Why We Want Markets In Health Care

13 january 2013

A piece from the UK showing why we really do want to have markets, multiple providers, in health care. This doesn’t mean government cannot be involved, most certainly doesn’t mean that there should be no place for tax financing of at least some health care. But we really do not want to end up with a single provider system under the control of the planners and the politicians:

One of the greatest risks of surgery is blood loss. There is a cheap drug which dramatically reduces the risk of haemorrhaging, but experts say it’s being ignored by British doctors, putting the thousands of patients who have an op every year in unnecessary danger.

Why? The drug is out of patent, meaning pharmaceutical companies aren’t interested in making it widely available, because they won’t make money from it.

The medicine, called tranexamic acid, is sold over the counter under the brand names Cyklo-F and Femstrual to help women affected by heavy periods.

Err, no, clearly, if the drug is on the market and available for purchase then companies are indeed interested in providing it. If they weren’t it wouldn’t be available.

The trial, widely known as the CRASH-2 trial, published in the Lancet, showed the drug could lower the risk of trauma victims bleeding to death by up to 30 per cent.

Since the trial, the drug has been introduced on to the battlefield by the military to help save the lives of badly injured soldiers. But according to Tim Coats, professor of emergency medicine at the University of Leicester, it is still not being widely used in NHS hospitals to save the lives of civilians

This brings us back to William Baumol and his point about the difference between invention and innovation. Planned systems and market based systems are pretty much the same in invention: the creation of spiffy new things. It turns out that for scientists the thought of getting fabulously rich, or not being sent to the Gulag with their families, provides about the same incentive. Or more seriously, a well funded lab where they can go inventing is what is important. They don’t care whether it is shareholders or taxpayers funding it: and why should they?

But Baumol defines innovation as getting that spiffy new thing into the hands of people who will use it to do things. And it is market based systems that have a huge advantage here. The UK’s centrally and politically controlled not a market NHS is very bad at rolling out such new treatments. Showing that, whoever finances it (even single payer!) a market system is a better health care system than single provider. For we really do want those markets that push innovation.