One
of the leading arguments against free market competition as the solutions to
the US healthcare issues has come from Economist Kenneth Arrow. Titled Uncertainty and the Welfare Economics
of Medical Care in the American Economic Review in December 1963. (Arrow 1963)
The article from Kenneth Arrow outlines how the healthcare market is not a
typical market and that healthcare in the United States needs intervention.
1. Unpredictability. Arrow points out that people’s needs for health care
are unpredictable, unlike other basic expenses like food and clothing. But
while we can skip the occasional meal or sale at Old Navy, our need for health
care can be far more urgently necessary.
There are markets with varying amounts of predictability
even though a patient may not decide when they will need services they still
for a majority or based on payments have the ability to shop around. When you
examine that 30% of healthcare expenditures go towards hospitalization
according to Centers for Medicaid and Medicare Services. (CMS 2012) There remains another
70% spent on prescription drugs, medical devices, clinical serves, and other
non emergency services.
2.Barriers to entry. Arrow notes that you can’t just set up shop on the side
of a road and practice medicine: you must have a license to be a physician and
gaining that license requires years of expensive schooling and training. As a
result of this constraint on the supply of physicians, there is a constraint on
the supply of medical services.
Barriers to entry can be described as the ability to
become a physician however; there is a relatively new paradigm in healthcare
known as retail clinics. Retail clinics are healthcare providers that are setup
inside of local pharmacies such as Target, Walgreens, and CVS. Although they
are mostly in urban areas the tendency to think of health care occurring in
hospitals or physician clinics is a changing dynamic of healthcare as most of
these clinics are staffed by physician assistants or nurse practitioners. (Deloitte 2009)
3. The importance of trust. Trust is a key component of the doctor-patient
relationship; if a surgeon makes a serious mistake during an operation, for
example, the patient may die or become permanently disabled. The patient must
trust that the surgeon knows what he’s doing, and can’t test-drive the surgery
beforehand.
4. Asymmetrical information. Doctors usually
know far more about medicine than do their patients. Therefore, the consumer of
medical services (the patient) is at a serious disadvantage relative to the
seller (the doctor). Patients are therefore vulnerable to exploitation. In
addition, third-party payers of medical bills, such as insurers or the
government, are that much more removed from the particulars of a given case,
and unable to effectively supervise medical practice.
Since
Kenneth Arrows research there has been the establishment of the Agency for
Healthcare Research and Quality (AHRQ) which was originally created as the
Agency for Health Care Policy and Research (AHCPR) on December 19, 1989, under
the Omnibus Budget Reconciliation Act of 1989 (103 Stat. 2159), as a Public
Health Service Agency in the U.S. Department of Health and Human Services
(HHS). The Agency was reauthorized with a name change as the Agency for
Healthcare Research and Quality on December 6, 1999, under the Healthcare
Research and Quality Act of 1999. The AHRQ's mission is to produce evidence to
make health care safer, higher quality, more accessible, equitable, and
affordable, and to work with the U.S. Department of Health and Human Services
(HHS) and other partners to make sure that the evidence is understood and used.
(AHRQ 2014)
5. Idiosyncrasies of payment. Unusually,
patients pay for health care after, not before, it is received (that is, if
they pay for health care at all). Because patients don’t see the bill until
after the non-refundable service has been consumed, and because patients are
given little information about price and cost, patients and payers are rarely
able to shop around for a medical service based on price and value. Compounding
this problem is the fact that patients rarely pay for their care directly. (Roy
2013 )
According
to the American Health Insurance Plans (AHIP) they are promoting three key
strategies for reducing health care costs. Tackling Barriers to Transparency,
Facilitating Benefit Modernization, and Advancing Bold Structural Reforms. (AHIP 2013)
Accountable
Care Organizations ACOs can include hospitals, specialists, post-acute
providers and even private companies like Walgreens. (Kaiser 2011) One instance
of solutions to cost is retail clinics. Retail Clinics can be used to provide
savings if 10% of patients went to retail clinics for outpatient care Out of
pocket expenditure per capita according to the OECD is $987.4 further, About
14-27 percent of all emergency department visits could take place at retail
clinics and urgent care centers, with a potential cost savings of approximately
$4.4 billion annually. (Rand 2013) The
Government endorsed ACOs with a combination of free market retail clinics
address the issue of cutting costs and access to primary care. This also
addresses the issues of barriers to entry as most retail clinics are staffed by
nurse practitioners or physician assistants.
An indicator
of the quality of care could be wait times to receive appropriate care according
to an Organization for Economic Co-Operation and Development survey from 2010
the only country to have shorter wait times was Germany the survey was Waiting
time of four weeks or more for a specialist appointment. In this survey was
just access waiting times of four weeks or more to see a specialist, this does
not include treatment. (OECD 2013) The waiting times of four months or more for
Elective surgery as collected by the OECD is a measure tracked that Germany and
the Netherlands were the two countries that had a lower percentage of wait
times. The only country noted as mostly
free market healthcare is the United States.
The other countries have single payer insurance with the exception of
Germany and the Netherlands.
Additionally
using OECD data for 19 countries to assess the relationship between physician
supply and healthcare outcomes, we have determined that there is no association
between avoidable mortality and overall physician supply. (NIH 2009) According
to the Heritage Foundation article titled Studies Show: Medicaid Patients Have
Worse Access and Outcomes than the Privately Insured
A 1992 study in the
Journal of the American Medical Association examined hospitalizations in
Massachusetts and Maryland. The study found that Medicaid and uninsured
patients were statistically more likely than privately insured patients to be
hospitalized for avoidable conditions such as pneumonia and diabetes.
A 2007 study in Health Affairs examined
access to specialty services for patients who receive primary care from
community health centers.[14] The study found that Medicaid recipients have
significantly more difficulty accessing specialty care than privately insured
patients.
A 2012 study in Health Affairs examined
physicians’ willingness to accept new patients. Using survey data from a
nationally representative sample, the study found that nearly one-third of
physicians nationwide will not accept new Medicaid patients. Doctors in smaller
practices, as well as doctors in metropolitan areas, are among the least
inclined to accept new Medicaid patients.[15] The authors’ results suggest that
this reluctance may largely be a consequence of Medicaid’s poor payment rates
to doctors. (Dayaratna 2012)
It can be easy to draw the conclusion that healthcare
insurance versus not having health insurance results in a lower quality of
health while having private health insurance is better than having our Medicaid
or Medicare.
There
are an estimated 174 million persons in the United States with private health
insurance 41.7 million with Medicare and 42.5 million people with Medicaid
insurance according to the CMS. The total amount paid in 2012 for CMS was $993.7
Billion while out of pocket and private insurance paid out $1.2 Trillion. (CMS
2012) Based on these numbers the United States Healthcare is on a continuum
mostly based upon free-market competition.
Free market economics is a summary term for an array of exchanges that
take place in society. Each exchange is undertaken as a voluntary agreement
between two people or between groups of people represented by agents. (Rothbard
2013) Encouragement from the Government to form ACO’s in conjunction with retail
clinics is making a difference when it comes to access and cost of healthcare. Even within the insurance system we see
elements of free market in the United States delivering a better quality
healthcare according to the Heritage Foundation. (Dayaratna 2012) While a Free Market and entrepreneurship may
not be the complete answer to the US healthcare problems it can be an asset to
providing solutions to better access and quality in the United States.
References
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Heritage Foundation Retrieved From http://www.heritage.org/research/reports/2012/11/studies-show-medicaid-patients-have-worse-access-and-outcomes-than-the-privately-insured
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