The Health Care Differece

Kevin Drum wonders if these predictions of ever-growing health care costs might not be groundless: “I can think of lots of technological revolutions that were pretty costly at first but eventually reached a point where they leveled out and then became cheaper. In fact, pretty much all of them. But perhaps healthcare is different in some ways from previous technological revolutions?”

I think health care is different in a pretty serious way. With normal consumer goods there’s lots of incentives for producers to come up with ways of making something that’s “worse but cheaper.” You don’t need to be making the best car to have a successful car company. You don’t even need to be tricking people into thinking that you’re making the best car. There’s a “luxury” car market, but there’s also a larger and more robust market for cars that are aiming to be good values.

But a whole lot of different factors militate against this in the health care realm. Medicare promises senior citizens all the health care a doctor can talk them into buying, but it doesn’t give them much of an option of consuming less health care and more fancy dinners or fun vacations if they’d prefer that. Nobody wants to encourage their spouse to get a discount health treatment option so that the family can afford to get the kitchen redone. Nobody brags to their friends “with the money I saved taking Johnny to the half-price pediatrician I was able to get him a XBox and me a new pair of shoes—everyone’s happier!” Even when people are paying for their own health care (rather than a family member’s) out of pocket (rather than via insurance) it’s still a weird marketplace. I was in this position myself recently, but at the very time I was (in conservaland) supposed to be driving a hard bargain over my dental surgery I was also in agonizing pain—hence the dental surgery—and psychologically desperate to believe that I was in good hands. Then on top of that you have all these provider-side regulatory restrictions that impede competition. All in all, it’s a mess.

I don’t think it’s plausible to imagine health care becoming a totally “normal” marketplace, since the dichotomy between health and care seems built into the human mind. But it is important to take some kind steps to shift out of this dynamic. And on some level, Paul Ryan’s Medicare ideas are meant to achieve this, though I have no idea why he thinks inserting an extra layer of profit-seeking interests will accomplish the task.