Comments on: Health Care: The One Market Where Keynesian Economics Actually Works

By: Sandy

Sandy — Tue, 02 Dec 2008 16:55:48 +0000

John,

I'm a frequent reader of your Health Alerts, and thought I would comment briefly on medical prices during recessions — our research has shown that medical prices increase during a recession. Our annual look at healthcare costs, Behind the Numbers, has a short discussion on this on p. 14-16.

By: D H Leavitt

D H Leavitt — Tue, 25 Nov 2008 14:50:19 +0000

It is a consumer decision. Absolutely. So called “elective” care is polluted thinking. Elective is a false label, because ALL CARE IS AND MUST BE ELECTIVE. Such is our real world, and not the J M Keyes world or other theories which are unreal and plain hogwash.

Decisions for care must remain an individual responsibility and accountability. Example: When my father refused to go for the second and last round of cancer treatment, I was upset with him. It took a long time for me to accept the fact (after he died) that it was his decision and not mine or some government agency.

By: David C. Rose

David C. Rose — Mon, 24 Nov 2008 18:52:31 +0000

There are many ways in which government artificially lowers prices (e.g., Medicare reimbursement rates). If the price of something is artificially low, there will be excess demand. A fall in the market price, if there is excess demand, works off unmet demand intitially so it does not translate into an immediate reduction in price. Only after the reduction in demand is great enough to produce a market price below the de facto ceiling will observed prices begin to fall. Indeed, the length of time it takes for observed prices to fall is good indicator of how badly government intervention has distorted the market.

By: John Goodman

John Goodman — Mon, 24 Nov 2008 15:19:27 +0000

Joint replacements are apparently lucrative procedures for hospitals. Although they are not lowering prices, they are advertising.

“The growth in orthopedic medicine comes amid a debate in the health care community about whether many of these knee and hip replacements are being over-prescribed when other treatments, such as physical therapy or pharmaceutical injections, would work just as well,” said Dean Smith, a public health professor at the University of Michigan. [link]

By: Bruce

Bruce — Fri, 21 Nov 2008 19:22:30 +0000

In regulation theory, when government arbitrarily sets a price, producers exhaust the potential rents in cost-increasing (usually wasteful) nonprice competition.

I think the same thing happens in medical care, and Devon’s post is a perfect example of that.

By: Devon Herrick

Devon Herrick — Fri, 21 Nov 2008 18:58:03 +0000

See today's Wall Street Journal, front page. When hospitals don't compete on price or on quality, some will apparently increase costs and lower quality to drive quantity. The story concerns an over-zealous doctor's attempts to increase volume of liver transplants at the University of Pittsburgh Medical Center:

To overcome a perennial shortage of organs, he used more livers from older donors.
He transplanted some of these into relatively healthy patients for whom the risk-reward calculation was less certain.
He used partial livers from living donors, and then understated complications from the controversial procedure.

Full story here.