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John C. Goodman / Oct. 20, 2013

How the Left Views Health Care

The liberal view of health care is easy to describe: health care is too complex and complicated for individuals to make good choices on their own. Therefore they need bureaucracies -- employers, insurance companies or government -- to make decisions for them. (See, for example, [Austin Frakt](http://theincidentaleconomist.com/wordpress/chart-of-the-day-complexity-and-health-care/).) What this view overlooks is that the primary reason why the system is complex is because the bureaucracies are meddling with it in the first place.

The liberal view of health care is easy to describe: health care is too complex and complicated for individuals to make good choices on their own. Therefore they need bureaucracies – employers, insurance companies or government – to make decisions for them. (See, for example, Austin Frakt.)

What this view overlooks is that the primary reason why the system is complex is because the bureaucracies are meddling with it in the first place.

In health care, we pit bureaucratic payers against bureaucratic providers of care. At least that’s the way we used to describe it. Now it’s software against software. On the physician side alone, there are 7,500 tasks Medicare pays doctors to perform and the number is expanding to many thousands more. So doctors and hospitals buy computer programs to help them maximize against the payment formulas. Then the payers buy programs to help defend against the provider programs. Then we get another iteration, with better programs and better defenses, etc. How could this not be complicated?

But notice how uncomplicated health care markets are where there are no third party payers or where they play a subordinate role. Walk-in clinics have posted prices that are easy for even a fifth grader to understand, even though at a typical physician’s office no one seems to know what anything costs.

Wal-Mart will give you a generic prescription for $4 and Rx.com and other mail order prescription drug services are almost as easy to understand. Both companies are catering to consumers paying with their own money. By contrast, your local pharmacy can’t tell you what any drug costs until they know what insurance plan you are on.

Package prices are normal and easy to understand and coming down in real terms in cosmetic surgery and Lasik surgery where the services are almost never covered by insurance. Yet the typical hospital can’t tell you what any procedure costs – certainly not in advance.

There is probably no invoice in America more complicated than a hospital bill, unless you happen to be a Canadian coming to the United States for elective surgery. Canadians pay one price and they typically pay it in advance. So do cash-paying Americans who take advantage of domestic medical tourism services.

Where there is price competition, there is usually quality competition as well. Hospitals in India (catering to the international, cash-paying, medical tourism market) post their quality metrics online – mortality rate, infection rate, re-admission rate – and compare them to such U.S. institutions as the Mayo Clinic and the Cleveland Clinic. How many U.S. hospitals do the same?

Bottom line: an enormous amount of what happens in medicine is not complex at all. In fact it’s very routine. What’s not routine is bureaucratic warfare that involves complicated payment formulas and complex strategies to maximize against them. Most complexity is artificial complexity created by the overuse of third-party payment, which is caused by unwise public policies.

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