January 14, 2017
David Brooks has apparently not heard of the Affordable Care Act (ACA) since he thinks he is providing new information in telling readers that markets can work in health care. If he was familiar with the law, then he would realize that the ACA was quite explicitly designed with the idea that patients should share in costs, and therefore have incentives to seek lower cost care.
As a practical matter, this has not worked out very well, since patients tend not to do comparative shopping for health care services. This means that giving them more control does little to hold down health care costs. A recent study by the Rand Corporation found that patients with high deductible plans did spend less on health care but also tended to avoid recommended preventive procedures such as cancer screenings. Since this was a relatively short-term study, it did not include the higher long-term costs that may result from patients not receiving preventive care.
It is worth noting that Brooks seems uninterested in ways in which obstacles to a well-working market may raise costs but also raise the income of highly paid people. For example, in most markets there is very little competition between insurers. This means that patients have few options if their insurers give them a bad time paying bills — in effect stealing patients’ money. (Personal note: I had to spend two hours on the phone, in three separate calls, to get my insurer [United Health Care] to pay a bill that was for a procedure that was completely standard, prescribed by my doctor, and obtained at an in-network provider. The value of the time I wasted, and that other patients must waste, are not generally included in calculations of health care costs.)
Brooks somehow failed to notice the fact that the price of prescription drugs can be inflated by a factor of one hundred as a result of government granted patent monopolies. To take one prominent example, the Hepatitis C drug Sovaldi has a list price in the United States of $84,000 for a three-month course of treatment. A high quality generic is available in India for less than $200. We spend $430 billion a year on prescription drugs. We might spend one-tenth of this amount if drugs were available in a free market. There is a similar story with medical equipment. In a free market, the cost of an MRI scan would likely be in the neighborhood of $100 rather than costing over a thousand of dollars, as is typically the case. We do need to pay for the research, but there are more efficient mechanisms than government-granted patent monopolies. (Yes, plug for my free book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.)
Brooks also doesn’t seem to care about the protectionism that inflates the pay of our doctors. Doctors in the United States get paid on average more than $250,000 a year, more than twice the average of doctors in other wealthy countries. This is in large part due to protectionist measures that make it extremely difficult for foreign doctors to practice in the United States. A foreign doctor will get arrested for practicing in the United States unless they complete a U.S. residency program. The extra pay for our doctors adds close to $100 billion a year to U.S. health care costs.
From reading his piece it is clear that Brooks wants to endorse a Republican plan to replace the ACA. It just is not clear why.
Note: The numbers on the free market and U.S. price of MRI scans has been changed from an earlier version. Thanks to Robert Salzberg for the correction.
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