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I was going to spend the next several diaries talking about the health care consumer, but reactions to my last diary made me realize that the issue of health care as a "free market" phenomenon excites all kinds of passions, and therefore needs some additional analysis.  So we will hold off on the consumer aspect of health care economics and try to sort out some of the analytical issues that arise in a discussion about the free market, whether the market is involved with health care or not.  

Perhaps rather than talking about free markets, because no market is totally free, we should focus our attention on a more fundamental phenomenon, namely capitalism itself.  Because if we define an economic market as a place where goods and services change hands through the process of buying and selling, then by definition where you find a market you find capitalism.  And in order for capitalim to exist, there have to be some capitalists.

What is a capitalist?  The capitalist is a person who puts together resources (materials and labor) and produces services or products that can then be brought to the market.  Now if this sounds like something right out of Marx's Das Kapital, it's not by accident.  I studied all three volumes of Capital in graduate school, and even though Marx himself never really worked for a living, he certainly understood what the capitalist system was all about.  And what capitalism is all about is selling what you bring to the market at a price which is high enough to pay off the costs of production and leave you with a profit that can be re-invested in more resources so that the whole process repeats itself.  

But the problem with the capitalist system, which Marx defined as its inherent contradicton (and which he analyzed brilliantly in Volume III,) was the tendancy, due to market forces, for the rate of profit to decline as more capitalists came into the market selling cheaper and cheaper products.  Sooner or later this would lead to market saturation, over-production, unsold products, the withdrawl of capitalists from the market and the collapse of that particular market segment.

This was the way in which the market functioned and capitalists behaved in the 19th Century.  But what Marx could not forsee in the 20th Century was the fact that capitalists could be induced to remain in the market if the participatory incentives were provided by the government.  And this is exactly what happened in the United States with the advent of Medicare and Medicaid in the 1960s.  From a capitalist perspective what these programs did was to create incentives for capitalists to stay in the health care market by expanding the number of consumers who could afford to buy health care products and services.

But who exactly were these health care capitalists?  The usual answer is that Medicare and Medicaid made it profitable for HMOs and other for-profit companies to enter the health care market and begin to transform the delivery of health care into an industry.  But this answer begs a very fundamental question, namely, if capitalism involves an exchange between seller and buyer, and if the seller is a capitalist who brings his wares to market looking for a buyer, isn't the physician in fact the capitalist?

And the answer is: yes.  The truth is that the entire U.S. health care system, subsidized or not by the federal government, was and still is based on fee-for-service arrangements between sellers (physicians) and buyer (patients.)  And whether the buyer pays directly by writing a check to the medical group or indirectly by submitting a claim to the insurance company is really besides the point.  Unless we want to throw out Das Kapitol and completely redefine capitalism, the undrpinnings of the health care system are held in place by the behavior of the capitalists who happen to be the MDs.

But in their role as physicians, these capitalists find themselves in as much of a contradiction as the old-line capitalists experienced when confronting the declining rate of profit.  Because the capitalist, once he creates a product, has to spend all his time and energy looking for customers.  And as he widens the customer net, he also has to drop the price.  On the other hand, to be a good doctor means that you are supposed to diminish the number of customers as much as you can.  After all, that's what healing the sick is all about.  If the patients keep coming back to see you again and again, you're not doing what you're supposed to do.  There's a reason why children can't go to school unless they've been immunized.  We don't want to turn an entire school of children into patients, right?

Don't get me wrong.  I'm not saying that physicians walk into their clinics or their practices or their hospitals wondering how they are going to make a buck today.  They don't think of themselves as capitalists, they think of themselves as healers, which is what they are.  But without their participation there wouldn't be a health care market, regardless of whether that market operates efficiently or inefficiently, or however it operates.

Stay tuned.  More to come shortly.

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Comment Preferences

  •  You can stop wondering whether docs go into (2+ / 0-)
    Recommended by:
    MsGrin, George3

    their office wondering whether they are going to make a buck that day. They are.

    I have been grousing about my local hospital setup which took the position that it would not accept regular Medicare from new patients and published a very short list of the Medicare Advantage plans it would cover.  It now appears that the hospital itself will accept regular Medicare but the XXXX Medical Group, which represents the doctors, is the one which won't and requires patients to use the specified plans, because of the reimburement rate. And in the second year, those approved plans have changed their terms and tripled the cap which limits how much patients must themselves pay.

    •  Medical groups (0+ / 0-)

      Question to you:  Is the medical group one specialty or multi-specialties?  I ask because there is some talk that multi-specialty groups are less "profit-minded" than the single specialty group but I'm not sure.  Which type of group are you dealing with?

  •  Some points to consider (0+ / 0-)

    I have just finished reading your series and have a few comments.

    1) As you correctly point out, consumers have little choice in the health care market.  The product (health) is not really optional, like TVs or detergent.  If you have a cancer, you HAVE to seek the product or die.  Few people die if they fail to buy a TV.

    2) Consumer choice is further limited by the insurance companies, that tell consumers which suppliers they may use and which they cannot use, which services are available for purchase and which are not available for purchase, and determine the cost of the service to the consumer.  Healthcare consumers cannot simply choose the best product for the lowest price, as they would whne making decisions about buying TVs and detergent.

    3) The choices an individual makes with regards to their healthcare may impact the larger society.  That is why immunizations are required for school participation.

    4) Doctors and hospitals, unlike other capitalists, are not free to decide what services to offer nor free to set the prices for their services.  Doctor and hospitals can only provide those services allowed by law, and are forced charge the price set by the insurers.  If a doctors sees a market demand for (for instance) abortions, or crystal healing, they cannot simply provide abortions or crystal healing to any who seek it.  The doctors and hospitals are not free to set prices "as the market dictates", but must instead follow the dictates of the insurance industry on prices.  This is very different from the business of making and selling TVs and detergent.

    5) The government plays a role both as supplier and consumer.    

    6) The government further intrudes on the "free hand of the marketplace" by legislating what services are available, who can provide those services, and how those services are to be provided.

    All of this says to me that the economics of healthcare are very different from the marketplace of other consumer activity.  In my opinion, it is a fallacy to think of the economy of healthcare as just another widget offered to meet consumer demand.  It may be better, in my opinion, to think of the economics of healthcare in the same way as we think of other societal undertakings, such as wars or building dams.

    I enjoyed your series so far, and I hope you can include some of these ideas in your future writings.

    "The fool doth think he is wise: the wise man knows himself to be a fool" - W. Shakespeare

    by Hugh Jim Bissell on Thu Oct 11, 2012 at 06:33:42 AM PDT

    •  response to Hugh Jim Bissell (0+ / 0-)

      I certainly will resond in detail to many of the points you made.  This series is free-flowing inthe sense that I have lots of data (accumulated since I began researching this issue in 20007) but want to present it in serial form based on how readers respond to it.  Stay tuned, you'll see many of your ideas being analyzed in detail as I go along.
      But I want to make a quick comment here becaus I had planned to spend a bunch of diaries on understanding the behavior of the consumer (i.e., patient) in the health care market and I need to put off those diaries for a bit.  Nevertheless, the data I have seen to date, notwithstanding the issue of the gtovernment deciding whaty can and cannot be done by physicians, clearly indicates that the mjabority of health care consumers behave in the health care market exactly the way that they behave in any other consumer market; i.e., the make rational choices based largely on their belief as to what they want, and these beliefs often have little to do with what they really need.  Further, in a majority of health care transactions, the consumer can also decide whether to participate in the market at all.  Whenever we talk about health care we are always drawn to the obvious examples of why people "need" medical care; i.e., trauma, critical illness, etc.  But I will show at some later point that the health care market, in terms of revenues and utilization of resources (including the ,lkabor of the people who deliver health care) is dominated not by the delivery of "must do" care, but by the delivery of all sorts of non-critical care.  In which case, the assumption that health care consumers are behaving differently from consumers in other markets simply is not true.
      Finally, I have kleft entirely unsaid (but will get to it at some point) the whole issue of the non-medical health care market.  By this I mean products and services thyat consumers purchase because these things make them feel better, even though they are not items for which either the government or the insurance industry is willing to foot the bill.  There isn't a single shopping mall in America, for example, that doesn't have a well-stock store selling health additives, vitamins, etc.  It's an enormous industry and the consumers who buy these products also buy traditional health care products and services for the same reason.  
      Thanks again for your comments and please feel free to continue youir feedback.

      •  I would like to see those studies (0+ / 0-)

        I would like to see those studies that show consumers of medical services make decisions about the purchase of medical services in the same way they make decisions regarding other consumer purchases.

        It seems intuitive to me that consumer decisions regarding medical services are very different from decisions about other consumer goods.  I tried to point out some of these differences in the first comment: 1) decisions about medical services are forced by time and circumstances in ways other consumer decisions are not; 2) prices are fixed in the medical marketplace in ways they are not fixed for other consumer goods; 3) medical decisions effect others in the family and wider community in ways that other consumer decisions are not.

        Here is a concrete examply.  A couple of years ago, my aging step-mother suffered a stroke.  My step-mother had previously decided she did not want life-prolonging care, and we the children were now faced with the decision of whether my step-mother should have an operation to place a feeding tube.  

        With this example, you can see a variety of ways that medical choices are very different from other consumer choices: my step-mother making a decision about medical care years in advance of needing and seeking that care, the legal requirements that had to be fulfilled in order for my step-mother to formalize her choice, other family members asked to make a decision for a consumer, decisions made in the complete absence of any information about the dollar cost, the lack of service provider options available.

        So I am dubious that health consumers behave just like consumers of other services when making decisions about purchases.

        Can you direct me to ay studies you have seen on this topic?

        I look forward to seeing the next installments of your series.  This is a good topic.

        "The fool doth think he is wise: the wise man knows himself to be a fool" - W. Shakespeare

        by Hugh Jim Bissell on Fri Oct 12, 2012 at 06:30:10 AM PDT

        [ Parent ]

        •  Health Care consumers (0+ / 0-)

          I will publish the data when it's aggregated but in the meantime, please note the following.
          Everyone has a terrifying story about a relative or a friend who suffered a critical medical problem and didhn't or couldn't choose the method or the person who would respond to them.
          But a spectacular medical incident doth not statistics make.  The fact is that the majority of income that hospitals receive comes from outpatient services, which means that someone got to the hospital under their own steam and then left after they received treatment.  This includes emergency rooms of which less than 10% of ER patients are then admitted as in-patients.  
          In most outpatient cases, the consumer (patient) can not only choose the site for the treatment but, much more important, can decide whether to go to a physician at all!
          I have spoken to many primary care physicians who work in hospital and group/individual outpatient sites and they uniformly tell me that the reason that patients come to see them is becauise the patient wants the physician to make them "feel better."  And when it comes to feeliong better, there are all sorts of options including many that aren't even considered part of the health industry.  Ever go to a shopping mall and notice the well-stock stores selling vitamins, food additives and all that other crap?  What about consumers who buy irganic foiod because it will make them feel better and prevent various illnesses?  Aren't they exercising choice as regards their health care?  Of course they are.

          •  I agree about statistics (0+ / 0-)

            I agree that my concrete example does not reflect the entirity of medical decisions making.  It is not supposed to, it is merely a croncret example to demonstrate some of the points I am making about medical decision making.

            By the same token, conversations with primary care physicians do not reflect the entirity of medical decision making, either.  If would be very difficult for you individually to have conversations with a representative sample of primary care docs, and primary care doctors are but one of many different sort of doctors

            I understand that a majority of medical care (and therefore economic activity) involves routine outpatient care.  But emergency care and life-threatening situations make up a not-insignificant portion of medical care and medical decision making (and a large portion of medical economics).

            If your surveys and studies focuses largely or exclusively on primary care, it makes sense that you specify that in your reporting.  A simple qualifier should suffice: "When making decisions about outpatient care, medical consumers do this, that, and the other, etc".

            As a reader, when I see the words medical care, I think about ALL medical care, including interventions, surgeries, ER care, inpatient care, care for chronic illness, end-of-life care, pregnancy and child-birth, and "all the ills that flesh is heir to ".  If you data does not include these sorts of things, it makes sense to say so.

            Keep up the good work.

            "The fool doth think he is wise: the wise man knows himself to be a fool" - W. Shakespeare

            by Hugh Jim Bissell on Fri Oct 12, 2012 at 11:18:10 AM PDT

            [ Parent ]

            •  A quick response (0+ / 0-)

              The issue isn't whether or not I am concentrating on primary care.  The issue is simply this: If we are concerned about the quality of care and the cost of care we won't do a very good job of changing things or fixing things if we don't understand what the data is really telling us.  When I first started this research all I knew was that we were spending 40% more on health care per capita than any other country and we ranked either 14th or 30th in the world in terms of health care outcomes, depending on which organization's scale you looked at. Then I began to look at the data and if you pull the 13 Southern states out of the national total we zoom up to #1 or #2 in health care outcomes and our per capita expenditure goes down.  But all I ever heard was that we had a national health care problem which had to be fixed nationally.  So how come just a cursory examination of the data showed that it's actually a regional problem?  And if it's a regional problem, why are we talking about fixing it nationally?  The same thing is true about health spending in general.  The reason I focused on primary care providers is not because I'm only interested in them and not because I've only spoken to them.  I talk to them because they are the ones who are generating the bulk of the income in health care, much moreso than the specialists who come in to deal with the critical cases but who, in total, are much less of a revenue and cost factor than the primary care people.  All I'm doing in this entire project is looking at data and looking where the data leads me.  And in the process I'm discovering that the bulk of what is usually stated as regards health care is based on no data at all.  
              Stay in touch.

  •  To me the question is very simple (0+ / 0-)

    The US average (2009) for expenditure on food was 6% of income.  Suppose that started rising, and rising, and rising with no end in sight. I would be concerned.  Yes, food is an industry, but the cost of food would have to be cut.

    Likewise with health-care.  I don't have the statistics on me, but I believe it is rising and rising and rising *on the average* covered-by-insurance person, even while the number of uncovered persons is rising.   So it isn't that we're getting more for our money either.

    •  Reply to Arun (0+ / 0-)

      Good analogy.  BUt let's follow your example to its logical conclusion.  Let's say that food proces kept rising and rising and something had to be done to deal with it.  Would the government impose price controls on food?  Maybe.  Woulkd they give people a tax break so that they would have more money with which to buy food?  Maybe.  The point is that whatever was done, there would be qa recognition that there was an economic problem that had to be solved in a way that would allow the market to comntinue to function.  Don't get me wrong, I've said it again and again that I believe in universal (read: fee) health care.)  But it has to be accomplished in a way that recognizes that health care is an industry, not some kind of social service.  Ans if you read my next diary (due by Friday I hope) you'll see that the Republican. "free market" remedy won't work.

      •  Assumption (0+ / 0-)

        The assumption is that the market can function properly in health care.

        I believe that that electricity, water, sewage, and even telecommunications are/were regulated utilities, and they all delivered affordable, cost-controlled services.  These were another case where the market could not function properly (in the case of telecommunications, that is changing with technology) because of the natural monopoly such service-providers tend to enjoy.

        There are similar, different barriers to the health care industry working as a free market.

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