How is health care different than other markets?

Well, I may as well say a thing or two before the big kids arrive and kick me to the corner of the sandbox.

Here's a piece that describes a nascent move toward patients finally being able to negotiate rates for medical services. I'm somewhat skeptical of the approach taken by the Columbus guy (note the spacing) -- negotiating leverage really declines after you've already received the service and been billed. But the meaningful line in the article is this: "Despite the complexity, the Internet has begun to open a window on this surreal world, allowing consumers to compare costs and, occasionally, to discover affordable alternatives." That's because a key component of an efficient market is transparency.

When I started work at a large NYC law firm in the mid-90's, there was very little information about salaries at the various large/national firms where we had all interviewed, and large disparities in salary at nominally competing firms. Then along came a message board (now website) called Greedy Associates. Suddenly, associates from every major New York (and eventually national) law firm were swapping salary and bonus information, and creating charts of who paid what for what level of experience, hours billed, etc. This in turn enabled associates committees -- as our poor excuses for representation in firm management were called -- to bargain for better rates with arguments like "you have frequently said that our competitor firms are X and Y. X is paying its associates $15,000 more than we are, and Y is paying $20,000 more -- why?" This information, coupled with a booming legal market and consequent shortage of acceptable[sic] candidates for big-firm jobs, led to steady pay increases, almost lock-step, by the biggest/most-prestigious firms, and a trickle-down effect well into the rest of the market. Nowadays it makes the front page of the legal papers when there's a salary increase at one big firm, because all the competing firms know full well that they'll be pressured to match it.

Health care has always been different than other markets, in large part because of the payment system. Between your doctor, third party providers, insurers and you, there are multiple disconnects between who chooses the service and who -- in the end -- pays for it. If consumers and insurers can get comprehensive information about what prices are charged to others, it could be the first step toward health care better resembling a "normal" market.