Can we shop for health care?
Today's progressives add a few more bullet points to Arrow's critique.
Some say that health care is a uniquely emotional decision. I might shop for a laptop based on the speed of its microprocessor and the resolution of its screen, but if I get cancer, I'm going to want the best possible care, with price as no object.
But we make many purchases on an emotional basis. I occasionally take a date out to a nice restaurant, instead of buying her a sandwich at the grocery store, and not because the restaurant's food has superior nutritional content. Entire industries--jewelry, say, or Hollywood--exist for no other reason than to satisfy our emotional interests.
My point here is not to say that health care is the same thing as jewelry: but rather that health care's emotional component is not economically unique.
Others point out that you can't always shop for health care. If you have a heart attack and become unconscious, you aren't capable of deciding where to get treated. This is probably one of the most important ways in which health care can differ from other economies.
So let's stipulate that this is true. No, you can't shop for health care when you're unconscious, or when you're in acute or emergent situations. Does this justify nationalizing the health care system?
No. At most, it justifies nationalizing a subset of health-care decisions that take place in acute settings. For example: I am certainly capable of shopping around to find a reputable doctor that will offer me a routine prostate exam at a reasonable price. I'm even capable of shopping around for care for chronic conditions, like diabetes or end-stage kidney disease. I'm less capable of shopping around if I have a stroke (though I am capable of shopping for an insurance plan that will try to help me get cost-effective treatment).
Of the $2.6 trillion Americans spent on health care in 2010, according to the Centers for Medicare and Medicaid Services, $814 billion--31 percent--was for hospital care. And not all hospital care is acute. So, the inability to shop for care applies to less than three-tenths of all health spending.
So, it seems to me, those who strongly believe in the shopping argument for socialized medicine should adopt a hybrid approach. Let's have a free market for the 70-plus percent of health care where market forces can most directly apply, and let's have universal catastrophic insurance for those situations where market forces work less well.
This way, we might get the best of both worlds: an efficient, affordable, high-quality market for chronic and routine health care, and a universal system for those who get hit by a bus, or have a stroke, or get cancer. Such a system would leave no one behind. But it would also allow our health-care system to benefit, as much as possible, from the forces of choice, competition, and innovation.
Singapore is looking better all the time.
Follow Avik on Twitter at @aviksaroy.