Thursday, June 05, 2008

Pay for your health, not for a "system" !

The Angry Economist, as usual, seems very sensible with his use of a clever analogy to argue in favor of the free market as the best way to allocate health services to the public.

Food is more important to your health than anything a doctor can do for you. Why don't we have a food insurance program?

Answer: because it would obviously be stupid. Now ... defend the health insurance system.

I didn't think you could. The reason we have employer-paid health insurance can be traced back to WWII wage and price controls. Desirable workers could not be paid more, but you could give them free health care. Employers did, and didn't stop when the wage controls went away.

Now we're stuck in the ridiculous situation of treating people like cars, doctors like car mechanics, and insurance companies like car owners. The car has no say in how much maintenance it gets, nor how much that maintenance costs. Consequently, it demands the best maintenance, price be damned. Any wonder that lots of people can't afford health care unless it's paid for by someone else?

Health care should be cheap and readily available, like food.

I once made this exact point on the radiowaves to socialist muppet and 3AW host Nick Mccallum. I said that free markets work beautifully in providing the masses with an abundance of cheap goods, like in groceries or electronics. Of course he was flabbergasted by such an opinion. First he played the sympathy card, suggesting that I don't care if people are sick. He said "So what if someone sick or critical turns up to a private hospital on a Sunday and its closed, do they just come back Monday ?"

Of course he hadn't thought through his own scenario under the status quo ! Turning up at a public hospital doesn't mean instant treatment, nor does it mean you get the appropriate treatment. Under socialised medicine, health services are rationed out. Which typically means you enter a waiting room or a waiting list no matter how much you are willing to pay or how urgently you want a treatment. No single patient will ever see the bill or pay for their services. No single provider will display a price list and compete from a price point of view.

When I told Nick Mccallum that free markets don't leave people to die on the streets as he suggested, because they provide an array of services, of different prices and standards, just as in electronics and groceries, he responded by saying "You're comparing apples and oranges my friend", before he ended the call.

No I'm not, my friend. Electronics and groceries are both complex markets. The end goods go through many stages of production, transportation and provide us with a massive variety of goods for our consumption. The raw materials, transport, energy, storage, marketing and sales involved is a significant challenge in logistics, just as it is with medicine (and education and roads for that matter).

Under a private market, so long as customers are willing to pay for something, there is absolutely no reason private clinics and hospitals wouldn't operate on a Sunday to accept them. In fact, the usual reason for things being unavailable on Sunday is government itself - regulations about shopping zones, trading hours and mandatory higher pay scales on weekends and outside of business hours.

More generally, why do health services have to be paid for via insurance schemes ? What about user-pays ? most people these days pay for insurance policies that cover small expenses well below $1000, like dental check ups, massage, optical, GP visits, x-rays etc etc. Shouldn't health insurance cover the once-in-a-lifetime emergency procedures and ambulance rides that cost several thousand ?

Insurance leads to over-consumption and little competition, thus no mechanism to encourage suppliers to compete for a quality and price point of view. It stifles innovation and efficiency. Doctors are some of the few remaining professionals who still do not rely on email and internet for communication.

Have you ever seen people shop around for a knee operation the way people frantically shop around for the best deal on a computer or plasma TV, or on a good butcher or cheap supermarket ? (have a look at how busy Aldi are these days to see how much people value a good bargain). There are though, medical procedures that are not covered by insurance and are indeed user-pays. These are mostly cosmetic and eye surgery and you do see clinics advertising prices and trying to import the latest technology to innovate and outdo each other. Despite the scare campaigns on Today Tonight and A Current Affair, this is a good thing. New technology and small new competitors take the market in new directions. Success is rewarded, failure is punished ultimately.

The conventional wisdom is that we need a health "system" and the government is the owner and manager supreme. Would we put forward such an argument for a food "system" ? ??

Before you even try to think it through, I've got good news for you - Its already been tried in the last century. Look up what happened under Mao and Stalin, and today under Mugabe and Kim Jong-Il.