Comment by hangonhn
5 days ago
You basically can’t or it won't have the same effects because medicine doesn’t really follow the same dynamics as most other markets: the supplier (doctor) has an information asymmetry and thus makes most of the decisions, while the buyer (patient) is not usually the payer (insurance) so aren’t really incentivized to save.
Kenneth Arrow famously analyzed the healthcare market and made the above insight: https://assets.aeaweb.org/asset-server/files/9442.pdf
I know he was a Nobel Laureate but not sure if this is the work that won him the Nobel.
Updated: I should qualify my statement by pointing out this is for the US healthcare system.
> the supplier (doctor) has an information asymmetry and thus makes most of the decisions, while the buyer (patient) is not usually the payer (insurance) so aren’t really incentivized to save
Counterfactual: patients in India routinely shop around for second opinions and negotiate fees.
Completely fair point. I should have prefaced my statement with US based healthcare system is structured this way. I don't know how the dynamics are in other countries -- though I do suspect it's similar in term of information asymmetry. I imagine doctors everywhere have some pretty advanced and specialized knowledge. I don't know enough about India to know how they overcome this issue or if they do or not.
Fixing a severe shortage is actually likely to have some impact.
For instance, if there's a lot more doctors, the payer may be able to negotiate lower prices. We already have insurance mechanisms that drive patients to the providers that the insurer has negotiated with...
It's even worse. This isn't a simply supply-demand curve. Supply here often increases demand (patients live more and longer; They need more care).
He said free clinics.
But then you're just shifting the cost somewhere else. The doctors aren't working for free. Someone is paying them. It's just not the patients in the case of free clinics.
In addition, doctors aren't the only cost centers in health care either. Even if they're free, which is sort of already the case or fairly inexpensive for the insured in the US, the overall cost of healthcare will still be high.
Plus if you want completely free clinics (everything from doctors to medicine, etc), then you're not talking about a market solution to the issue, which is completely fair too. No one said you have to use a free market solution for this problem.
My point is that we can't expect a free market to solve this issue. It isn't as simple as supply and demand.
> It isn't as simple as supply and demand.
It really is that simple.
Giving people insurance without actually increasing the supply of doctors or clinics increases the number of people willing and able to seek treatment. It does nothing for lowering costs of said treatment. Per basic economics, that’s shifting the demand curve (i.e., increasing demand).
With no changes to supply that leads to higher prices. So every time the government makes a new program or expands anny existing one that provides insurance coverage, costs for everyone will go up.
In contrast, my proposal for explicitly bringing in doctors and creating clinics increases supply. People who would have gone to see a doctor elsewhere may now choose to go to this new free clinic.
The demand curve itself would not change, though with the lower cost due to the supply curve shift you would have a larger overall market.
This is clearly oversimplified. There’s some second order effects where if primary care market increases, you’ll need more X-rays and CAT scans. So there could be an increase in those prices. But that’s could be solved in the same way too.
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