Arnold Kling  

Health Care Technocrat

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Doctors' prescriptions for health care tend to conflict with economists'. In this essay, I take on the proposals made in The New Republic by Dr. Arnold S. Relman.


In a free market, consumer sovereignty and competition tend to create instability when sellers learn to game the system too well...

In a technocratic system, it is more difficult for consumers to exercise countervailing power. Innovative competitors are often precluded by regulation. Suppliers tend to apply concentrated lobbying power to protect their interests, while the diffuse interests of the consumer are poorly represented in the political process.

Centralized, regulated systems look good on paper, and they may be effective as they start. However, market systems learn faster, because competitive innovation prevents a market from getting captured by the incumbents who have learned how to game the system.


For Discussion. Relman believes that physicians would practice better medicine if they were insulated from market forces. Comment.


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COMMENTS (14 to date)
Mcwop writes:
For Discussion. Relman believes that physicians would practice better medicine if they were insulated from market forces. Comment.

I have read Relman’s pieces on health care. It seems to me that his proposals are designed to solve the problems of equality (everyone gets the same care), and providing insurance to all people. To make this goal more palatable he claims that his solutions will also solve efficiency, cost, quality of care, and some other perceived problems (He provides little evidence). However his writings are sometimes contradictory. If managed care technocrats are incompetent, then why should I believe that government technocrats won't be imcompetant?

Further, in his writings he complains about the rise of for-profit medicine. Why has the rise of for-profit organizations prevented doctors, who might agree philosophically with Relman, from organizing into not-for-profit medical providers that can uphold the highest ethical standards at no profit? By his analysis, such an organization will provide such great care that nobody in the right mind would go to a for-profit organization. The organization would be both the mutual insurer and the provider of services. There is absolutely nothing stopping these organizations from being formed. Where are these organizations (I bet some exist)?

tipper writes:

It depends on what physicians means by "market forces." I suspect what they mean by "being insulated from market forces" is not having consider how they will be paid and who will pay for the medical services they deliver. They will just get the money they want for providing the services they feel are needed. The problem for physicians is that someone or some entity will be paying and the someone or some entity may not believe what they have to pay is worth the benefit, or may not have the money to pay. This holds whether we're talking about insurance companies paying with premium revenue, governments paying with taxpayer dollars or individuals paying with their own money. Canadian physicians may be free from "market forces", but they are not free from government/political forces. There is rarely enough money to practice medicine as they would like.

So, it's kind of a moot question. If not market forces, then there will be other forces.

tipper writes:

I forgot. I wanted to include my tagline for Relman's healthcare plan in the post above:

One giant HMO . . . run by bureaucrats.

Lancelot Finn writes:

There's no question that this is a market with serious information imbalances. I know hardly anything; the doctor knows everything. If he says I need Treatment X and it costs $1000, who am I to say no? But more serious is the philosophical problem that we consider human life infinitely valuable, and most people would consider it immoral for someone to die because of cost considerations.

Ken Rogoff recently argued that health care might be the way that socialism sneaks in through the back door, despite the fall of the Soviet Union etc. Ultimately, we are still reluctant to let people die because they are unable to establish ownership over whatever they need to live. Amartya Sen made an observation akin to this as an explanation of the fact that no democracy has ever suffered a famine. That's a decent example. How many of us would remain true to free-market principles of not subsidizing the needy if it meant watching people starve? In a famine, redistribution crushes property rights.

Fortunately, food has become so cheap that we can keep everyone fed, through the market plus an informal network of soup kitchens and the like, without much difficulty. But unlike food, health care becomes more expensive over time.

Ultimately, we do not allow hospitals to turn away those desperately in need of medical help. As long as we don't, we don't really have free-market health care; and our system is likely to resemble a free-market system less as time passes. To get one, and see how it would work, we would need to allow hospitals to let sick people die on their doorsteps for lack of money to pay for medicine. Is that a moral Rubicon we're willing to cross?

Lawrance George Lux writes:

I once made the tongue-in-cheek comment that the best health care system would be One where Doctors were allowed to charge every Patient $1000 per Visit. Doctors would take excellent care to entice follow-up Visits for the original ailment, or further distress. They would also drop the Patient flat, if external costs to the Doctors were over $1000.

Patients would not be fed junk, as it's cost would come out of the Doctors' fees. Hopeless Cases would be immediately dropped, at great Savings to the system. Doctors would meet their Goal-Income without extensive measures, and so would not becomes involved with such Procedures. The last Point to be made is People would probably live equally as long, if they watched their Diet. lgl

Brad Hutchings writes:

Forget doctors. If I were isolated from market forces, I would work less and play more. Nuff said.

nick ronalds writes:

That's one request for comment that requires no comment, except perhaps that it takes a rare combination of arrogance and ignorance for the good doctor to make such an assertion and expect to be taken seriously. I lived in Japan for seven years and one of the most common and most risible explanations the Japanese bureaucrats offered for intervening in markets is that "too much competition can be confusing to consumers." A diagnosis any producer of services could surely love.

dsquared writes:

So if I've got this right, Arnold, your position is either that doctors should be exposed to all market forces except lawsuits, or that the common law on gross negligence is not a "market force"? Pardon me when I say that this does not make a whole lot of sense to me.

John writes:

I have often had much the same thoughts that Lancelot Finn expresses so well above. Aside from cosmetic surgery (other than correction of serious disfigurement), we Westerners are unwilling to view health care as consumption; we see it instead as the exercise of an inalienable right. That worldview has become quite expensive.

In response to Prof. Kling's original question, I agree with what most posters have said: I don't see how removing competition could possibly cause doctors to perform better. By way of example, I offer my experience as a lawyer in private practice. Even though licensing keeps me somewhat insulated from competition, the market for legal services is sufficiently vigorous that I must continually examine whether my work is as good and efficient as that of my competitors, who would be all too happy to take my clients (as I would be to take theirs). And it's no secret among lawyers that those who go into government work (and thus feel no market pressure) are -- GENERALLY speaking -- less talented than those who pursue private practice.

Arnold Kling writes:

"So if I've got this right, Arnold, your position is either that doctors should be exposed to all market forces except lawsuits"

I am willing to get rid of medical malpractice, but only by substituting something more expensive (and socially beneficial) in its place: real evaluation of doctors, by independent, competent analysts.

I do think that evaluation of quality is at the crux of a lot of medical issues. I think that doctors will be able to resist rigorous quality assessment to the extent that health care is paid for by the government rather than by markets.

David Thomson writes:

“Centralized, regulated systems look good on paper, and they may be effective as they start. However, market systems learn faster, because competitive innovation prevents a market from getting captured by the incumbents who have learned how to game the system.”

I agree completely. The provider of health services should be compelled to constantly improve while the buyer is encouraged to obtain the best deal possible. Only a system premised upon free market principles can be successful. It simply cannot be “gamed” forevermore.

Jon writes:

Arnold writes:

I am willing to get rid of medical malpractice, but only by substituting something more expensive (and socially beneficial) in its place: real evaluation of doctors, by independent, competent analysts.

But now isn't that concentrating the ethical and legal decision in the hands of a bureaucracy of technocrats? These are the same bureaucrats you don't want running the health care system.

The current system has the opinions of doctors and competent analysts involved in the decision making process. Just the final decision of which technocrat is correct is in the hands of the same group of people who make up the consumers.

If you believe that overall consumers decision making ability is good enough to make the market reasonably efficient, then you should believe that their decision making ability is good enough to serve on the jury. Furthermore, you the juror's economic incentive points towards denying a claim, unless there is enough evidence to show that the deterence would protect them, as the jurors ultimately bear the costs. When I served on a jury, every member was well aware of this.

Arnold Kling writes:

Jon,
Think of the independent, competent evaluators of doctors as auditors, not a jury. They would audit preformance and report on it. The public would have access to the audit reports.

The auditors would look at a random sample of all of the actions of doctors, rather than at what are today considered medical malpractice cases. And the auditors would not have any formal power to punish bad doctors. But a bad audit report, read by consumers, likely would cause sharp drops in a doctor's income.

Jon writes:

Arnold,
Your proposal is even less of a solution than I originally though; it does not even provide medical care or replace lost income for those injured by negligent practice!

Having seen plenty of cases where auditors have signed off on blatant violations of accounting rules and professional review boards that seem to protect the interests of their peers, why should we expect these auditors to give consumers an accurate picture?

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