via Matthew DiPaola:
I completely disagree with Krugman and again believe that his NY Times pulpit and Nobel prize in economics inappropriately legitimaize a weakly argued, soundbite point.
Krugman claims that healthcare is distinctive for 2 reasons: 1) no one knows “when or whether” they may need care (health events can be unpredictable) and 2) healthcare is complicated. He is wrong on both points. In order for his point to ring true, he would have to prove that free markets are incapable of effeciently distributing unpredictable and/or complicated services. Free markets efficiently distribute both unpredictable and complicated services all of the time.
Point 1. Free markets operate extremely efficiently to protect against the unpredictable events of death (life insurance), car accidents (automobile insurance) and fires (homeowners insurance). In each case there is a disincentive for the insurance company to pay- not unlike the case of healthcare. Well manged insurance companies such as Geico, through excellent planning and policy pricing are able to offset claim payouts by prudent float investment and either break even or turn a profit. Such insurance firms provide a solid protective service to countless people daily. Without free markets (and we can argue about how truly “free” some of these markets are) these people would surely be worse off.
Point 2. Free markets efficently allocate complicated goods and services all of the time. The computer industry is an excellent example. I don’t know how to create a microchip but i can certainly explain to a competent professional what types of activities for which I would use a computer. And in a free market, an honest, trained salesperson can help guide me to the appropriate computer, at a good price for my needs. The same holds true for medicine. No patient needs to know the nitty gritty distinctions between various stents. They do, however need to be educated and guided appropritely regarding the qualities of that stent that most effect their decsions- “Doctor, how long does stent X last? what are the side effects? what are appropriate alternatives? what quality of life will this provide me? The professional’s role is to guide the patient through this complicated desicion process and is their "value added” to the market interaction.
Krugman fails to delineate why healtcare is truly distinctive. Healthcare is distinctive because its practitioners are obligated through professional ethical standards to provide the highest level of care to ALL patients/consumers regardless of age, disease status and ability to pay. Certainly this differs from the flat screen TV market: this would be the equivalent of every TV shopper DESERVING the $5000 48 inch flat screen TV (assuming that the 48 inch was considered the highest quality). And this ethic may indeed raise costs- to the extent that high quality equals high cost. One can argue ad infinitum about what constitutes the “highest level of care.” And I think Jay makes good points in his writing that high cost does not ALWAYS equal high quality care.
Milton Friedman, a Nobel prize winning economist with a decisively different take on these issue is worth considering. For a look at why free markets in healthcare must be considered please read Friedman’s 2001 article "How to Cure Healthcare.“
btw, Matthew, when’s that blog coming online??