December 20, 2009

The Cost of Eliminating Prices

Justin Katz

If you're looking for some worthwhile snowed-in reading, Kevin Williamson's recent National Review essay, "Priceless Is Worthless," would be an edifying use of your time. In sum:

... as we continue to pretend that there is another unseen economic reality beyond market prices when it comes to health care, banking, housing, labor, cotton, sugar, fuel-efficient Japanese automobiles, solar panels, and every other product with prices distorted by politics--whose interests do you imagine are being served? Yours, chump?

A timely example:

Health-care prices are a mishmash for lots of reasons, but one of the main ones is the way we pay for health care--you don't pay the doctor, your insurance company does, an arrangement that gives at least two of the three parties involved a good incentive to obscure prices, so that the consumer has no idea how good or how rotten a deal he is getting while the insurers and hospitals attempt to game and swindle each other. Given the shocking and terrifying size of serious medical bills--my mother's last stay in the hospital billed out at $360,000 (that's a Ferrari 612 Scaglietti for Doc X plus a BMW 5-Series for one of his brats)--the American health-care consumer, quaking in his paper hospital slippers, no longer even asks: "What does this procedure cost?" He only asks: "Does my insurance cover it?" No prices, no negotiation, no mystical coordination between producer and consumer--instead, maddening and expensive and often underhanded mediation by the insurer.

Medicine is complicated; computers are complicated, too, but you can call Dell or Apple or Best Buy or whomever and ask: "What does this sort of computer cost?" and you will receive an answer. And then, when you get to the store--miracle of miracles!--that will be the price. Computers are damned complicated to make, with programmers in the United States and India collaborating with Taiwanese microchip fabricators, Dutch LED manufacturers, Irish customer-support agents, etc. You can get a price on an iMac, but you can't get a price quote on an ingrown toenail.

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It seems to be seldom mentioned that many doctors will cut their fees for minor matters, if they are paid cash. I understand this to be about 35-40%. I think that says a lot. It may be a form of charity for the uninsured, or it may reflect the cost of dealing with the insurance company.

Posted by: Warrington Faust at December 20, 2009 5:26 PM

This article reminded me of a conversation with a medical student in the 80's, he was sure that the separation of "fee from service" would destroy medicine.

It is well to remember that prior to widespread medical insurance, "rich doctors" usually were the beneficiaries of inherited wealth. Poor kids couldn't afford medical school to begin with.

Sherlock Holmes fans may recall that Dr. Watson strived for years to accumulate enough mnoey to buy an "established practice". There was no other way to guarantee himself a living from the practice of medicine.

Posted by: Warrington Faust at December 21, 2009 4:25 AM
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