Newsgroups: talk.politics.misc
Subject: Re: Health insurance stuff
From: <DGS4@psuvm.psu.edu>
Date: Wed, 23 Dec 1992 11:34:47 EST
Distribution: world
Organization: Penn State University

In article <1h7q2dINNo1k@spim.mti.sgi.com>, mpolen@suntory.mti.sgi.com (Mike
Polen) says:
>
>DGS4@psuvm.psu.edu>, DGS4@psuvm.psu.edu writes:
>|> Matt Austern) says:
>|> >
>|> >Michael Ballard) writes:
>|> >
>|> >> Supply and demand seems to work to bring down the price of most
>|> >> commodities.  "We" could either lower the demand by restricting who
>|> >> could be eligible or "we" could increase the supply of health care.
>|> >> For example, "we" could stop kow towing to the guild known as the
>|> >> AMA and demand that more bright individuals be admitted to medical
>|> >> school
>|> >
>|> >Most, yes, but all?  Is there evidence which shows that increasing the
>|> >number of doctors lowers the price of medical care?  I can think of a
>|> >great many reasons why it might, in fact, do exactly the opposite.
>|> >After all, medical costs in America have been increasing far faster
>|> >than inflation during just the period when we've been getting more and
>|> >more doctors.
>|>
>|> This idea, in fact, has a large literature in health economics.  It's
>|> known as supplier induced demand (or physician induced demand).  As
>|> long as there is some uncertainty about the effectiveness of
>|> medical procedures and some informational advantage for physicians
>|> physicians might be able to increase demand for their services.
>|> Empirical evidence seems to support this idea, but it is by no
>|> means a settled issue.
>|>
>The laws of supply and demand only work if there is 1) limited gov't
>intervention and 2) a competitive environment.  In the past, we

Actually, it is a bit more complicated than that.  The laws of demand
and supply work best under certain conditions, including no
externalities, exclusivity of goods (no public goods), symmetric
information, increasing costs (no monopoly).  Government intervention,
in theory, can help solve some of these problems, though in practice,
it may do more harm than good.

>have been affected by (2), in that there are many characteristics of
>a monopoly at work in the health care industry.  In the future, we
>face (1), in that Clinton (like the leaders of nearly every
>industrialized country in the world) believes that the way to eliminate
>the current anti-competitive environment is to increase the amount
>of gov't intervention.

Most other countries have found a way that provides significant consumer
satisfaction with health care, with few demonstrable effects on quality.
We have not yet found such a combination of market and public structures.

I heard a comment over the weekend on CNN Newsmakers (Stu Altman, I think)
that it is ironic that the U.S. is moving towards managed competition.  Most
other countries decided that in creating their system it was more important
to preserve consumer choice of physician than consumer choice of insurer.
The U.S. appears to be moving to a system in which we will retain consumer
choice of their insurer through these purchasing co-ops; this system will
probably involve more consumers losing some choice over their provider.

>The monopolistic characteristics is the medical industries control
>over entry into the industry (AMA), the insurance companies making it
>both difficult and unrewarding to negotiate with providers, etc.
>
>This is not meant to address the issue whether or not a truely
>competitive and unregulated environment would be an improvement
>or whether the move toward some type of gov't directed environment
>is a better answer.
>
>At least if we understand the problems, we can address them.
Dennis G. Shea, Penn State
<<DISCLAIMER>>
Ain't nobody's bizness but my own. I'll be happy to accept all
the credit for anything I've written.  It's funny, however, how
employers only acknowledge the profitable ideas.
Newsgroups: talk.politics.misc