Comments on: Medical Market Failures

By: Southern Appeal » It’s Not Over

Southern Appeal » It’s Not Over — Thu, 30 Jul 2009 04:33:53 +0000

[...] Some of the more sophisticate proponents of Obama’s health care plan have argued that medical care is subject to market failures involving things like adverse selection and moral hazard. It’s therefore worth noting that the “consumer protections” Obama is touting not only wouldn’t solve these problems but would actually make them worse. Prohibiting insurance companies from refusing coverage because of pre-existing conditions, for example, would raise the cost of insurance while simultaneously making it less desirable to have insurance if you are healthy. Both factors would exacerbate any adverse selection problems inherent in health care, leading to an increase in the number of uninsured. (Obama shouldn’t feel bad though, most government interventions in the health care market suffer from similar problems). [...]

By: It’s Not Over « The American Catholic

It’s Not Over « The American Catholic — Wed, 29 Jul 2009 14:13:42 +0000

By: Guy Thomas

Guy Thomas — Fri, 24 Jul 2009 23:41:23 +0000

2. Insurance adverse selection – If those who privately know their risks are lower buy less insurance, too little insurance gets bought.

This is standard economics, but simple arithmetical argument shows it may often be wrong. The objective function of a utilitarian public policymaker should (arguably) be the risk-weighted quantity of insurance bought. Given this objective, some adverse selection may actually increase coverage (when coverage is correctly measured, ex-post not ex-ante). Some “adverse” selection may not be “adverse” at all. Google “loss coverage as a public policy objective”, or look at these papers
http://tinyurl.com/cgal3g

http://www.guythomas.org.uk/pdf/LC2.pdf

By: Doug S.

Doug S. — Fri, 24 Jul 2009 03:54:36 +0000

You know what one of the biggest market failures in the U.S. health care market is?

Individuals don’t get to choose their insurer. Their employer chooses their insurer for them. And employers have little incentive to choose the insurer their employees would prefer.

Agent failure is a well-known type of market failure, isn’t it?

By: Floccina

Floccina — Thu, 23 Jul 2009 14:33:06 +0000

In the pod cast linked below John Cogan says that the uninsured only contribute 1 to 4% of the cost of health insurance.
http://www.econtalk.org/archives/2006/07/cogan_on_improv.html

By: Overcoming Bias : Government Insurance Advantage?

Overcoming Bias : Government Insurance Advantage? — Thu, 23 Jul 2009 04:15:59 +0000

[...] on Tuesday’s post itemizing medical market failures suggest that many think private insurance fails via excess [...]

By: a soulless automaton

a soulless automaton — Wed, 22 Jul 2009 23:29:26 +0000

Robin, I made no claim about that. Your logic was faulty. Noting the existence of regulation-free credence goods is not in any way a rebuttal to Tomasz’s point 11. That is, given “X is Y, Y has problem Z, ergo it should have intervention”, saying “A, B, and C are also Y, and don’t have intervention” is a non-sequitur.

However, one of the distinctive features of a credence good is extreme information asymmetry, which is a pretty standard imperfection that reduces market efficiency. Whether or not there’s any useful way to correct it, that does actually seem like a pretty clear-cut case of a minor market failure, unless you’re using some definition of “market failure” that doesn’t boil down to “suboptimal economic efficiency”.

Your rain example is very witty, but irrelevant.

By: gnat

gnat — Wed, 22 Jul 2009 19:49:20 +0000

Do we want to add product or service transparency? Medical choices are extremely complex. What I want to buy is an effective healthcare outcome weighing costs and benefits. What I pay for is doctor hours generally for each specialist (each with its own overhead). The market tends to be stove pipe by type of specialist. To the extent they have market power doesn’t this create double marginalization.

Quality rankings: Virginia has begun publishing hospital quality measures (e.g., infections from IV) which certainly should have an impact on consumer choice as it has on on restaurant inspections.

Medical incomes are extraordinarily high even with insurance company cost controls. Moreover, incomes seem to be positively correlated with the number of medical specialists in a metro area. I understand that a new class: “doctor’s assistants” are being used to serve medicare-medicaid patients in some offices. The expansion of these types of providers may lower the overall cost particularly for routine care. This may allow medical offices to compete on price and quality.

By: Robin Hanson

Robin Hanson — Wed, 22 Jul 2009 17:52:43 +0000

Mike, there can be non-government non-profit insurance providers, who can whatever mission they want, including ‘serving the public good.’

By: Matt C

Matt C — Wed, 22 Jul 2009 17:10:12 +0000

Yup. Try to find out how much a medical procedure will cost you in advance of getting it.

I did this recently. I called several hospitals and clinics to try to find out the cost of an endoscopy. I never got what I considered a straight answer. I got passed around from person to person and had to leave messages to get called back. They wanted me to tell them exactly which medical codes were going to be applied for the endoscopy. I also had to give them my insurance information for them to be able to tell me anything.

In the end I got guesses ranging from $600 to $4000 and decided not to bother with the endoscopy.

At least my dentist can still give a straight answer when I want to know how much something’s going to cost me. For now anwyay.