Photo of the day

From a Big Picture set on the Fina World Aquatics Championship:

Multiple exposures were combined in camera to produce this image of Kent De Mond of US competes during a High Diving training session on day eight of the 15th FINA World Championships at Port Vell on July 27 in Barcelona, Spain.(Alexander Hassenstein/Getty Images)

Capitalism failure

So, for your long reading today, I highly recommend this NYT piece on “medical tourism,” i.e., going to Belgium to get your knee replaced because it costs about 1/10 as much over there.  There’s lots of reasons this is the case, and the article hits most of them.   In many ways, what happens is that we, on some level, are trying to run health care as a free market, but it just doesn’t work that way, which gets us into big trouble:

The American health care market is plagued by such “sticky pricing,” in which prices of products remain high or even increase over time instead of dropping. The list price of a total hip implant increased nearly 300 percent from 1998 to 2011, according to Orthopedic Network News, a newsletter about the industry. That is a result, economists say, of how American medicine generally sets charges: without government regulation or genuine marketplace competition.

In Belgium there’s no pretense of market competition– the government is heavily involved in keeping the price down:

His joint implant and surgery in Belgium were priced according to a different logic. Like many other countries, Belgium oversees major medical purchases, approving dozens of different types of implants from a selection of manufacturers, and determining the allowed wholesale price for each of them, for example. That price, which is published, currently averages about $3,000, depending on the model, and can be marked up by about $180 per implant. (The Belgian hospital paid about $4,000 for Mr. Shopenn’s high-end Zimmer implant at a time when American hospitals were paying an average of over $8,000 for the same model.)

Well, with all that government regulation, surely Belgians cannot get a decent hip implant?  Nope.

“The manufacturers do not have the right to sell an implant at a higher rate,” said Philip Boussauw, director of human resources and administration at St. Rembert’s, the hospital where Mr. Shopenn had his surgery. Nonetheless, he said, there was “a lot of competition” among American joint manufacturers to work with Belgian hospitals. “I’m sure they are making money,” he added.

A big part of this is how the device manufacturers manipulate our political system to their benefit.  In all fairness, a purely open marketplace in medical care (as I know Pino would advocate) would avoid many of these problems.  But that simply is not going to happen in any first-world country, anywhere.  Our non-sensibly regulated hybrid, though, basically gives us the worst of both worlds.  We get the downsides of capitalism– cartels, monopolies, market failure from price intransparencies– without the benefit.  Again, the evidence is overwhelming that to get far more efficient health care, the answer is more government regulation.  Just like in Belgium and all of Western Europe.

Now, if the evidence showed we’d get more efficient health care (that still covered all citizens) with less government involvement, that would be just fine with me.  It’s just that there’s no evidence for that proposition.   The ends– healthy citizens and efficient policy– are what’s important; not the means.  And the means of our current market hybrid are not a total failure, but an absolutely massive waste of our national resources (that also leave millions and millions of Americans needlessly suffering).  Boy, that sounds a lot like a total failure.

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