Medical Robbery
You may ask, if your local grocery store can't get away with price gouging, how can your local hospital do so? Economists will tell you that in a private market prices get established by demand and supply. If you don't like the price of eggs at one supermarket, you can go to another and check out the prices there. But if you're sick or injured, you're not going to bargain with a hospital before you're admitted; your bargaining power is zero. So your demand for eggs is totally different from your demand for health services. On the supply side, the hospital also has some great advantages that the grocery store doesn't have, unfair advantages that make the whole market system break down.
If a grocery store is making a killing, somebody is going to get the notion of putting up another store like it not too far away. However in the case of hospitals in most states an entrepreneur needs to get a "certificate of need" if he wants to get a permit for opening a facility not far away from another one already there. The entities that issue these certificates tend to be uncannily aligned with the hospital already present. The result is that potential competition is throttled. We're not likely to see hospitals vying for business across the street from one another like gas stations do.
The other trick that hospitals get away with is a total lack of transparency. There is usually no way of knowing what price they will charge for which service until long after the fact. With a supermarket analogy, it's like going to the meat counter, seeing no prices, grabbing a steak, going through the checkout line without a receipt, and sometime later in the month you get a statement saying the steak cost you $500.
Most any economist will tell you that without transparency and competition markets can't work well. Suppliers can charge as they please, especially for an essential service customers are hard pressed to do without. Moreover, there is no incentive to improve efficiency or quality because the cost of waste can be simply passed on to the customer. And bad outcomes can hide behind a veil of secrecy.
In the case of my son the attending physician, without any apparent shame, charged $1,240 for a few seconds' (not minutes') worth of consultation. Even if she had spent an entire hour to exclusive attention for my son, $1,240 would still be a an hourly fee even the most expert professionals in other fields would love to get away with. But it's common in the opaque, uncompetitive world of medical services.
This broken market for medical services impacts not only individuals, but the nation as a whole. Some sad details will follow in the next installment.
In the case of my son the attending physician, without any apparent shame, charged $1,240 for a few seconds' (not minutes') worth of consultation. Even if she had spent an entire hour to exclusive attention for my son, $1,240 would still be a an hourly fee even the most expert professionals in other fields would love to get away with. But it's common in the opaque, uncompetitive world of medical services.
This broken market for medical services impacts not only individuals, but the nation as a whole. Some sad details will follow in the next installment.
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