Blogging gives me a chance to introduce and link my readers—many of them my current and former students, I hope, and readers of my book—to various stories, articles, books, and research that I rate A+ for importance and clarity. One such case is the research of James Tooley on for-profit schooling in the slums of poor contries that I wrote about last month. I thought of another today, thanks to another intriguing “Weekend Interview” in the Wall Street Journal, this one by Joseph Rago.
The interview is called (in my print version) “A Drop of Blood. An Instant Diagnosis.” It describes the work of Elizabeth Holmes, a Stanford dropout developing very cool technology for doing blood tests—pretty much any and all of them, if I’m reading it right—faster, more accurately, and more cheaply than such tests are done now, and using just a drop, rather than the “tubes and tubes of blood” we’re accustomed to having taken from us.
As I read the interview a few moments ago, I thought to myself, “That’s the kind of disruptive technology that John Cochrane is talking about in his superb essay!” The essay is “After the ACA: Freeing the Market for Health Care.” If you want to understand why we have such desperately expensive health care, if you want rich insight into what fosters and what blocks creative destruction, if you want to enjoy a delightfully humorous and lively piece of serious writing about desperately important matters of public policy, don’t miss this essay!
Here is a taste of what got me thinking of what I learned from Prof. Cochrane:
Theranos [Holmes’s company] is committing to a half-off discount on Medicare fees. “So a test that costs $100 now, we’ll do $50 or less. The quote-unquote payer community I don’t think has ever seen someone walk in and say we want to bill you at less than you’re willing to reimburse,” [Holmes] says…
Ms. Holmes says her larger goal is increasing access to testing, including among the uninsured, though she might also have a market-share land grab in mind. For instance, she says Theranos will publish all its retail prices on its website. The company’s X-ray of self-transparency also includes reporting its margins-of-error variations online and on test results and order forms, which few if any labs do now.
When I read that clause (my emphasis) I thought, disruption. And then immediately I remembered the infuriating account Prof. Cochrane gives about how bloody difficult it is to get a disruptive technology into America’s government-at-all-levels-dominated, croney-ridden health care industry. Mr. Rago was there ahead of me:
This strategy may be inviting a hell of a battle with the health industry, where the incentives are rigged against startups and the empire usually finds a way of striking back. Witness the medical-practice regulations that make medicine a cartel against competitors. Pathologists, lab scientists and technicians won’t be pleased if their jobs go the way of travel agents. (my emphasis)
Right. Government regulation draws special interest groups as blood in the water draws sharks, to feed on those supposedly “protected” by the regulations. To emphasize a theme from last week’s post, the subject of Part II of Free Our Markets, that’s one main reason why government regulation usually does more harm than good. Regulation by market forces would work better. Yes, especially for something as important as medicine.
Try to find time to read the interview; it’s inspiring. (Holmes “first funded Theranos at age 19 by cashing out an education trust that her parents set up, which allowed her to hire her first employee and rent lab space.” God bless entrepreneurs.)
Do make time to read Cochrane’s essay; it’s enlightening. Don’t just take my word for it. The brilliant Bryan Caplan of George Mason University entitled his blogpost on Cochrane’s essay, “You Should Repeatedly Read Cochrane’s ‘After the ACA’.” The brilliant Russ Roberts of the Hoover Institution agrees: “The best essay on health care, ever, is by John Cochrane … It is wise, witty, and full of good economics. Read the whole thing. Then read it again. You will be wiser.” He’s right.