Sunday, May 22, 2011

Buying Healthcare is Not Like Buying Milk

You would think this is obvious.

Buying healthcare is not like buying milk.

There is a lot of what is called "asymmetrical information" in the market for healthcare that makes it extremely unlikely that consumers armed with vouchers will be able to "discipline inefficient providers" of healthcare, despite the fanciful claims of certain politicians to the contrary. For one, it is very difficult and often impossible for a consumer to know, without the expertise of the very healthcare provider they are supposed to discipline, whether an outcome is the best one possible. It is very difficult and often impossible for a consumer to know whether the extra steps taken by one provider over another are necessary or useful, given the tendency of the appropriate steps to be taken to vary based on nuanced differences in diagnoses.

Or to put it another way, there is a reason that medical school takes four years in addition to college and many years after that in order to specialize. Add to all that education knowledge gained through experience, and it is quite clear that there is a major asymmetrical information issue regarding basic issues of what the "service" that is delivered should be.

It really is amazing that some politicians are proposing to end Medicare and replace the system with vouchers based on simplistic theories that do not address the plainly obvious point that buying healthcare is not exactly analogous to buying milk.

Jared Bernstein has more at his blog.

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