Jeffrey Singer’s recent article published in the Washington Post presents the case of a man needing hernia surgery. The estimated cost was $23,000, and his insurance would cover $2,500, and he would be responsible for paying the rest. By deciding not to use his insurance, he saved roughly $17,000 by paying for his procedure up front. The several care providers involved agreed to prices far below the listed prices of their services, as they are often willing to do.
Singer’s article syncs with a recent experience I had with health care. First, some background: I’m 28 years old, single, male, active, and in good physical health. As it probably typical of people my age, I do not worry about my immediate health, although I do worry about aging, getting cancer, and the slow deterioration of my mental faculties. I am also uninsured, and I hate it. I evidently don’t hate it enough not to get insurance, but I did look into getting personal insurance when I left my job (and its mediocre insurance policy) to return to graduate school. I thought I’d be an attractive customer for insurance companies, but the monthly premiums available to me were roughly on par with the Utah average of $173 per month.
I wanted insurance to make sure I wouldn’t leave grad school with medical debt on par with my student loans, but I didn’t know if my risk of testicular cancer or some comparably expensive, unforeseeable, and sudden ailment justified spending more each month on health insurance than I do on food. I opted for no insurance, hoping that some pantheon of unseen gods would keep my testicles safe. And it worked, as far as my testicles go. However, in June, I crashed my mountain bike spectacularly and ended up with a fairly serious injury. I decided to go to a doctor because of the frightening (and, it turns out, permanent) deformation of my shoulder. I paid up front in cash, and (as in the article) the price was lower than initially listed because I didn’t have insurance. At the end of the day, this major injury ended up costing me less than one month’s insurance would have.
I recognize that this isn’t always the case – my injury could have been much worse. My case (and the Singer case) of lower-than-expected costs due to the absence of third party insurance are encouraging and seem to provide a market-based solution for the problematic American health care system. However, I have no idea how externally valid these cases are. The health care system is complex. Singer’s main complaint against Obamacare seems to be that it will expand the role of third-party players (including government agencies) rather than reduce it. I’m sympathetic to this argument: it seems Kafkaesque to introduce new layers of bureaucracy to facilitate navigation of the current bureaucracies. But there are some reasons we collectively may not want the healthcare market to look like other markets.
Singer says third-party payers disallow market-clearing prices in healthcare. In a “normal” market, a market-clearing price is achieved when the amount suppliers are willing to provide at that price equals the amount consumers are willing to purchase. This has some nice properties – in the ideal case, society invests the appropriate amount of time and resources in the industry given the competing demands for the inputs and the relative value of the goods provided.
Health care is a different beast, though. It’s not like purchasing a house or a hamburger or a massage – the costs are frequently not transparent, individual’s “demand” for healthcare fluctuates drastically with illness and injury (making effective planning difficult), and I think most Americans would agree that part of civilized society is that an individual’s access to potentially life saving treatment should not depend on their ability to pay. Triaging a plane crash’s victims based on their net worth is deeply offensive to our sense of equity. With a market-clearing price, there are plenty of people who would purchase at a lower price point but who choose not to at the given price. This could be fine for elective health care, but seems undesirable for procedures that can save lives.
I’m not sure if the Affordable Care Act (I haven’t read or I haven’t studied it, and frankly don’t care to) will improve the American health care system, and I’m confident that it’s not the best possible solution. It seems like the European systems (which generally involve more state involvement than Americans are comfortable with) provide better health outcomes than the American system with lower rates of government and personal spending (source), although European programs are not without their issues.
I’m not sure if the best solution includes more government involvement in health care or less. Speaking for my generation, we don’t care; what we want is simplicity. The potentially staggering costs, the complexity, and the opaqueness of the health care industry already combine to make it seem impossible to make an informed decision. Singer suggests that markets provide the simplest solution. I don’t quite buy his argument, but his criticism of ObamaCare (that it increases complexity by adding another layer of bureaucracy) resonates with me. I understand that making health care decisions cannot be like buying a car, but is there some way we can make it feel like buying a car?