Will telemedicine create perfect competition? – Health News Today

That is not how health care operates.At least not yet.

In health care, patients with good insurance might have to wait for appointments or services and might encounter impersonal or rude staff. Price is uncorrelated with quality of care. Why?

Health care markets are local.Consumers see a primary care physician or a specialist in person.This means a patient must see a provider who is an in-network provider and is accepting new patients and is within a reasonable distance from their home and has openings compatible with the patient’s own schedule. Comparative information on price, quality and customer experience of competing physicians is incomplete, unreliable, and hard to find. And it is not well utilized where it does exist; a 2019 consumer survey by Deloitte found that only 45% of US consumers consider themselves likely to use decision health care support tools. Provider directories are woefully inaccurate; studies reveal that information inaccurate for 40% or more of network providers.

With all of these constraints on a functioning marketplace, Adam Smith’s invisible hand fades as opportunities for constructive competition diminish. In the US there is one endocrinologist for every 43,000 people and one interventional cardiologist for every 85,000 people.And many of these providers work together in group practices, thereby negotiating prices together rather than competing on price.Therefore, for many specialties there will not be much competition within a one-hour drive, particularly outside of major metropolitan areas.

In addition, there is substantial economic evidence that hospital systems are consolidating, and that hospital consolidation leads to higher prices and even lower quality. Provider consolidation, which limits supply side competition, should have the same economic impact on price and quality as the constraint to local health care markets due to geographic proximity.

There was a time that another market had this locality constraint –books.Before the year 1995, people shopped locally for books.They were constrained by both the selection at bookstores in their local market and the prices that were offered at those stores.Then Amazon began a simple and convenient service to easily search for books online and have them delivered directly to the consumers’ home.Book delivery eliminated the market constraint that supply needed to be local to demand.The impact on book prices was swift – prices dropped quickly. While there is nostalgia for the closed community bookstores, Amazon provided consumer greater choice at a better price. And the availability of competition had a result in other industries as well. For example, the life insurance industry reduced prices on term life policies by 8% to 15% due to increased internet competition.

Online education is another example of how the breakup of a local market reduces prices through increased competition.Online education is a good analogy because it is a service and not a product, and…

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