Are patients consumers?

Paul Krugman writes today that moves to introduce more consumer choice in US medical care are useless because patients aren’t really consumers. They do not have the information as Ken Arrow pointed out long ago. Austin Frakt points out that they asymmetry is not just in information but how that translates into power. Of course, the actual power of patients is an empirical issue for which we don’t have much information.

One insight we get from this is a study that Andrew Leigh and I conducted a little while ago (not yet published because apparently the issue of patient power isn’t of importance to health economists!). That study looked at doctor-patient negotiations over birth timing. Here is the paper and here (and here) is a discussion explaining the result. The bottom line is that in Australia, patients have some power (despite the large public health care system) while in the US they have no power (despite the private system).

11 thoughts on “Are patients consumers?”

  1. Of course, patients have power, although the extent of this power will depend on the context.  Perhaps not so much power if lying in intensive care, unconscious, but in most situations, patients have power and it is increasing.  Armed with the power of the Google search, increasingly patients march into the physician’s office with all manner of half baked information and demand particular action. That there is asymmetric information of course defines the market; if we all knew as much as the physicians and could treat ourselves (this would be very clever for surgical procedures, but it has been known to occur, albeit by trained surgeons generally), there would be no market.  But asymmetric information does not necessarily confer any power on the provider if patients can shop around for different opinions from other providers – and they do. Perhaps the Australian system facilitates this more than other countries – there is no restrictive enrolment arrangements for primary health care, for instance, which is the case in other countries. But let us call the users of health care PATIENTS – there is no need to change and simply creates another layer of confusion for the analysis.  (Note: when my daughter was a Medical student, the psychiatric patients were called CONSUMERS – under the Victorian government protocols.  Surely this is much worse than being a patient; having a mental illness is not the equivalent of popping down to Myer and buying a new shirt as a customer!)


  2. Paul Krugman is a strange fellow. Maybe he doesn’t know anything about medicine. Maybe he doesn’t choose the doctor that will treat him. Who knows what goes on in his mind. Sacred relationship he says? Nobel prizes have become very cheap in recent times. In my case, I select the doctor carefully (sure, when I’m not in a coma, that is) and I like to believe that I take informed decisions on his competence. If not, my wife is an expert in choosing doctors and I absolutely can’t complain about her abilities. If this act of choosing a professional is not a manifestation of a market, I don’t know what it is. Are better doctors usually more expensive? Really?


  3. how do you select your doctor carefully and what information do you use? Neither of you have really spelled this out.


  4. I had a German chemist as an office partner for many years and he once decided to shop for prices on a dental procedure he needed.  He asked his dentist for the billing codes for his recommended procedure and called three other dentists and asked them for prices for those codes.  No dice of course, he would have to come in and get a complete evaluation to get a price.  This is like shopping for TV’s at stores that charge you a couple of hundred bucks at the door to come in and browse whether or not you buy anything.  Some market.
    If you are young and want to save money on dental care it’s a fact that a couple of plates will cost you far less to maintain over your lifetime than your natural teeth.  Anyone who hasn’t opted for this cost saving procedure is not allowed to talk to me about market solutions.  They are not thinking rationally about health care.  They are emotionally attached to some expensive to maintain body parts.
    Richard A


  5. I don’t know if I should reveal my secret way of selecting good doctors. Should I? If I do and the readers apply this knowledge, they will be rushing to the same waiting rooms making my life miserable and inflating the price of just the same doctors.

    Just like Paul Krugman, many people commenting in this blog don’t seem to have a clue about selecting doctors, just as many people in the world don’t know how to select tomatoes. I guess it’s to my advantage to keep these in the dark about how they could figure out what’s a good doctor and what’s a moron in doctor’s clothes. 

    A market doesn’t need to be efficient, does it?


  6. Zappi, if I wanted to buy a printer cartridge of a particular brand/type I can search google for the cheapest price. I can’t do the same for a gp. As far as I know there is no such thing as ranking table for the quality of the doctors nor is a way to search the price for each service. I think it’s a bit harsh to accuse people of having no ‘clue’ (or accuse Paul Krugman of being awarded a ‘cheap’ Nobel) when it’s hardly contentious the healthcare market is characterised by asymmetric information.


  7. Ok, I admit it’s a bit harsh to claim Krugman’s Nobel prize was cheap, but I find myself at odds when I try to find some sense in what he writes or what he says in general. 

    On the issue of patients NOT being consumers, let’s imagine a situation in which Krugman would be actually correct.

    Imagine you walk into a public hospital in Cuba or in South Korea, and there the rule is that you will be attended by the first available doctor. Even if Jayant Patel shows up, you’ll have to accept his ‘treatment’. 

    In that case, Krugman would be correct. But I wonder why Krugman thinks he is in North Korea.

    About the transaction cost, of course you’ll have a higher cost in the selection process than when you buy a cartridge.  But again, what’s the value of your own health?


  8. As I suspected no evidence to back up assertions at all.

    By the way Krugman did not win a ‘nobel prize’.


  9. Re how do you find a good GP, dentist etc?  I would have thought that one of the better methods would be to ask friends, neighbours, other parents et al for their recommendationsin the same way as one looks for a good tradesperson.


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