A Sales Pitch for Laissez-Faire Health Care; D. B. Klein

Education and Training of Practitioners: Private and public institutions would issue degrees, certificates, and other credentials to candidates meeting their requirements. Many training programs would be intensive programs for specific skills. Training would Professor Klein teaches economics. at the Uni versity of California, Irvine. expand and diversify drastically, perhaps even reaching down to basic training for lay people. The profile of practitioners would thus expand. It would permit practitioners the flexibility to adapt their human capital to the opportunities of time and place. Costs to the consumer would drop considerably. To make sense of this blossoming of health services, people would rely on knower intermediaries, information disclosures, brand names, and so on. Drug Developmentand Availability: Costs would plummet, timeliness would improve and the profile of drugs would expand.

Strong safety and quality incentives would flow from the umbrella of the pharmaceuti cal brand name and the tort system. Knower-institutions-perfectly analogous to Underwriters' -Laboratories-would de velop to certify safety. Doctors and phar macists, acting as knowers and middlemen, would use their expert knowledge of drugs in advising the consumer. The market would serve as an experimen tation process-sometimes people would be killed by unsafe drugs (and companies would pay dearly), but such consequences belong to a benign process. There is a saying for people who frequently use air travel: If I never miss a plane I know I'm spending too much time in airports. At present, the FDA is the Chauffeur whose pre-eminent incentive is to get the passenger to the airport on time. The consequence is that it gets us to the airport three days before the flight, and charges us dearly for the ride.

The deaths of 100 children from Sulfanil amide in 1938 pale when compared with the annual death toll from the FDA's curtail ment of drug availability. One study cata logues 192 generic and 1,535 brand-name tested drugs available abroad but not ap proved for sale in the United States. 2 How many thousands of deaths per year does such delay cause? Sam Kazman of the Competitive Enterprise Institute estimates that the FDA delay of just two drugs, misoprostol (which reduces gastric ulcers) and streptokinase (which dissolves blood clots in heart-attack victims), has caused thousands of deaths. 3 422 Information and the Active Patient: Drug information would be improved by freedom to self-disclose in labeling and advertising. At present, consumer access to medical information is expanding, in the forms of healthcare literature, medical libraries , on line information services like Internet, re ferral services like Prologue, and services like The Health Resource, which generates for a fee thick packets of medical litera ture to customers specifying a diagnosis.4 In a freer market consumers would have easier access to opportune and pointed knowledge.

Commercialization: Brand-name and fran chised clinics, medical groups, hospitals, and insurance· plans would flourish. Milton Friedman prophesied in 1962: ' '[T]hey could organize medical care efficiently, combining medical men [and women] of different degrees of skill and training, using technicians with limited training for tasks for which they were suited, and reserving highly skilled and competent specialists for the tasks they alone could perform. ,,5 Con sumers would obtain at low cost gatekeeper diagnosis, referral, and second-opinion. Friedman's early vision of "department stores of medicine" would be proven pro phetic. MedicalGroups and Insurance: Currently, medical groups employ utilization review and peer monitoring to police quality. In termediaries (such as employers, member ship organizations, and so on) serve as middlemen and agents, shopping over med ical plans, helping large sets of ignorant consumers discriminate between better and worse health care. In a regime of freedom and enforcement of contract, health plans and insurers could write better patient enrollment contracts and patient-perfor mance contracts. They could mitigate mem ber-selection problems by using more refined screening and pricing techniques.

Perhaps firms would emerge to research, compile, and verify individuals' medical histories. Health plans and insurers could mitigate moral-hazard problems by requir ing flu shots, checkups, and other programs to promote prevention and early treatment. 423 Independent Knower Organizations: Data banks, consumer information bureaus, re ferral services, reporting literature, drug testing facilities, and auditing firms would evolve more swiftly. Local organizations would emerge to rate healthcare providers through undercover monitoring, patient interviews, or treatment reviews. Such a service might be supported by patients, analogous to Consumer Reports, or by phy sicians, analogous to Underwriters' Labo ratories or Moody's. Consumers would re ward those organizations that help them assess credentials and discriminate among the array of available health services. Lay Awareness: There would be medical education without sacerdotal restraints. Ba sic medicine could be part of the high school curriculum. All manner of healthcare edu cation and training could be offered in com munity colleges and private institutes. En trepreneurs have already developed medical software that responds to a list of symptoms with possible diagnoses and treatments. 6 This program is based on data that are more extensive, more accurate, and more current than any doctor could hope to command.

Informal courses might teach lay people how to use such programs. People would have better information to assess their needs and opportunities, and they would have the power to self-medicate. In 1963, the famed economist Kenneth Arrow could write: "It is the general social consensus, clearly, that the laissez-faire solution for medicine is intolerable."7 Now adays there is no such general social consensus. D 1. Paul J. Feldstein, Health Care Economics, 4th ed., Albany: Delman Pub., 1993, p. 321. 2. Kenneth Anderson and Lois Anderson, eds., Orphan Drugs (Los Angeles: The Body Press), 1987. 3. James Bovard, "Double-Crossing to Safety," TheAmer ican Spectator, January 1995, pp. 24-29. 4. Brigid McMenamin, "An Educated Consumer Is Her Best Patient," Forbes, June 21, 1993, p. 118. 5. Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962). 6. Stephen S. Hyde, "The Last Priesthood: The Coming Revolution in Medical Care Delivery," Regulation, Fall 1992, pp.70-74.

7. Kenneth J. Arrow, "Uncertainty and the Welfare Eco nomics of Medical Care," American Economic Review, 53, December 1963, p. 967.