We Want to Have Our Appendix Out Too

April 26, 2012
Posted by Jay Livingston

How compatible are medical care and the free market?

The SocioBlog’s most viewed post (it got Boinged) showed widely varying prices among countries for the same medical products (hospital stay, Lipitor, OB delivery, office visit).  The US prices were four to ten times higher. 

Within the US, even within the same county, prices also vary widely.  Sarah Kiff at WaPo’s Wonkblog reports (here) on a study in the Archives of Internal Medicine (gated, here) that compared prices for an appendectomy.  The range: $1,500 to $187,000.  It’s as though the price of haircut ranged from $15 to $1870.   Even in the county with the least variation, the difference between the least and most expensive was $46,000.

It’s essentially the same service, though one haircut or appendectomy might be much better than another.  But not that much better.  These prices suggest that the usual market processes are not in play.  And they are not.  When I get a haircut, I pay the barber, and I check the price list before I go into the shop.  If my haircut insurance company were paying, I’d just walk in.

Also, unlike an appendectomy, my haircut is not an urgent production.  My untrimmed hair is not causing me to double over in intense pain, desperate for relief.  Even if I don’t act quickly, I won’t die.  I can take my time to shop around.  I can ask friends for suggestions, I can look for online reviews, and afterwards, I can form a reasonable opinion of the barber’s competence.  I’ve never had appendicitis, and unlike Miss Clavel's charges, I’m not eager for it.  But if my appendix were to start acting up, I’m sure I would not be a Consumer Reports type of consumer. 
 
The market is supposed to bring us more and better goods and services at a lower price.  With healthcare in the US, both the process and the outcomes suggest that this is not the ideal example of a market.