This is a rather disturbing question.
John Goodman of Southern Methodist University is a leading US analyst of what is commonly called healthcare, which employs one in ten American workers. He asks us to imagine for a moment a grocery store run along healthcare industry lines. In this case, he notes:
- Product prices will not be posted.
- The price will vary even within the same store, depending on who is buying and paying.
- You won’t be able to shop during evenings or weekends.
- If you need something, it probably won’t be there in the store. You may be told to come back days or weeks later.
- Even if you find the item, you may have a long wait to be able to buy it.
- If you want to charge your purchase, it won’t be at an automated machine; the transaction may be rejected; the necessary records may be missing; and someone from outside the store will have to approve the amount of the purchase. Since this all takes time, you may not be able to charge at all.
- You won’t have the right to return anything. Even defective merchandise will not be reimbursed. As a result there will be no incentive to maintain product quality.
- Your degree of satisfaction will not matter much to the store. What will count is the satisfaction of third-party payers, and the store will focus on how to get the most from their formula. If the third-party payer formula says you may not buy cherry pie and ice cream on the same day, you may grumble, but most likely you will have to return to get what you want.
- There will be very few brands to guide you in your selection. Labels and quantities will be all over the map, so direct comparison shopping will be impossible.
- Your chief protection against injury or death from what you buy will be hiring a lawyer to sue. These suits will in turn greatly increase the cost of the food you buy.
- The purchase of many food items will require permission from a licensed professional. The professional, fearing a lawsuit, will require you to buy items you do not need or want.
We could go on and on in this vein, but the point is clear. The grocery industry somehow manages to organize thousands of products, many coming from thousands of miles away, and have them on the shelves whenever you want them, at prices that in total represent a small proportion of national income. There is also tremendous consumer choice. Yes, many grocery and drug stores seem to be primarily junk food stores, but this is the consumer’s choice, and there are health food stores as well.
The healthcare industry is in complete contrast to this. Costs keep rising, consuming more and more of national income; quality of service keeps declining; and outcomes are surprisingly poor. It is not widely known, but research in respected medical journals suggests that healthcare mistakes are the leading cause of death in the US, ahead even of cancer and heart disease.
John Goodman argues that one of the main reasons for systemic failure is the lack of transparent pricing. He asks: Why is it that prices are so difficult to discover in healthcare?
The problem of the Soviet economy writ large is exactly the same problem we have in our healthcare system. Should we train one more doctor? Or would our money be better spent training a nurse or two? If we choose the doctor, should she be a primary care physician? Or an internist? Or some other specialist? How on earth would anybody ever know? No one in healthcare ever sees a real price. No patient. No doctor. No employee. No employer. In the absence of real prices, we have no way of knowing the marginal value of one more doctor, one more nurse, one more technician, or one more anything.
This article was adapted from chapter 13 of ANH-USA Board President Hunter Lewis’s new book Crony Capitalism in America 2008–12.