Lack of Information on Health Care Quality

David Wessel uses his Capital column in the Wall Street Journal to explain one reason why markets for health care fail - imperfect information. In order for competitive markets to function properly, consumers must be able to determine the quality of the goods they are purchasing. If consumers cannot adequately judge the quality of the health care they receive, then there is no reason to presume that comparison shopping for health care as envisioned by privatization supporters will produce an efficient outcome:

In Health Care, Consumer Theory Falls Flat, by David Wessel, Commentary, WSJ: It's fashionable these days, particularly in Washington, to argue that the best way to improve the quality and restrain the cost of health care is to make the market for health care more like the market for everything else.

The theory: Give consumers more information, let them choose the best provider and the resulting competition will help to squeeze out costly waste and ineffective care. After all, markets work pretty well for other goods and services. ... But as a cure, the approach rests on the belief that health care is -- in most respects -- like any other product.

An intriguing new comparison of patient-satisfaction surveys and medical records suggests ... [that] [j]ust because patients say they're very happy with their doctors and the care they're receiving doesn't mean they're getting good care...

Researchers ... asked 236 elderly patients at two big managed-care plans ... to rate the medical care they were getting. The average score was high -- about 8.9 on a scale from zero to 10. ...[P]atients rated their caregivers' communications skills even higher -- at an average of 9.2 on a 10-point scale. ...

In the second part of their study, the medical researchers systematically examined 13 months of medical records to gauge the quality of care the same elderly patients had received, using a comprehensive measure of quality developed by Rand...

With restaurants, or movies, or airplane rides, or even newspapers, customer satisfaction can be almost the whole story. Not so in medicine. "Patient ratings reflect some important things, but not whether [patients] are receiving recommended care," says Robin Hertz...

Satisfying patients matters. ... But confusing high scores on patient-satisfaction surveys with high-quality medical care can be dangerous to your health.

This may be intended to undermine comparisons of customer satisfaction in VA hospitals and hospitals in the private sector made by Krugman and others to justify their call for universal care:

The result is a system that achieves higher customer satisfaction than the private sector...

But there are also objective measures of quality to back this up:

The result is ... higher quality of care by a number of measures and lower mortality rates — at much lower cost per patient. ... Mortality rates in [private HMO Medicare Advantage] plans are 40 percent higher than those of elderly veterans covered by the V.A.

The higher quality care in V.A. hospitals obtained at a lower cost coupled with the informational market failure David Wessel identifies, along with other common private insurance market failures, make a pretty good case for universal care.