Why are medical tests so expensive? (1 Viewer)

[RobertR]

This is circular reasoning. "I will give the medical field the means to avoid market forces because they will seek to avoid market forces". The examples you cite are example of crooks (lies, theft, and corruption are hardly absent where government is involved--the OPPOSITE is true) or examples of companies (cable, phone, etc.) able to avoid the market because they convinced the "well-meaning" that they would be better off without it.

 

[Carlo_M]

No it's not circular Robert, because even though I see something wrong with the current system, the "corporate/business" route is not the only way out. It would be circular if those were the only two options, and I vacillated between the two. I don't believe either way is the way of success for both healthcare providers and patients.

No, I have my own opinion as to the way to proceed, but it would contradict the no-politics edict of HTF, and so I remain respectfully silent on that subject.

 

[RobertR]

There are indeed only two options, Carlo. Either the medical field operates under the free market, or it doesn't. It's circular reasoning to say "ok guys, I advocate letting you escape the free market because you're always looking for a way to escape the free market". Either you trust the free market or you don't. Many things people cite as examples of the "free market" are no such thing. They're examples of government favoritism, regulation, or restrictions.

 

[ChristopherDAC]

No, the question is whether there can actually be a free market. For example, electrical deregulation has been a massive failure for the simple reason that the electricity market does not approach the classical free market.
The classical free market requires that there be : a uniform product ; a statistically large number of sellers ; a statistically large number of buyers ; and complete, symmetrical information. A market which does not exhibit these characteristics is going to have significantly different behaviour than the classical free market, and the assumptions made on the free-market basis will be substantially invalid. Thus, mechanisms predicated on free-market dynamics will break down. The Enron and WorldCom collapses are examples of failure modes in such a case.

There are all kinds of different economic models which apply to different markets. If you're honest, you won't try to govern all kinds of business by the same rules, since they're not at all alike.

 

[KurtEP]

I'd be surprised if anyone could present an example of a truly free market. The reality is that markets run in a continuum from being almost unregulated to almost completely regulated. All industries fall somewhere between the two. It's not an on or off proposition.

 

[Dome Vongvises]

There's always paperwork to file.....

 

[RobertR]

I'm not arguing that the continuum you mentioned doesn't exist. I'm saying that to claim the "failure" of the free market where it doesn't really exist is wrong.

 

[KurtEP]

Going from more regulation to less regulation is as close as you're going to get. The only way that there will be true deregulation is if the fabric of society breaks down totally. Otherwise, there's always at least some regulation. In that sense, the free market can never fail, but that's just saying that some impossible ideal can never be tested. In the real world, it doesn't add much.

I'm not sure that I buy your argument about fraud being a phenomenon apart from the market, either. Some people use fraud to increase their stock price, allowing them a lower cost of capital (think places like Enron). This allows them to compete more effectively against their direct competition. Other people defraud suppliers, customers, banks and on down the line. One of the earliest reasons markets were regulated was to prevent fraud.

 

[Carlo_M]

Again Robert, I respectfully disagree. There are more than two options in this case, with various levels of involvement from parties such as the government, private industry, etc. This is not black and white and I'm not going to go into my beliefs any further because this isn't the forum for it. Kurt and ChrisDAC make highly relevant statements as to why I feel deregulating fully makes the medical industry isn't the way to go forward, but the current status quo also cannot be maintained. I still fail to see my circular reasoning.

I do not fully support the current system. Nor do I think free market is the way to proceed. There are a myriad of incremental steps in between. There is no circular logic here. (i.e. just because one doesn't support the "war in Iraq" doesn't make them a "cut-n-runner" or "unpatriotic"--and that's about as close to the political arena as I'm going to get!)

 

[Chu Gai]

Well, in the case of some tests and procedures, this seems to already be the case. For example particular blood tests, upper and lower GI series, some xrays, cosmetic surgeries, hip and joint replacements, dental work, and so forth. There's even a thriving business for such things overseas as in certain, very modern, well equipped and staffed hospitals in Thailand and India where procedures, even with travel and recupperation in stunning resort settings are a fraction of what they are here let alone the rest of the world.

 

[RobertR]

Saying "some" people commit fraud does not show it's an inherent characteristic of the market. I could just as well point out examples of corrupt politicians, regulators receiving kickbacks, handing out favors, pork barrel spending, etc., yet any argument that such incidents "prove" that fraud is an inherent characteristic of government or regulation would be rejected. Likewise, the market system is not structured on fraud. You'd have to make the rather silly argument that NO market transaction can occur without fraud.

 

[KurtEP]

I don't think we're on the same page here. Saying that there are always some people who commit fraud does, as I understand things, show that it's an inherent characteristic of the market. True, it doesn't make it the dominant one, but it's there nonetheless, and must be dealt with.

It's also true that the market system is not wholly structured on fraud or the prevention of fraud. However, fraud has probably been around as long as any kind of market existed. It has certainly been a factor in the medical profession historically, with any number of quacks and snake oil salesmen operating before regulation against the practices cropped up.

 

[RobertR]

Anyone who's read my posts on this forum for a long time knows how frequently I've argued against the snake oil going on in the high end audio industry. But you'll NEVER see me argue that the audio industry shouldn't be a free market. The key is being informed and educated about the hucksters, NOT thinking the market is the problem.

 

[KurtEP]

OK, we're apparently not going to agree about this. You seem to be taking an extremely narrow definition of what a market is, while mine is much broader. I know that some economic theorists use pretty narrow definitions of things like markets in an attempt to create a useful model, but the reality is always far more complicated.

That said, the question at hand is not one that has one simple solution, it seems to have a large number of interacting roots, and changing one will just change the nature of the problem, not fix the whole thing. A few examples:

* A lot of medicine now uses technology that would have been science fiction 30 years ago. Much of this sort of thing is expensive and complex.
* A significant portion of the population doesn't pay for their medical care directly, hence, they don't have any incentive to rationalize expenses.
* The system for medical payments is extremely complex and cumbersome. Working your way through the billing system at the average company in the medical business is a mind bending exercise.
* Malpractice, while not common, can often have dramatic consequences, that result in huge jury awards. How much would you want to be compensated if someone sawed off your foot when they weren't supposed to?
* The system for malpractice insurance is probably not optimal. Some economists have suggested that insurance should be available to the patient instead of building it into the doctors bill. Then, if the bill was too high for a particular doctor, you might suspect that something's wrong.
* There are at least some lawyers out there willing to try to litigate weak cases in the hopes of a big verdict.
* Malpractice cases are tried before juries, who can be swayed emotionally to give verdicts out of line with reality or the law.
* A lot of doctors are poor businessmen. In almost any other industry, people would be happy to give you a discount for prompt cash payment. A lot of doctors don't seem to be open to the idea, at least until recently.
* Prices in the United States are sometimes artificially high because of price caps in other markets serviced by drug companies. They have to make money somewhere.

I'm sure that there are a lot more that could be added, and I really doubt that there is any one solution that will take care of them all.

 

[Chu Gai]

Kurt, even if your premises are granted, what's the problem with shopping for some tests and procedures and getting a handle on prices and services?

 

[KurtEP]

I don't think there's any problem at all. In fact, I think a large part of the problem is that people don't do this, they just complain when they look at the bill. If people paid attention to what they paid and made some attempt to negotiate prices before hand, the system might work better. Unfortunately, for most people with third party insurance, there isn't much incentive to do that. You get the bill, shrug your shoulders and be thankful someone else is paying it.

PS, I don't take my premises as granted, they are just pieces of the puzzle I've picked up visiting various companies and paying attention to the issue over the years. I just tossed them out there to illustrate that the issue is very complex and doesn't have a simple answer.

 

[ChristopherDAC]

Using the phrase "the free market" as a scibboleth does not advance the discussion at all. "The free market" is not a person, that I can put my trust in it. In fact, it isn't anything concrete at all. It's a conceptual model, one of many, which is useful in describing and analyzing some classes of economic transactions and arrangements. Almost nothing in human affairs is a matter of the Good. Almost everything is a matter of the Preferable, and as such, different arrangements will work better for different people, at different times, for different purposes. Anyone who says he has found the One True Way in political or economic organisation is not only mad, but dangerous. Excluding a system from consideration because of a name attached to it, such as "socialism", or insisting on a system because of the name attached to it, such as "free market", without actually considering the properties and behaviour of each system, only leads to bad ends. (My own political leanings are toward a form of anarchist socialism, or syndicalist voluntarism, resembling that advocated by Prince Kropotkin, but very few people are comfortable with the kind of attitudes and behaviour that implies, and I'm not about to force it on them — my concept of voluntarism includes allowing people to choose not to be voluntarists. As proven by Mussolini, syndicalism is a terrible system if it's forced on people. I only mention this to dispel preconceptions anyone may have concerning the economic model I prefer. As one might imply from my remarks above, I'm too much of a practical man to advocate any system on an a priori basis.)

 

[RobertR]

"Involuntary voluntarism" would indeed be an oxymoron. I don't really have a problem with people voluntarily choosing a collectivist model (NOTE: I do NOT consider political imposition of such a system to be "voluntary"), but everything from the early American colonies to Israeli kibbutzes to 20th Century socialist states tells me such a model is a failure, and I reiterate that many examples pointed to as a failure of market economics are in fact failures of government intervention.

 

[Chu Gai]

You may lean towards Prince Kropotkin, but I say it's good to be the king.

 

[KurtEP]

And yet, the mere existence of government regulation points its finger toward the failure of the free market. It has been amply pointed out that a pure free market is an ideal that has never existed, and never will exist. It's an ideal, developed using a deliberately narrow set of facts. Unfortunately, the closer you get to it, the more problems you can expect to show up.

Things like warranty of title (which goes back a few hundred years) exist because the free market allows for title fraud. In a truly free market, the strong take from the weak (and, of course, the smart take from the strong). Many, if not most other laws exist because of abuses of the free market. Simply put, the free market is an ideal that sounds good on paper, but is ripe for abuse, and there's ample history to prove it. This does not mean that we need to tend toward totalitarianism, but we do need regulation, and we need it badly.