Perhaps you have heard that health markets work reasonably well when patients pay with their own money. LASIK surgery and cosmetic surgery are two examples. Yet, the authors of a new study dispute this claim.
The article is called “Self-Pay Markets in Health Care: Consumer Nirvana or Caveat Emptor?” It was funded by the Center for Studying Health Systems Change (an RJR outfit) and appears at the Health Affairs web site. The authors (both non-economists) focus mainly on LASIK surgery, but also include in vitro fertilization, cosmetic rhinoplasty and dental crowns. They do not find nirvana.
But first things first. Buried in the middle of the article, in the middle of a paragraph, with no bold heading and no mention in the Abstract, as though it were only of passing interest, is this amazing factoid: over the past decade, the real price of LASIK surgery has decline by 30 percent. Equally buried, is another startler: The satisfaction rate among patients is 93 percent. And we can all be thankful the editor’s shears did not expunge this tidbit: unlike every other kind of surgery, in LASIK surgery higher quality service routinely commands premium fees.
Is there some relationship between falling prices, high patient satisfaction, higher pay for superior quality and the fact that patients are paying out of pocket? The authors never ask this question.
Given that the rest of the world is apoplectic over rising health care costs and people everywhere are telling pollsters how much they dislike their third-party payer systems, you have to wonder. Either a) the authors are remarkably uncurious, or b) their world view is several standard deviations away from the mean.
The authors did find many blemishes, however, causing them to conclude that self-pay markets don’t work, or don’t work very well. Although they never talked to any actual patients, interviews with people on the supply side revealed a market with inconsistent pricing and inconsistent bundling. (Some quoted prices include initial screening and follow up procedures; others do not). Worst of all: the primary source of patient information is word of mouth! Alas.
Here’s a personal confession. Before I go to the supermarket I do not know the price of bread. Nor do I know the bundles (is the sales price per loaf? Or is it buy one, get one free?) I would not be surprised to learn that most shoppers are just like me. But prices are not determined by what most buyers do.
They are determined by the buyers at the margin.
It’s economics 101.