even worse inefficiency in the pharmaceutical industry where products are given generation long monopolies (patents) that eliminate price competition. Companies price drugs based on the severity of the condition rather than their costs of development. They figure more seriously ill people can be coerced into paying more. They have been correct thus far. In the U.S. free markets are interpreted to mean free to make maximum profit.

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