Does “the market” work in health care?

There are a number of reasons the “free market” doesn’t work in health care.

The first and most obvious is that we don’t really “shop” for health care services in the same way we shop for a car, for dish soap.

Secondly, there is often a ‘disconnect” between the payer for the service, an insurance company, and the receiver of the service, the patient.

In a true market, you buy what you receive. You make a decision between quality and cost, you try to maximize the one, and minimize the other.

An insurance company does not have that same dynamic when buying health care. They want to minimize what they pay, and are only concerned with quality when it increases what they have to pay; i.e., when it impacts profits. They spend more to protect profits (fighting doctors with paperwork) than would a patient who is more concerned with quality. Disconnect.

As a consumer who does not pay the doctor, you don’t care what the insurance company has to pay, you simply want the best possible care available. Disconnect.

Senator Ben Westlund says the consumer has even less information when buying health care than they do when buying a car, because “of the complexity of the issues, the complexity in everybody’s life.” Disconnect.

Westlund is comfortable with a system that dictates what services are available, and how much they cost. He says that there are areas of Oregon, notably the Medford and Bend areas, where back surgery is prescribed up to 10 times as often as in other areas.

Even though there is evidence that noninvasive (nonsurgical) treatment is more effective, and costs less.

“Isn’t that a more effective use of the health care dollar?” he asks.

Westlund says that doctors will prescribe unnecessary MRIs to pay for MRI machines or to turn a profit. He would like to intervene here in the market as well.

John Kitzhaber has said we need to “realign financial incentives to ensure the transition to a more efficient delivery system.” (Read it here).

We don’t know if they are right, and we like market-based solutions that encourage efficiency and choice. At the same time, if the market can’t work in health care, we need a solution that minimizes the cost, financial and social, to the Oregon community.