Matthew Yglesias has an interesting post about the slow rate of organizational innovation in health care. He is right that the slow rate of organizational innovation is helping fuel cost inflation in health care, but I think his example tends to tell against the kinds of policies Yglesias favors. Yglesias uses the example of IKEA and earlier Nordic furniture producers. IKEA isn't as good, but it is lots cheaper so it attracted lots of customers. Yglesias list psychology as one of the reasons people don't want that kind of organizational innovation in health care. Who wants not-quite-as-good cancer drugs? That is partly true, but not every form of medical care is that high stakes. You might go for your routine care to a doctor who is ninety percent as good as the best doctor in the world if the fee was one-tenth as much. Or would you?
Part of the problem is that health care lacks customers in any recognizable form. To borrow an example from David Goldhill, imagine if we paid for "furniture insurance" which was really just a form of comprehensive prepayment for furniture. Imagine you sent your furniture bill to an insurance clerk to review your purchases and have the insurance company reimburse the furniture store. Now imagine the government forces you to buy furniture insurance and forces the insurance companies to provide comprehensive coverage ("no longer will Big Furniture deny people access to needed end tables"). You might as well buy the good Nordic furniture. It doesn't cost you that much more. But it is a shame about how those furniture insurance premiums keep going up. Perhaps we need a law that extends furniture insurance coverage through government subsidies, and makes it even more comprehensive. Then when costs really spiral out of control and the "insurance" system collapses, government can then directly tell what furniture to buy and put us on waiting lists for purchase.
And no I'm not against health insurance, but I am in favor of health insurance reform that allows health care consumers to act more like health care customers. Then we might get some of that innovation that saves people money, time, and maybe even gives them more security than the current system.