- Joined
- Jan 21, 2004
- Messages
- 314
- Reaction score
- 2
I know there was the other thread about free markets, but I figured I'd start a new one that deals more with how to make healthcare more into a free market
I haven't posted much in this forum even though I'm getting my MBA in Healthcare Management right now before I start med school next fall
Not saying this for anything that deals with me, but I think I could bring some good info to these kind of discussions since my father is an economics professor with specializing his research/teaching in Health Economics
(fascinating field by the way, just took it for my MBA program)
we've had numerous discussions about markets and healthcare
I too (I guess you could say it's in my genes being the son of an economist) am a free market kind of guy
However, the title of the other thread is an oxymoron b/c healthcare is about as far away from a free market as one can get
it has market failures up the wazoo (that's technical economics speak by the way )
due to insurance, healthcare is not a free market at all
consumers don't feel the economic reality of the decision they make
consumers reacting to price is the corner stone of free markets
in every other market, P and Q (price and quanity) are inversely related (causing the typical downward sloping demand)
this makes sense, the higher the price of the good, then less quanity of the good is demanded
however, in health care P and Q are directly related!!
over time, as the price of healthcare has gotten more expensive, the quanity demanded has risen
this violates economics
however, there is an explanation, in which this does not violate economics, and that's where the insurance comes into play
consider this...
here's interesting fact from my health econ class, and this may come as a shocker...
health care is actually cheaper now than it's been for decades!!!
yes, I did say this right
before everybody says I'm crazy, I must specify here, the NET price of healthcare is cheaper (the net price is defined as the price the consumer pays for healthcare), the overall price has definitely risen
controlling for inflation, consumers are actually paying LESS for their healthcare now than 50 years ago...
now, let's revisit our P's and Q's
the P and Q relationship being inverse is a function of the consumers
so since the consumers don't feel the overall price and only the net price, the net price should be used as P
when this is done, P and Q now make sense, as healthcare has gotten cheaper for consumers, more of it has been demanded
bascially this price mechanism as economists like to call it has been dismally absent from healthcare as compared to all other sectors of the economy
this is why health economists are for putting the price mechanism into healthcare
this would mean something being done about insurance, in order to make consumers feel more of the costs of care
the problem in turn from this is consumers feel entitled to wanting all the healthcare they can get, but now wanting to pay a dime for it...
Managed care, which worked for a while do stabilize costs, is now lessening its influence b/c the public didn't accept it.
how is this anti me paying anything thought of the public supposed to be overcome???
Healthcare has other market failures such as:
Monopoly and monopsony power (few hospitals, and HMO's, group practices in many areas
Barriers to entry
Supplier induced demand - this is very interesting and is a whole other discussion for another day
in normal markets, supply and demand should be independent of each other, but there's some research that shows that in healthcare, the supplier (ie physicians) influence and can induce demand for healthcare services
for example, research shows that after Medicare reduced the reimbursement for cataracts procedures, the number of procedures fell (unlike what would be the case if need and need only was the sole determinent of utilization; could it be doctors influenced by money )
very interesting and very controversial, discussion for another thread...
As for now, I wanted to get a discussion going for people to put their input in on how to put market forces back into healthcare and possibly override the problems listed above...
I haven't posted much in this forum even though I'm getting my MBA in Healthcare Management right now before I start med school next fall
Not saying this for anything that deals with me, but I think I could bring some good info to these kind of discussions since my father is an economics professor with specializing his research/teaching in Health Economics
(fascinating field by the way, just took it for my MBA program)
we've had numerous discussions about markets and healthcare
I too (I guess you could say it's in my genes being the son of an economist) am a free market kind of guy
However, the title of the other thread is an oxymoron b/c healthcare is about as far away from a free market as one can get
it has market failures up the wazoo (that's technical economics speak by the way )
due to insurance, healthcare is not a free market at all
consumers don't feel the economic reality of the decision they make
consumers reacting to price is the corner stone of free markets
in every other market, P and Q (price and quanity) are inversely related (causing the typical downward sloping demand)
this makes sense, the higher the price of the good, then less quanity of the good is demanded
however, in health care P and Q are directly related!!
over time, as the price of healthcare has gotten more expensive, the quanity demanded has risen
this violates economics
however, there is an explanation, in which this does not violate economics, and that's where the insurance comes into play
consider this...
here's interesting fact from my health econ class, and this may come as a shocker...
health care is actually cheaper now than it's been for decades!!!
yes, I did say this right
before everybody says I'm crazy, I must specify here, the NET price of healthcare is cheaper (the net price is defined as the price the consumer pays for healthcare), the overall price has definitely risen
controlling for inflation, consumers are actually paying LESS for their healthcare now than 50 years ago...
now, let's revisit our P's and Q's
the P and Q relationship being inverse is a function of the consumers
so since the consumers don't feel the overall price and only the net price, the net price should be used as P
when this is done, P and Q now make sense, as healthcare has gotten cheaper for consumers, more of it has been demanded
bascially this price mechanism as economists like to call it has been dismally absent from healthcare as compared to all other sectors of the economy
this is why health economists are for putting the price mechanism into healthcare
this would mean something being done about insurance, in order to make consumers feel more of the costs of care
the problem in turn from this is consumers feel entitled to wanting all the healthcare they can get, but now wanting to pay a dime for it...
Managed care, which worked for a while do stabilize costs, is now lessening its influence b/c the public didn't accept it.
how is this anti me paying anything thought of the public supposed to be overcome???
Healthcare has other market failures such as:
Monopoly and monopsony power (few hospitals, and HMO's, group practices in many areas
Barriers to entry
Supplier induced demand - this is very interesting and is a whole other discussion for another day
in normal markets, supply and demand should be independent of each other, but there's some research that shows that in healthcare, the supplier (ie physicians) influence and can induce demand for healthcare services
for example, research shows that after Medicare reduced the reimbursement for cataracts procedures, the number of procedures fell (unlike what would be the case if need and need only was the sole determinent of utilization; could it be doctors influenced by money )
very interesting and very controversial, discussion for another thread...
As for now, I wanted to get a discussion going for people to put their input in on how to put market forces back into healthcare and possibly override the problems listed above...