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Medicine and Market Forces

One of the clearest signs that market forces are being stymied is a wide spread between the top and bottom price for a commodity. Nowhere is this more conspicuous than in medical services. The price of treating, say, a simple fracture of the arm can, and does, vary by hundreds of percent. A simple remedy for this would be to require medical service providers to post prices for routine procedures. Market forces would immediately begin to cause those prices to converge toward the bottom end.

Would it be a panacea for all that’s wrong with American medicine? Of course not. But would it be a powerful inducement to cut costs and make medicine more efficient, lowering prices further? It could hardly help but be so. And, like that sovereign remedy for all that ails us—chicken soup—it can’t hurt. A big plus would be that it wouldn’t cost government a dime.

Now’s there’s evidence from a clinic, the Surgery Center of Oklahoma, that it actually works (h/t Instapundit). It started posting prices, which turned out to be far lower than other facilities, and people started coming from far and wide to take advantage of the lower prices. One of the local TV stations in Oklahoma City did a story on the clinic last week. It’s worth watching.

As one of the founders explains:

“When we first started we thought we were about half the price of the hospitals,” Dr. Lantier said. “Then we found out we’re less than half price. Then we find out we’re a sixth to an eighth of what their prices are. I can’t believe the average person can afford health care at these prices.”

There are two things of particular interest in this story. One, the first non-local people to come to the clinic were from Canada. Why would people come from the single-payer paradise of Canada and pay their own money for a procedure they could get locally for free? That’s easy. Unless the condition is life threatening (and even if it is, if the patient is “too old”), you have to wait on line in Canada for elective procedures. And wait and wait and wait. Rationing is how Canadian medicine—totally devoid of market forces—keeps down costs.

Two, while the clinic accepts private insurance, it doesn’t take Medicare or Medicaid. Why? Those government programs forbid posting prices. One can only wonder why. It could be simply that bureaucrats love to promulgate rules, whether they make any sense or not. But I suspect it is because the real, ultimate goal of government health programs is to take control of one-sixth of the American economy. Anything that would make that harder, such as lower costs, is to be discouraged if not forbidden.


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