From: tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105)
Newsgroups: talk.politics.medicine
Subject: Re: HIAA and Reform
Date: 17 Dec 92 18:47:37 -0800
Organization: SSRL, Stanford Synchrotron Radiation Lab
NNTP-Posting-Host: ssrl01.slac.stanford.edu

In article <92352.183150DGS4@psuvm.psu.edu>, <DGS4@psuvm.psu.edu> writes:
> In article <1992Dec16.161122.1@ssrl01.slac.stanford.edu>,
> tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105) says:
>>
>>   In article <92351.101620DGS4@psuvm.psu.edu>, <DGS4@psuvm.psu.edu> writes:
>>>
>>> The arguments of libertarians about the removal of legal restrictions
>>> IMHO fails to address either the underlying distortions or the
>>> possibility that the legal restrictions may, in fact, reflect consumer
>>> desires.  Tony asked a questions a while back on whether a fully informed
>>> consumer should be allowed to contract with any medical provider (I think
>>> I have that right).  Tony chided me for my answer, when, in fact, I think
>>> he misunderstood it.  How can a consumer be fully informed, when the actual
>>> transaction that takes place between the consumer and the provider is
>>> information (about the condition, about the productivity of various
>>> alternatives, etc.)?
>>
>>   Dennis. You are off dancing with another straw man again.
>>   Actually, I said, "Assume that I, as an informed, rational
>>   being..." - nothing about being `fully informed'.
> 
> Fine, Tony.  Thanks for jarring my memory.  Will you allow me to
> re-state you hypothetical, adding in what I think are additional
> elements of the real problem?
> 
> Assume that I, as an informed, rational being wish to make a contract
> with any health care provider.  Assume that there is a high probability
> that fraud or negligence can occur, because the provider has an informational
> advantage over me.  Assume that there is a low probability that I or anyone
> else will detect this fraud or negligence because of the informational
> asymmetry and the large amount of uncertainty involved in tracing the
> effects of any medical intervention on health.  Assume that these difficulties
> also make so difficult to prove fraud or negligence, that the probability
> that I will win a tort even if I was truly harmed is very low.
> 
> I would assert that my statement is a much more accurate reflection
> of the true nature of the problem.  Your statement is the straw man
> which assumes away the most important parts of the problem.

   I think to start my reply, I should point out that there are two
   distinct pieces of `information' we are considering here.

   First, there is the information which _I_ am using to select my HC
   provider.

   Second, there is the product which my HC provider is returning me
   after selection. Part of this is material (an inoculation, say);
   part informational ("You'll die soon if you don't stop smoking").

   I think that the information _you_ are referring to is the latter.
   (..the provider has an informational advantage over me...)
   Clearly, the probability that fraud or negligence might occur in
   _this_ information is related to how good a job I do at
   accumulating the _former_ type of information, convolved with the
   use that I might make of it. (Hence, "informed" and "rational" in
   my original post).

   As for this latter information, I would argue that qualitatively,
   it is no different from information I might obtain from anyone else
   I might want to do business with. There is always information
   asymmetry - if I knew the answer, I wouldn't be going to someone
   for it. That someone could be a car salesman, real estate agent,
   fortune teller, or (the case in point) a physician.

   Now the _quality_ of the information may have a greater impact
   upon my life than if I were buying a pen, say, but I don't think
   that this necessarily increases the probability that I might be
   defrauded. 

   But what about the _first_ kind of information - that I use to
   choose my physician? Is it _this_ which you argue is so asymmetric
   as to compel licensing of physicians? I have had several e-mail
   discussions with various correspondents, but none have managed to
   convince me that the free market cannot provide this information. I
   support Tim's view that the free market can provide much finer
   granularity on physician competence than the current True/False,
   Good/Bad categories which licensing forces one into.

   In fact, the modern practice of medical licensing convolves
   additional factors with the supposed justification - getting a
   competent physician.

   In California, physicians can loose their licenses if they are
   behind on their child support payments. Some unlicensed HC
   providers may be wonderful doctors, hoodwinked by a merciless
   spouse.


   Even if I were convinced that the asymmetry demands special
   treatment for physicians, that doesn't address my real point - if,
   knowing that I am contracting with an unlicensed provider, should
   the law be involved in preventing that interaction.

> 
>>   As a physicist, I can tell you that `complete information' just
>>   cannot be obtained, so any pretense of being `fully informed' is a
>>   fiction.
> 
> It is the asymmetry of information that is important.

   If true, then _which_ type of information?

> 
> 
> 
>>   On a practical level, if `fully informed' is to be made a criteria
>>   for economic transaction, how can _anyone_ be allowed to buy
>>   _anything_ unguided? I certainly wouldn't claim to be `fully
>>   informed' when I bought my car - I'd have had to strip the damn thing
>>   down first!
> 
> There are readily available public and private sources of information
> on both the costs and quality of cars.  The salesman has no
> informational advantage, unlike the medical provider.  Beat that
> straw man to death.  Full information is not the issue.  Asymmetric
> information is.

   But he _does_.
   We are not talking about costs and quality of cars in general, we
   are talking about _this_ car. Is the frame bent? Is their gravel in
   the sump? Are the steering rods loose?

   It is not difficult to generate scenarios in which life threatening
   decisions can be made by negotiating with unscrupulous salesmen.
   But noone argues for licensing car salesmen (or do they?).
   Why? Because informed, rational people buy cars from dealers who
   have good track records.


> 
>>
>>   In the real world, people can and do make decisions based upon
>>   incomplete information. They have no choice in the matter.
> 
> But this is not the issue.
> 
> 
>>   The key words in my question were "informed" (meaning that I at
>>   least have _something_ upon which to make a judgement) and
>>   "rational" (meaning that I am capable of using that information in
>>   a reasonable way).
> 
> The key missing words in your question were the meat of the issue.

   I think perhaps I _am_ not understanding you.
   You seem to have latched onto the supposed phrase, `fully
   informed'. You ask how a consumer can be fully informed when the
   actual transaction is information.

   The answer is, of course, "How indeed?".

   So where do we go from here?

Tony Cox, Stanford, CA