Background: Surveys show that people are cutting back on drug purchases [link] and elective surgeries (see below) in response to the economic slowdown. The Commonwealth Fund claims that more than half of American chronic patients skip care because of cost [study gated, but with abstract]. Clearly, they think this is bad. So here's the question:
Should health care consumption be independent of
income and relative prices?
OR
Should health care consumption vary, just like the consumption of
other goods and services?
There is no economic model in which utility would be maximized by consuming a fixed quantity of a normal good, independent of income and relative prices.
Case closed!
This is the question that should have been asked and answered 15 years ago when we first started debating health savings accounts (HSAs). Unfortunately, even HSA supporters never understood what these accounts are all about. They allow people to choose between health care and other uses of money.
Greg is right. Utility maximizing individuals will vary their consumption of health care as incomes and relative prices change. And the HSA gives them a vehicle to do that.
Yeah, Ken. But what you are missing is: the people at Commonwealth (even the economists there!) don’t want patients to choose beteen health care and other uses of money.
The Commonwealth crowd doesn’t believe in utility maximization. They believe in people consuming health care, whether they like it or not.
Whatever happened to the idea of revealed preference? People reveal their preferences through the choices they make. If they choose to buy X rather than health care that means they prefer X to health care and that means they achieve higher utility or well being by consuming X rather than health care. QED
Problem, as always, is imperfect information on our part and consumers’ part. Consumers may or may not know whether they are truly making utility-maximizing choices by responding to price stimulus. Nor do we.
MOSTLY BASIC HEATLH CARE USE SHOULD NOT BE LINKED TO ABILITY TO PAY.
Cal, nothing follows from the fact that information is imperfect. The patient may not know what choice he shlould make. But none of the rest of us know either. And no one has better incentives to get the right information than the person who pays the bill and gets the services.
There are four points that nobody ever covers in the great debate over health care reform. Neither of the two choices in this survey apply to the underlying problem.
1. Our Founding Fathers did not provide, in the Constitution, any means to establish receiving medical or health care as a right.
2. Until the 20th Century, providing goods and services related to medical care (to treat illness) and health care (to support good health) was not regulated. Consequently, costs were low, competition in the marketplace provided many choices and ideas that the AMA didn’t like flourished. In this free market atmosphere, non-medically-trained (by AMA standards) people developed Osteopathy, Chiropractic, Naturopathy, Thomsonianism, nutrition-based healing practices, Eclectic Medicine (a combination AMA-type medical care and herbalism). There was the rapid growth of homeopathy (an import from Germany developed by AMA-type MDs as a rejection of AMA-type medical ideas) as well as the growth of a variety of other healing products and practices that are now the underpinnings of the so-called “natural health” industry.
3. Our current medical system was designed and is run by the AMA-inspired medical folks and backed by Big Pharma to force people to use their products and services as well as guarantee payment for them. This group has systematically condemned non-drug, non-high tech healing modalities claiming they are “unscientific”, “unproven” quackery.
4. While the AMA-type medical products and services related to emergency room care, surgery and some other high tech modalities are true miracles, the AMA-type medical philosophy has been a tragic failure when it comes to the diagnosis and treatment of chronic illness. The goal of the medical “experts” running the current medical system is to name more and more conditions that need lifetime drug maintenance, conditions often better served by natural health care means at a much lower cost.
Until we get real about why millions of Americans don’t go to MDs, don’t buy health insurance and don’t want anything to do with government-designed one-size-fits-all payment schemes, we will never be able to bring down prices, expand choices and have a fully-functioning medical and health care system in America, like we used to have before the 20th Century.
Nothing is immune from the laws of supply and demand, even (and maybe especially) healthcare. If the laws of supply and demand are artificially subverted by government fiat (price fixing or rationing), either prices will escalate or quality will decrease (or both).
In other words there is no option for “healthcare consumption” to be “independent from income and relative prices” assuming the goal is to decrease the cost of healthcare services to make them more affordable to more of the population.
Even in a “universal” government controlled healthcare system, the providers of service will have to be paid. The level of pay will determine the quality of care, etc, etc.
Lets not try to put everyone into the same round hole.. As we are all different in size and shape, we are also different in the way medical procedures and medicine affect each of us. REAL REFORM begins with competition offered across state lines and of course TORT REFORM… just these two things will lower costs through real competition and lower physican care costs and trickle down to hospital costs being more reasonable. Regulation of healthcare costs is not rocket science – but when is Congress logical??