Grocery Stores, Healthcare, and the Case for Real Markets

Think of a supermarket. There are probably more than a hundred in the city of Dallas alone. I can walk into any of them—in most cases, at any time day or night—and buy thousands of different products. The only wait I experience is at checkout, but express lanes speed that along if I want only an item or two. When I go to purchase something I want, the product is always there. I can’t recall an instance when a shelf space offering something I wanted to buy was empty. Further, the products being offered are produced by thousands of different suppliers, and they travel thousands of different routes to get to market. What is true of Dallas is true of every city of any significant size in the country.

Contrast that with the market for medical care, where almost nothing is available at the drop of a hat. Nearly one in four patients has to wait six or more days for a physician appointment. Less than one-third of physician practices have made arrangements allowing patients to see a doctor after hours when the practice is closed. Sixty percent of patients find it difficult to get care after hours or on weekends.[1] Newspaper reports around the country tell horror stories of the consequences of the shortage of cancer drugs and other life-saving pharmaceuticals. Four- and five-hour average waiting times at hospital emergency rooms are not uncommon.

In fact, the few places in healthcare where waiting is not a problem provide services that are peripheral to the orthodox healthcare system. Teladoc promises a physician will return your call within three hours or the telephone consultation is free. Most calls are returned in less than one hour—during which time, you are free to do other things. MinuteClinics in some CVS pharmacies give you an estimated waiting time so you can shop while you wait for your care. Think of these last two examples as services that developed in the part of medical care where normal market processes have not been suppressed.

Everything I purchase in a supermarket is fee-for-service. There is no pre-payment of the type that so many favor in healthcare. I pay the market price for what I get. There is bundling, to use another popular buzzword. I don’t pay extra if I ask an employee for directions. There is no extra charge for the butcher to trim fat off tenderloin. These services are included in the price of the products I buy. But the bundling choices are made by the supermarket, not by the buyers of their products. There is no supermarket equivalent of managed care, integrated care, or coordinated care. Market prices are sending continuous signals to producers of thousands of products all over the world, and these prices accomplish the remarkable feat of making sure that everything we want to buy is on the supermarket shelf at the time we want to buy it.

The vast majority of goods sold in a supermarket are not produced by the supermarket itself, using its own employees. They are produced by independent entities in private practice, to borrow another term from the medical world. Supermarkets meet the needs of millions of people without the necessity of employing all of the people who produce all of the products they offer—unlike the Obama administration’s plans to force virtually all doctors to become employees of hospitals.

Supermarkets have electronic inventory and monitoring systems—far more sophisticated than anything you will normally find in medicine. When Sam Walton first started electronic inventory control in his Wal-Mart stores, he did it in order to improve the quality of service and lower prices to attract more customers. Unlike healthcare, electronic inventory systems have emerged quite naturally in the supermarket business, without any government guidelines and without any government subsidies.

Now, you might be inclined to argue that healthcare cannot reasonably be compared to items on a supermarket shelf. Okay. I concede that. One is a product. The other is a service. But consider your Blackberry. Or your iPhone. Or your iPad. In some ways these have similarities with our bodies. Things can go wrong. When they do, we want someone to help fix them.

In my neighborhood, I can walk into almost any phone store (Verizon, Sprint, AT&T, etc.) with no appointment, and most of the time I get service immediately. And the phone store has competitors. Independent phone repair companies are popping up every day. There are even tools on the Internet that help you start your phone repair business.[2] In most places, repair companies are within ten miles of their customers; repairs are done in fifteen minutes or less; and they are usually inexpensive ($40 to $60, say).[3] Shopping malls have phone repair kiosks. Some companies will come to your house to repair your phone.[4]

Consider customer education. Elderly buyers in particular often have difficulty mastering the electronic devices they buy. The market has a solution. Verizon offers its customers free two-hour classes in how to use their iPhones. Yet, I don’t know anywhere in Dallas that will give Medicare patients free counseling (or even paid counseling) on how to manage their diabetes. That’s unfortunate. This one disease is costing the country $218 billion a year.[5]

Why is the marketplace so much kinder to my iPhone than it is to my body? As I explain in Priceless: Curing the Healthcare Crisis, it’s because one type of service is emerging in a real market, while the market has been suppressed in the other.

Notes:

1. Karen Davis, Cathy Schoen, and Kristof Stremikis, “Mirror, Mirror on the Wall: How the Performance of the U.S. Healthcare System Compares Internationally, 2010 Update,” Commonwealth Fund, June 2010, http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2010/Jun/1400_Davis_Mirror_Mirror_on_the_wall_2010.pdf.

2. “How to Start a Cell Phone Repair Business,” eHow.com, http://www.ehow.com/how_5635463_start-cell-phone-repair-business.html.

3. Daniel Vitiello, “Business Idea: iPhone Repair Business,” PowerHomeBiz.com, December 4, 2010, http://www.powerhomebiz.com/News/122010/iphone-repair-business.htm.

4. Website for Onsite Cellular Repair: http://www.onsitecellularrepair.com/.

5. Timothy M. Dall, Yiduo Zhang, Yaozhu J. Chen, William W. Quick, Wenya G. Yang, and Jeanene Fogli, “The Economic Burden of Diabetes,” Health Affairs, Vol. 29, No. 2, February 2010, pp. 297–303.