In a recent interview with Conor Clarke in The Atlantic, Professor Arrow was asked how much of his 1963 paper “is still an accurate representation of the problems the health market faces.”The emphasis is mine. Whenever market based solutions to health care economy problems arise, the response is predictable. A firm and confident declaration is made that the market does not work in health care. End of story. Debate is closed. Justification or empiric support is not required. A Nobel Laureate has spoken. It reminds me of one of my favorite movies, A Christmas Story where the main character Ralphie desires a Red Ryder bee bee gun for Christmas. When he expresses his desire, he consistently gets the same response:
I think the basic analysis hasn’t changed. There are wars over the details, but the basic analysis is accepted. Some specifics have changed. If you look closely at my argument there is a sociological structure. There is a kind of sociological thesis. The market won’t work – it doesn’t work well in the health context. But something else supplements the market, and the thing I put stress on in the paper are the elements that put a non-economic influence on the market: professional commitments to provide a service, to engage in services that aren’t self-serving. Standards of caring decided by non-economic actors. And one problem we have now is an erosion of professional standards. In a way there is more emphasis on markets and self-aggrandizement in the context of health care, and that has led to some of the problems we have today.
Ralphie: I want an official Red Ryder, carbine action, two-hundred shot range model air rifle! Mrs. Parker: No, you'll shoot your eye out.He gets his courage up to ask a departmental store Santa and he gets the same response. Why would you want that...you'll shoot your eye out!!! No argument. No response. Ralphie's desires are trumped by a statement for which he has no response. He cannot ask whether this claim is supported by any sort of empiric evidence. He is not at liberty to ask whether the risk of eye injury is different in Red Ryder air gun users. It is the gospel truth and should not be questioned.
So tell me why markets won't work in health care? I don't want to be shown that market solutions will not be perfect. I take that as a given. I do not want to be shown anecdotes of imperfect outcomes. Bad outcomes will happen even with even good systems and should not be used as a basis to scrap market approaches. The center piece of Arrow's argument was the existence of information asymetries which he comments on further..
Such has changed since the early 1960s. In particular, the unimaginable advances in information technology have revolutionized many sectors of the economy. In health care, this electronic revolution has made it possible for patients to be much better informed about the efficacy of alternative medical treatments. That, by itself, should have reduced the problem of information asymmetry.
On the other hand, as medical science and practice advance rapidly, the information gap between physicians and their patients increases. Many transactions in the market for health care therefore still proceed on the basis of trust in the expertise and integrity of physicians and other health workers, rather than on the countervailing power of equally well-informed buyers and sellers, each looking out only for their own self-interest.
Again there are times where those who are ill at inherently at an insurmountable disadvantage but not always. In the same vein automobile repairs do not always have to happen within the context of being broken down in a desolate place with a tight time table. However, if your car breaks down in the boonies where you know no one you are more likely to be fleeced by someone who can and will take advantage of you. That does not mean we should eliminate the market to deal with automotive repairs.
It is not as if it needs to be all or nothing immediately. For each health care entity, give us the flexibility to move parts of our business to outside the third party system. As it stands now, you are either all in or all out. That is no way to structure a system that needs innovation. No one wants to make that big bet. Which portions of the health care business that can move to market and consumer driven models will be decided by many little bets. Many will lose. Some will win. A few will win big and winning big I mean the consumer will end up getting much more for much less. That is what markets do. Yes, someone may shoot their eye out. I am willing to take that chance.