Thursday, May 27, 2010

Shopping around, health care edition

Here's a great example of what's wrong with health care in this country:
I wanted to have a small epidermoid cyst removed from my back. The first practice I visited was a dermatologist's office, which deals primarily with insured customers and can afford to charge exorbitant rates. I explained to the assistant on my first consulting visit that I didn't have health insurance — I choose not to — and asked how much the procedure would cost if I paid cash. She quoted me $700 for a riskless procedure that takes about 15 to 20 minutes to perform, and would not in this instance be performed by the dermatologist, but by the assistant herself. As I explained to the students in the public-health-policy class, the fact that there are very basic procedures that cost the equivalent of $2,100 an hour is a glaring sign that the market's normal price mechanism has been broken.

On the recommendation of a friend, I decided to visit another medical practice, Country Doctor, which deals mostly with lower-income patients who do not have health insurance. Because its customers pay out of pocket, Country Doctor has a much stronger incentive to charge prices that its customers are willing to pay up front. When I had the procedure to remove the cyst done at Country Doctor, it was performed by an actual doctor, and it cost less than $50.
It would therefore seem that in order to reduce health care costs a good place to start would be reducing the central role of health insurance. Instead, the Obama administration has done the opposite by ordering every American to purchase it. This will not end well.

By the way, also make sure to read the entire article, which is excellent throughout. It also makes some good points about intellectual property that warrant consideration. My own skepticism about the value of strong intellectual property rights has grown, particularly since reading this book which casts doubt on its usefulness.

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