Wednesday, November 24, 2004
Medical Free Markets...
One of the frequent theories of medical cost inflation that gets a great deal of play in the medical blogosphere is the insulation of consumers (patients) from the real cost of their care by insurance companies. Patients demand the newer, more expensive medication (Clarinex, Nexium) rather than the old reliables (Claritin, Prilosec) because they only pay the co-pay, and are spared the true cost. Well via The Commisar comes this commentary from Obsidian Wings and Marginal Revolution about how one medical procedure has actually fallen in cost. Mr. Tabarrok begins:
One of the frequent theories of medical cost inflation that gets a great deal of play in the medical blogosphere is the insulation of consumers (patients) from the real cost of their care by insurance companies. Patients demand the newer, more expensive medication (Clarinex, Nexium) rather than the old reliables (Claritin, Prilosec) because they only pay the co-pay, and are spared the true cost. Well via The Commisar comes this commentary from Obsidian Wings and Marginal Revolution about how one medical procedure has actually fallen in cost. Mr. Tabarrok begins:
Everywhere we look it seems that health care is more expensive: prescription drug prices are increasing, costs to visit the doctor are up, the price of health insurance is rising. But look closer, even closer, closer still. Don't see it yet? Perhaps you should have your eyes corrected at a Lasik vision center.To which Mr. Holsclaw adds:
Laser eye surgery has the highest patient satisfaction ratings of any surgery, it has been performed more than 3 million times in the past decade, it is new, it is high-tech, it has gotten better over time and... laser eye surgery has fallen in price. In 1998 the average price of laser eye surgery was about $2200 per eye. Today the average price is $1350, that's a decline of 38 percent in nominal terms and slightly more than that after taking into account inflation.
Why the price decline in this market and not others? Could it have something to do with the fact that laser eye surgery is not covered by insurance, not covered by Medicaid or Medicare, and not heavily regulated? Laser eye surgery is one of the few health procedures sold in a free market with price advertising, competition and consumer driven purchases. I'm seeing things more clearly already
Of course he is a little carried away there. One reason prices are low is because laser eye surgery can be deferred, and you can shop around on the basis of quality and price. This isn't easily available to people having a heart attack, though it is available for long term or maintenance issues. It is worth noting that laser eye surgery has been steadily improving over the last few years. So as the price goes down and quality goes up, the overall value of the surgery becomes a better buy than even the declining price would show. His basic point remains--people are getting more for less in one of the few health care markets which is open to free competition. Maybe the post should entitled: "Good Point, to consider talking more about..."The commenters ask whether the costs of other pay-up-front procedures, such as breast augmentation, are falling in price. Not likely. LASIK has the advantage of being a highly automated, high volume, outpatient procedure done with minimal anesthesia. Few other procedures, covered or not, have those advantages. The new laparoscopic techniques that have come out for a wide variety of procedures; cholecystectomy, fundoplication, and colectomy, for example, have actually increased the cost of those procedures in the short run. This is primarily due to increased equipment costs, and sometimes (especially early in the learning curve) the operative time is increased. This is offset by the reduced length of stay and earlier return to activity compared to the more traditional open operations. With refinement of technique and reduced instrumentation cost, the overall cost of these could fall. But I'm sure reimbursement will be reduced before the true cost falls. |
