The Health Care Market One More Time

11 Nov

Altogether now: The market for health care doesn’t work like the market for other goods and services. I’ve made this point many times before. Now Ezra Klein makes it again using a great analogy: What if Best Buy sold health care?

…An insurer covering people in Redlands, Calif., cannot decide to stop paying for services at the local hospitals and instead demand that people travel to Intermountain Health Care in Utah. That is the fundamental difference between health care and other goods. In health care, we can’t say “no.” In television sales, we can. The fact that we don’t care whether flat-screen televisions are too expensive for people means that Best Buy has to figure out how to make them affordable. The fact that we believe all people should receive health care–even though we don’t always make that possible–means that hospitals don’t need to make it affordable.

Indeed, their job is to make health care better. Imagine if Best Buy’s job was simply to make TVs maximally awesome, and their business model relied on salesmen telling customers what they need, with the costs then being paid by a third party who mostly bills the customer’s employer. How do you think the television market would change?

His example hits all the major points: The people telling us what we need are getting paid by a third party and our employers are bearing most of the costs of that. Sure, we’re actually paying for it, because our employers are spending our potential wage increases on our increasing health insurance premiums, but we don’t know those details. The bottom line: If Best Buy worked the way health care does, we’d have some very expensive televisions of questionable quality.

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Posted by on November 11, 2009 in Uncategorized


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