Writing for Forbes, Dean Zarra takes on Paul Krugman and his position on Medicare. You can read the full article here.
Zarra’s point is that the free market system can work in the health care system. He makes his case in part by illustrating the following:
In a free market system, prices perform that role. I might want a Ferrari, but the price makes me realize I don’t really need it. This is the underlying principle behind the typical “demand curve”: demand goes down as prices go up, and visa versa. Note that this is demand that I actually act on — my wants might remain constant regardless of price. If in fact I truly need something that is very expensive, I have to make choices about how to allocate my resources to raise the funds.
Where he heads with his thinking is that high deductible health plans save money because they force people to make economic decisions about receiving health care. He and others point to slower growth in health care premiums for high deductible health plans. It’s hard to argue that if a family has a $5,000 deductible before collecting one cent in reimbursement it won’t attempt to avoid as many costs as possible. And even if it doesn’t and pays for those costs, the plan still saves money because it has shifted that $5,000 to the worker. This aversion to spending on medical care [and here I mean relatively routine care] is clearly more prominent the lower the income of the insured. In other words, a $5,000 deductible is a financial burden whether the money is to be spent on an office visit or open heart surgery.
While it is true that the patient’s near total insulation from costs is a factor in our current cost crisis, this idea that the free market system works as well on health care as on an automobile is, shall we say, questionable. I don’t want open heart surgery or a knee replacement or IV therapy for Lyme disease, but I sure as heck may need one of those. My demand (need) for those services doesn’t go down as prices go up. On the other hand, with a high deductible health plan or government intervention (think any form of rationing) my ability to receive what I need may go down.
About those choices, which choice do I make to allocate my resources to come up with the $5,000 for my hip replacement? I suppose if I give up food, I won’t need the surgery.
There is far more to all this than free markets, the key is to change the system so that only the required (truly needed) care is provided in the most efficient manner possible. The patient cannot make that determination in any meaningful way. In addition, pricing of those services can no longer be a game of discounts, networks and other mysteries beyond the patient, but a uniform payment model. Every payer, private or public pays the same for a given service (adjusted for demographics). Providers can charge as they like and greedy or inefficient providers will fall by the wayside. If you think this is a radical idea; in fact it is not that much different from the way insurance operated in the 50s and 60s when there were fixed fee schedules.
Rather than block my access to care with a huge deductible, let me know what you will pay, point me toward quality providers (this implies good measures along with ongoing utilization review), tell me what they charge and let me decide how much I want to pay for something I perceive of value beyond the allowed fee. If I can’t afford to pay an additional amount, I still have access to quality health care albeit with a bit less choice.
To say that free markets are applicable to ones desire for a Ferrari (I’ll settle for a Mercedes) and a hip replacement in the same manner is economics gone wild…what’s new?
Related articles
- High Deductible Health Plans are not the solution. It is not the patient who can manage health care. New study finds skimping on preventive care. (quinnscommentary.com)
QUINNSCOMMENTARY 