But the case of diabetes and other evidence suggest that a third problem with health savings accounts may be even more important: in practice, people who are forced to pay for medical care out of pocket don't have the ability to make good decisions about what care to purchase.
How exactly does third-party medicine fix this problem? In fact, it exacerbates the problem in some areas. We are grossly over consuming antibiotics. So much so that we are forcing them to evolve into antibiotic resistant strains. How many thousands of unnecessary and risky operations are performed each year? How many people rush off to the doctor at every sign of a runny nose to get treatments that they don’t need? When doctors propose a new fangled procedure that they are just dying to try, how many patients take the time to find out more about it?
Since our wallets are never any lighter we have been trained to not ask any questions. And because we do not pay the costs we do not think twice about asking for medicine and procedures that we do not need. We heard that our neighbor Suzie had a brand new operation to cure her back pain so we rush to the same doctor and ask to get it too. Why would the doctor say no – he wants to make money after all. We see fancy new advertisements on TV about some WonderDrug – not that we know what it does – so we rush to the doctor to get it. If he says no, we just try another doctor. Most communities have a resident pill pusher, so it’s not like it’ll be hard to find someone to prescribe it. If we can’t find someone we will just it online.
Would free-market medicine fix these problems? Perhaps, though perhaps not. I do know that if people had a larger stake in the decision making process (i.e. how much is coming out of my pocket) they would be more likely to start asking questions. It’s likely that people would seek out more second opinions and I know, for a fact, that prices would start coming down on medical devices at the very least.
How can I be so sure? Because the prices for medical devices are all over the map now. A friend of mine broke his ankle and the hospital told him the walking cast would cost $500. (Needless to say they were a bit taken aback by being asked how much something cost) Being the frugal sort (and we have a high deductible) he told them to shove it. He did some online shopping and found it for $95.
Admittedly that is a single anecdotal case, but I challenge you to search for some medical devices online and witness how widely the prices vary and think about how many billions of dollars are wasted because there is no price sensitivity in the current system.
HatTip: Café Hayek