10A074 The Price of Health by Jim Davies, 11/15/2010

It's too high, by a factor of about seven. Procedures that "ought" to cost $20, cost $140 and when a fair price would be $100, we and our insurers are charged $700. Why? - that's one question economist Paul Krugman didn't address yesterday. I will.

First, let's define "fair". A fair price, like a fair wage, is what buyer and seller would agree upon if no third party were present. It's a price that is equally pleasing (or displeasing) to each. Otherwise, it could not be fair - one would enjoy the deal less than the other. There is only one price that pleases each to the same degree, and that degree of subjective pleasure can be assessed only by the two parties involved. This principle is true of all exchanges, so fairness occurs only in a free market - one in which no third party is present, to distort either choice.

Unfortunately, following more than a century of intrusion by government, that's far from being the case in health care. So, there is no fair price in that industry. It may be possible to ruin it a bit further yet, but it is basically already broken.

The intrusion and distortion has been in favor of physicians (by prohibiting low-price competition from those lacking an expensive degree) and of drug makers (by granting them a 17 year patent monopoly after requiring them to submit to FDA testing for 7 years or more) and of insurers (by encouraging and now mandating purchase of their products; the encouragement was to tax earnings but not "benefits.") It has very much disfavored everyone else - we who have to pay, directly or indirectly. Not one of those intrusions is necessary or even beneficial; for example a new drug is kept off the market long enough for FDA bureau-rats to feel secure, but during the delay thousands may die while awaiting its approval. All of them bring extra, greedy, parasitic mouths to the table and feed them well at our expense, in return for which they make generous re-election contributions and run a shell-game to disguise the real costs. Our immediate, out-of-pocket expenses seem appreciably lower, but all the charges have to be paid (that's why the bill displays them) so we do, for sure, all end up paying them.

Few if any such intrusions took place in South Asia (yet) so prices there are much closer to being fair (that is, as above, close to zero-government levels.) The facilities offered are comparable to American ones and may be superior; the professionals are just as skilled and were often even trained here. As a healthy foretaste of life in a zero government society, I leave you with this table of sample prices in US dollars, drawn from a page about treatment in Thailand:

Procedure $s in US $s in Thailand Saving
Heart bypass 130,000 11,000 92%
Heart valve replacement   160,000 10,000 94%
Angioplasty 57,000 13,000 77%
Hip replacement 43,000 12,000 72%
Knee replacement 40,000 10,000 75%
Hysterectomy 20,000 4,500 77%
Spinal fusion 62,000 7,000 89%

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