Free market health care

[Chmee]

Alex Tabarrok at marginal revolution has a good observation.

Seeing is believing (in the free market)
Everywhere we look it seems that health care is more expensive: prescription drug prices are increasing, costs to visit the doctor are up, the price of health insurance is rising. But look closer, even closer, closer still. Don't see it yet? Perhaps you should have your eyes corrected at a Lasik vision center.

Laser eye surgery has the highest patient satisfaction ratings of any surgery, it has been performed more than 3 million times in the past decade, it is new, it is high-tech, it has gotten better over time and... laser eye surgery has fallen in price. In 1998 the average price of laser eye surgery was about $2200 per eye. Today the average price is $1350, that's a decline of 38 percent in nominal terms and slightly more than that after taking into account inflation.

Why the price decline in this market and not others? Could it have something to do with the fact that laser eye surgery is not covered by insurance, not covered by Medicaid or Medicare, and not heavily regulated? Laser eye surgery is one of the few health procedures sold in a free market with price advertising, competition and consumer driven purchases. I'm seeing things more clearly already.

Thanks to Jonathan Van Loo for research assistance on this post.

[Zaelath]

In other words, your medical insurance system is raping the general public for all it's worth. Thank you, Captain Obvious.

[Chmee]

In other words, your medical insurance system is raping the general public for all it's worth. Thank you, Captain Obvious.

No, in other words government regulation is distorting the market and causing higher prices.

[Spang]

when did he quit Jeopardy?

[Zaelath]

The government regulates insurance premiums and payments? If so, they're doing a shit house job. Your insurance system is in desperate need of regulation, like not allowing a massive reduction in the tariff for the insurance company that basically forces everyone to be insured...

[Aaeamdar]

Insurance regualtion, including rates, is done at the state level. Some states (New Jersey as an example) have extensive regulations others have next to none.

Here is a link to a comprehensive list of those regulators and the regulators web sites. From tehre you can conduct reasonable extensive research int o the matter. http://consumeraction.gov/insurance.shtml

As a general rule, in highly regulated states, the insurance rates are higher and the insurance companies make less profit. recently, only a last year change in regulations prompted several large insurers not to leave the State of New Jersey.

That said, your tangent onto insurance is most not relevant to the conversation. The original example given (laser eye surgery) is a medical procedure not covered by insurance (stupidly, I might add, given that contacts and eye visits are generally covered and the cost of eye surgery is dwarfed by the anual costs of alternateive remedies after about 2 years.)

[Chmee]

I also probably used too specific a word in regulation, although certainly regulation is some of it. But other government activities also have a large impact. Particularly the tax code which encourages our third party payer system which insulates health care buyers from the direct costs and the fact that through medicare and medicaid the government is the buyer for a pretty large portion of the healthcare market.

[Voronwë]

to suggest that the risk of lasik surgery is reflective of the risks involved in the average surgical procedure - therefore that the liabilities are comparable - is simply innaccurate in my opinion.

lasik surgery happens to be something that thanks to a technological innovation is relatively easy to do, non-invasive, requires no anesthesia, does not induce stress responses in the body, does not expose the patient to secondary infection, and happens to work a very high percentage of the time.

i would argue that Lasik is just about as "best case" scenario in terms of medical procedures as one could choose to as an example to say that free market health care "works".

[Lalanae]

It seems to me that lasik decreased in price as more doctors learned the procedure and it became more available. I remember when lasik was first available and there were only 2 clinics in Houston who performed the procedure. I'd bet it was a hell of a lot more expensive back then.

[Aaeamdar]

Lasic is not the only example, however. There are clinics popping up across the country, including several in Los Angeles (from NPR) that are run by Nurse Practitioners. They use diagnostic software tools to assist them and they perform all of the basic areas of medical care. This includes, by the way, vending machiens with prescription medication. They are performing these services far more cheaply than does the doctor/insurance driven standard route. They are too expensive for anyone with insurance (e.g a visit is apx. $50 as opposed to apx. $10 someone with a co-pay insurer would pay), but far less than the cost of the co-pay plus the insurance. Currently the AMA is exerting political pressure to regulate (e.g. shut down) this budding industry. Their arguemnt - "safety." The only real "safety" involved, however, is the safety of the medical oligopoly.