A friend of mine (I know, again) made the following claim about medicine and free markets:
The fact is that, on average, Americans spend far more money on health care and don't have a commensurate benefit in any measure of health. In fact, Health Care is a great example of an industry that likely confounds the free market. Consider: For thousands of years, health care operated with free market principles. Yet, there was very little relationship between the amount of money spent on a treatment and its efficacy. This is because health care providers have something I like to call a "Confuse-opoly". The product they are selling requires a lot of specialized knowledge to detect quality. As a result, customers have a very hard time making rational market decisions. The best treatments fail to work many times, and patients often recover without any medical care, so it is super-hard to separate out the value of the care being offered. It is very hard to imagine an effective free-market in health care.
Obviously, what he is saying is quite ridiculous both empirically and theoretically: a person will know a difference between health care in China and in US. But to a certain degree, his point may have something to it, because the doctors practiced treatments like bloodletting, which were paid for by the customers, yet, as we know today, were actually harmful to the patients.
So, what's the best way to show how he is wrong?
Don't let him get away with responses like that. There's no point in spending time discussing this with him if he's not willing to back up anything he says, so just give him the 3 questions and make him dig his own hole.
The product they are selling requires a lot of specialized knowledge to detect quality. As a result, customers have a very hard time making rational market decisions. The best treatments fail to work many times, and patients often recover without any medical care, so it is super-hard to separate out the value of the care being offered.
That is wrong as such, but close to a truth. I recently had a discussion with my dad about his decision to quit chiropractic. I had previously thought it was madness. He talked about how all through school they try to make you excited about all the good you'll do. He ultimately concluded that there is not much that can actually be done alone as a practitioner to "fix" people. As in every other matter, people want magicians to wave magic wands and solve all of their problems without doing anything to help themselves. The market demands such deception whether practitioners idealize it or not. Aside from that, the main problem with what he says is that he believes there are angels that will wave magic wands solving the unsolvable problem of exploitation of ignorance/stupidity. How ironic.
For the record, bloodletting is still medically endorsed and practiced, though perhaps in a narrower scope of cases.
Here's a good response from a thread similar to this one, made a while back.
Bogart: Here are my top 5 reasons in order of most significant to least significant. These are all caused by government intervention in the marketplace for health care: 1. Price/Payment Fixing by Medicare, CHIP, Medicaid, etc make it difficult for people without insurance to afford health care. Moreover the government has laws about who care providers can serve and what they can charge if participating in these programs. So health care providers have no reason to to compete on price as all the folks using these services have no incentive to economize. The result of this fascism is predictable: Higher prices and Fewer Choices. 2. Regulation of the development, manufacturing, marketing, distribution, advertising, etc of medical devices, pharmaceuticals, alternative medicine etc only helps those large organizations who have expertise in managing the process over those other providers. For example: Kellogs is removing a claim on cholesterol reduction under pressure from the FDA. Why, who does this help, it certainly does not help consumers of food. It does help cholesterol reducing pharmaceuticals. 3. Licensing of doctors, nurses, etc. These licenses are extremely difficult to get. They are given out by "accredited" agencies to people they favor only. The medical industry would save billions by letting the licensing be done by private organizations. Then people would have the ability to request the certifications of their providers. You can have the following done by non-certified people: parenting, educating, communicating, manufacturing, producing food, etc. Why does the government need to license doctors when it does not license who makes your food? 4. Regulation of insurers, people are not allowed to buy insurance across state lines and insurers have lots of mandates on them that increase costs. If the mandates were removed and people could buy insurance across state OR BETTER YET INTERNATIONAL boundaries then the price would be dramatically reduced. 5. Insane liability system for negligence. This part is completely nuts. There is a weird lottery where the whole system is at the whims of a jury. How about a system where the two parties the plaintiff and defendant each select an arbitrator or agree on one to hear the case. Then the arbitrators would pick a third who has binding authority. This would not only save billions but would be much fairer to those who have been damaged.
Here are my top 5 reasons in order of most significant to least significant. These are all caused by government intervention in the marketplace for health care:
1. Price/Payment Fixing by Medicare, CHIP, Medicaid, etc make it difficult for people without insurance to afford health care. Moreover the government has laws about who care providers can serve and what they can charge if participating in these programs. So health care providers have no reason to to compete on price as all the folks using these services have no incentive to economize. The result of this fascism is predictable: Higher prices and Fewer Choices.
2. Regulation of the development, manufacturing, marketing, distribution, advertising, etc of medical devices, pharmaceuticals, alternative medicine etc only helps those large organizations who have expertise in managing the process over those other providers. For example: Kellogs is removing a claim on cholesterol reduction under pressure from the FDA. Why, who does this help, it certainly does not help consumers of food. It does help cholesterol reducing pharmaceuticals.
3. Licensing of doctors, nurses, etc. These licenses are extremely difficult to get. They are given out by "accredited" agencies to people they favor only. The medical industry would save billions by letting the licensing be done by private organizations. Then people would have the ability to request the certifications of their providers. You can have the following done by non-certified people: parenting, educating, communicating, manufacturing, producing food, etc. Why does the government need to license doctors when it does not license who makes your food?
4. Regulation of insurers, people are not allowed to buy insurance across state lines and insurers have lots of mandates on them that increase costs. If the mandates were removed and people could buy insurance across state OR BETTER YET INTERNATIONAL boundaries then the price would be dramatically reduced.
5. Insane liability system for negligence. This part is completely nuts. There is a weird lottery where the whole system is at the whims of a jury. How about a system where the two parties the plaintiff and defendant each select an arbitrator or agree on one to hear the case. Then the arbitrators would pick a third who has binding authority. This would not only save billions but would be much fairer to those who have been damaged.
The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger
The doctor looked into the current medicine books (which were based on pseudo-scientific Aristotelean view of the world) and opened up the patient’s veins to let some blood out.
What makes you think that anything has changed? Medical research is still essentially the same as it always was and still often produces wrong results that are continuously debated over in the journals. There is no such thing as a "view of the world" used by researchers in the entire profession. If I was in that field I would take a causal realist approach.
(Also, when an educated gentleman does something that he says will help, that makes me feel like I got a treatment, whether or not I am actually feeling better.) Yes, there is a placebo effect as well.
(Also, when an educated gentleman does something that he says will help, that makes me feel like I got a treatment, whether or not I am actually feeling better.)
Yes, there is a placebo effect as well.
The "placebo effect" is far from proven to exist and is not even generally accepted. A causal realist would not prima facie favour the notion that you can "cure" yourself by sheer belief. Separated from the sensible concept of feeling better due to the relief of stress worrying about the illness, it is silly within the framework of current knowledge.
Well, the same reason why they pay for predicting future or why they go to casinos or to chiropractors.
Your explanation demonstrates ignorance of why people go to casinos and of health related education. Gamblers are mostly aware of the law of averages being against them. Casinos advertise excitement, not probability of winning. On the other hand, chiropractic is designated as a primary care profession, as it obviously should be given that it shares about 90% of the education process with medicine, and the old feud over it started by medical doctors is mostly a relic of the past based on a particular aspect of its original theoretical foundation (which is non-essential and now often ignored).
The objection to chiropractic was never more empirical than the objection to anything new within the medical establishment itself. That brings us back to the original point that your friend made. As nearly everyone does, out of "rational ignorance" you automatically trust the assesment of both medicine and alternatives by an one group carrying the designation "M.D." You had to choose someone to trust and you could not make an educated guess; if you could, you would know enough to not need to trust anyone. It's a necessary, permanent situation that the one true way to protect yourself against deception is to study everything. The fault of your friend is presumably to attempt to solve that problem by introducing a new entity, the state regulation agency, which does not solve the problem because that merely becomes the new route through which special interests must act to market their products (and bar competitors).
There is a similar argument trending here: http://iamdavidhenderson.wordpress.com with regards to the FDA.
Any input would be GREATLY appreciated!
Sorry for my ignorance...but what 3 questions are you referring to here? Thanks!
Information asymmetry is not a problem that government can solve. And, it is a problem that markets can solve. If you cannot discover what treatment to purchase, hire a professional to help you choose. This is known as "consumer reporting" or consulting and it exists in many industries where large purchases are made by individuals or organizations who are not experts in the product they are attempting to purchase.
There is absolutely nothing, not one thing, about health care that makes it different from automotive manufacture, retailing or agriculture - industries that we readily accept should be "free market."
Clayton -
@Malachi: We should expand it... it's illegal to do anything you weren't instructed to do. The whole concept of licensing and permits is that you shouldn't do somethign without at least asking permission or, better yet, waiting until instructed to do so. "Who asked you to do this?" A new business should only be started when some VIP decides that it needs to be started and asks someone to start it. If we allow people to just go out and do things willy-nilly, the entire social order will come crashing down!