Tuesday, February 2, 2010

Paul Ryan wants to ration health care and has weird ideas about the health care market

Ezra Klein has an interesting conversation with Paul Ryan, though, frankly he gives Ryan too much credit (proposing a draconian bi;l that is politically unfeasible but gets you great headlines because most people don't actually know what's in it is not exactly a profile in courage).

Two points:

Paul Ryan comes right out and says he wants to ration health care -- a point that
Charlie Sykes is unlikely to raise on his show.

Paul also has weird ideas about the health care market:

Ryan: So what I’m saying is that rather than having government ration care to manage decline, let’s take those market signals that work in every sector of the economy to reduce cost and improve competition. I got Lasik in 2000. That’s a cash surgery. It cost me $2,000 an eye. Since then, it’s been revolutionized three times and now costs $800 an eye. This sector isn’t immune from free-market principles.

Klein: The Lasik thing is interesting because it gets to the question of whether health care is a market. When I think of getting Lasik, or buying a television, I can walk out of the store. That’s what gives me as a consumer my power in the market. But if I have chest pains and my doctor prescribes a bypass, how do I walk out of the store?

Ryan: In Milwaukee, the price of bypass ranges from $47,000 to $100,000. Nobody knows where to go for quality, or the prices. So wouldn’t it be good for the prices and quality metrics to be publicized? And let people make a decision. There’ll always be some level of co-pay or deductible or co-insurance that’s going to push people towards the best value. Then, when you have those chest pains and you’re being rushed in the ambulance, you’ll be rushed to a hospital that’s all along been competing for business and has been improved by that process. You’ll get better health care than you otherwise would. That’s how you improve the system.

Klein: You’re arguing that the benefits of competition accrue, and so even if you don’t choose at the moment of emergency, there’s still an effect from a higher-functioning market.

Ryan: Absolutely. I don’t know anything about cars. I look at Consumer Reports and their ratings. What matters is that someone who knows about cars went and figured this out. The car company is competing for the really tough customer who goes under the hood. I’m not saying every American has to be that consumer. But enough people have to so the rest of us can benefit.

"I have chest pains!"

"I'll take you to Joe's!"

"Nah, take me to Bob's, Joe's charges too much and skimps on the anaesthesia!"

I can't vouch for the spread in heart bypass costs cited by Ryan, but safe to say not all bypasses are the same nor are all patients the same whereas a Corolla of a Corolla wherever you buy it. Moreover, there is a severe limit on the accrual of the benefits of competition given that health care is a highly localized market (unless you're a medical tourist). And given that there's a limited number of providers in any geography, they will most likely mysteriously settle on a price that affords them a healthy profit -- not that there's collusion, per se, it just works out that way. Klein is a smart guy, he should have shredded Ryan on that point.

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