Interestingly, health care might be one of the rare marketplaces where the consumer is compelled to spare no penny and spend as much as possible. Especially when the situation is more grave than cosmetic dental caps. If you find out your child has Leukemia, would you haggle over prices? I bet you'd feel you SHOULDN'T haggle over prices when your children are at stake.

Nay, it seems in your best interest to pay any price, or the highest price possible. And in this situation, I'm not sure the free market can ever govern the ever exploding price of health care.

Most market advocates would reply that one should be insured only in the cases of cancer or other catastrophic illnesses, a point Kling makes in the article linked above. However, your point about the limited capacity of consumer choices to control the cost of relatively inexpensive care is well taken.

Splendid post, Zach.

I don't see any reason why the truly elective procedures can't and shouldn't remain basically market-driven. But one of the most basic problems with market-driven approaches to medicine is that much more often, the consumer is singularly ill-situated to judge how elective a procedure should be. Deciding on a brand of crowns is one thing; deciding on the appropriate treatment for one's heart disease, quite another. Bargaining only makes any sense at all when there's pretty decent equivalence of information between the two parties, and in a medical setting, the patient typically has almost none of the relevant information. This is also why I, and so many others, dislike bargaining with used car salesman & the like; it's not an ickiness of 'unseemliness', but rather the ick of recognizing that we are doing the economic equivalent of bringing a knife to a gunfight. _That_ is what is so particularly unpleasant about the thought of plaid lab jackets.

Also, we have every reason to think that people will badly underconsume the kind of non-urgent, non-serious medical services (regular checkups, etc.) that help to keep more expensive urgent & serious medical costs down. If we know that people are generally going to make choices that will actually lead to their being more expensive consumers of medical treatment on the whole, then we have every reason to think that market-based approaches will simply fail to bring total costs down. One could still prefer to go marketastic for other reasons (like a basic commitment to libertarian principles, e.g.), but the cost-cutting reason wouldn't be one of them.

A good way to use the market to keep medical costs under control* is to set a decent floor for coverage, and then have insurance companies compete directly for consumer dollars under the constraint of that floor. There's no good way to do this with the current employment-linked system, but in a national mandate system, it would be much more possible.

* = which is not the same as bringing them down, really. I agree with many of the reasons Jane offers for why it's basically impossible to actually bring costs down per se. But the rate of growth can, I think, be curtailed somewhat, and without the negative impact to r&d that Jane is afraid of.

one thing that nobody had mentioned when i checked kevin's post (back when it went up) was the possibility of advertising; haggling is an inefficient method of price discrimination (*depending on your definition of efficient, of course), but publicly-advertised prices in a free market for health care might drive down prices whilst avoiding the Ick factor.

Of course, phil, the market-for-lemons problem you point out would still have to be dealt with ...

This strikes me as a pretty important statistic: 80% of the $$$ spent on health care every year covers treatment for 20% of people.

So are we talking about bringing "the marketplace" into the care of the chronically ill, the very sick and the dying, those people who make up that 20%?

And if we're not talking about that, we're just tinkering around the edges.

"If I had asked my customers what they wanted, they'd have asked for a faster horse." - His Fordship

Perhaps the biggest problem with health care is that most customers do not know what they need, so the market is easily driven by fads and cons. I'm not saying that the current system is better. However, the consumer can point the finger more easily today, than if he made his own choices.

HSA is working every well for me. You can write it off. you can also keep what you don't use tax free after 65. Expand these plans to everyone!