Arnold Kling  

Kevin Drum's Turkish Bazaar

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Arnold Kling, who thinks the healthcare biz need less insurance and more free market capitalism in order to drive down costs and force people to buy only the care they need. I doubt it. More likely it would result in what I saw today: medical offices becoming more like Turkish bazaars (or used car dealerships), filled with distraught patients trying to decide whether they can afford a crown today or if they should wait and run the risk of needing a root canal later. No thanks.

To which I plead: Guilty!

Just today, I saved money on a drug prescription, thanks to the Turkish Bazaar. What happened was that my doctor had prescribed a patented antibiotic. I asked if this was medically necessary relative to just using a common generic. He explained the difference, we agreed that it was minor, and we went with the generic. It cost 95 percent less. If only Medicare had that kind of negotiating power!

You may be thinking, "That's ok when you're dealing with an evil, impersonal drug company. But you can't negotiate with a human professional, can you?"

Well, also this week, the econ department at George Mason contacted me about teaching intermediate macro. My first thought was to come back with the car salesman's line, "Just how much were you thinking of spending today?" But instead I named my price. GMU said that they could not meet it. Fine. The Turkish Bazaar works.

UPDATE: I should have thanked Zach Wendling for the pointer to Kevin Drum's piece.


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TRACKBACKS (2 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/631
The author at In the Agora in a related article titled Consumer-Driven Health Care III writes:
    I was once very enthusiastic about the potential of market forces to control the costs of health care in the US, even going so far as to put my money where my mouth is and open an HSA. My enthusiasm... [Tracked on January 19, 2007 9:02 PM]
The author at Constrained Optimization in a related article titled Doctors as Car Dealers writes:
    In this post by Arnold Kling, he quotes Kevin Drum’s fear that with privatized health care, medical offices will turn into used car dealerships. Fine, let’s accept this characterization as true. The danger of receiving a lemon is minimal ... [Tracked on January 22, 2007 12:50 PM]
COMMENTS (6 to date)
Ajay writes:

I don't know why you bother arguing with idiots like this guy and Holt. There must be some intelligent voices on the left that are actually worth arguing with. Although with the evidence of Drum, Holt, and Krugman, maybe not.

However, while I support the privatization of health care, I don't think it will end up as a turkish bazaar. As everybody on the left will point out, the stakes are too high. They believe that the doctor is the only one who will have the patient's best interest in mind and be informed enough to choose the best treatment. This is patently false, as anybody who has been in a doctor's office can testify and as Drum did in his own story. Like any economic agent, the doctors are interested in maximizing their revenue and will skirt all the ethical lines they can to do so, with an eye towards malpractice suits as the big stick to avoid. No wonder they're so in favor of limiting malpractice liability.

The insurance companies can be the third party that steps in and helps the patient choose the best treatment for them. However, because of disincentivizing regulation and their own moral and intellectual bankruptcy, they have not done this. Their role in the future will be minor, relegated to catastrophic insurance, as Arnold points out. The question is who will step in and make sure the patient gets the best treatment? I believe a whole new medical broker profession will rise up to take their place. These brokers will collect information on treatment, prices and outcomes and advise patients on their best options. Right now, the doctors do not collect any information on patients in any meaningful way because they profit from their patients' ignorance. Have you ever looked at the computers in a doctor's office? They run highly profitable businesses yet they would not be out of place if they were still in the 1980's. EMR has never taken off for precisely this reason. The brokers can point patients to the best doctors for their problems and collect their treatment, cost, and outcome data in a central location. Future patients can then benefit from this aggregation. They will play the role that those on the left, in their ignorance, imagine that the doctors do now. While nobody has laid out a case for this new 3rd party yet, I believe they will be an integral part of a new free-market healthcare system and allow free market advocates to counter the left's argument that nobody can fulfill that role but the doctor, combined of course with their beloved solution to every problem, the government.

napablogger writes:

My Dr.put me on medicine for diabetes, and it was $90 a month. I complained to him about how expensive it was, and he said, isn't your insurance paying for it? I said yes, but I have a deductible and besides I don't want to run up my bill because I think they will raise my rates. Isn't there any generics I could take? Finally he said, well, there is an 8mg size that costs $130, (my size is 4mg) and you could get those and break them in half, thus reducing the cost to $65 a month. I said great and that is what I am doing. But I realized that no one ever says stuff like that to him and he would never have thought of it unless I made him think about it.

I am always on him about cutting costs like this, and he always gives me these funny looks, like, why bother? Well, because the US economy is going down the tubes because not enough people think about health care this way? Possibly?

Robert Schwartz writes:

Further evidence for my thesis that modern liberalism is driven by aesthetics, not Salus Populi.

Chicagodoc writes:

Fundamentally, I see the issue as one of misaligned incentives. Medicare/3rd party payers all reimburse for "doing something" ergo our whole DRG/APC/CPT based reimbursement where a physician is basically rewarded for performing a procedure or a "visit". Basically if healthcare providers try to do the right thing, they invariably lose $$ (see article about Virginia Mason Hospital in the WSJ on 1/12). So basically every doc in the US is looking for ways to "do more" --be it order tests, prescribe a drug, perform a surgery--because his/her take home at the end of the day is how many of these he can do.
Word of advice for "napablogger" - I am an MD (surgeon); an 8 mg sustained release pill broken in half is sometimes not comparable to a 4mg tablet. The capsule coating ensures that the drug is released in a timely fashion over a 24-hour period. So breaking a 8mg sustained release tablet MAY be dangerous as the 4 mg is not released in a sustained manner. Please investigate before you engage in this strategy.

Bill Conerly writes:

My nephew has a surfing accident; lifeguard bandages a cut and says go to emergency room for stitches. Neph's girlfriend is smart, gets on phone for price quotes (cause surfers don't have jobs or buy insurance), finds an occupational health clinic that charges 2/3 less than a hospital ER for stitches.

Nephew's wound healed, no scar, but, unfortunately, he got a job. No longer price-sensitive, not much surfing.

Zach Phillips writes:

It seems to me that an "open market"a approach to health care would only be benificial to those who are financially secure enough to be able to play the field. When there is a large price range of possible providers on the market, I feel that there would always be a group of people who could only go to the cheapest possible facility.

This works in a sense that it provides great flexibilty, because the cost conscious group that im describing may have been paying more for health care in the past, but it also raises questions about the quality of medical care at the cheaper facilities.

I personally feel that everyone deserves to have the neccesary treatment performed by a qualified professional. I would hate to see such a vast quality gap as to have one facility stitch you up and another facility hand you the needle and thread.

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