Economists have slowly and inexorably gravitated towards soft issues that defy esoteric equations and graphs.
The issues include happiness, marriage, and even sex.
The shift has spawned a whole new field - behavioural economics which has even won Nobel prizes.
We focus on one such issue – healthcare. Two reasons have made economists shift to healthcare. One is the costs to governments, firms and individuals.
Two is its universality; no matter who you are, your age, your economic status or race, healthcare keeps you company.
A more compelling reason to focus on healthcare is that a lot of money is poured into this sector from several sources.
One is from the public sector (read government), which sees healthcare as a national duty; a healthy nation is a productive country.
The historical connection between physical and spiritual well-being bring in lots of faith-based organisations that see healing as their mission. Remember mission hospitals?
The private sector will not say this loudly, but there is a lot of money in this sector because of a simple fact: healthcare is inelastic. In layman’s language, it simply means if the price of medical care rises, the demand will not go down.
Compare that with the rise in the price of luxuries like jewellery or even outings. Healthcare, like food, is recession-proof. How often do you bargain with your doctor or pharmacist?
The other attraction to this industry is information asymmetry.
Simply put, the medical doctors or practitioners have more knowledge about your condition or ailment than the patient, whom I am avoiding calling a customer.
If you are told by a medical doctor you have a certain ailment, you have no choice but to accept. If you are told you need to be admitted, you have no reason to say no.
Would you ask a doctor if a patient on a life support machine in ICU is dead?
That is more like your mechanic, his diagnosis of your car is rarely questioned; all you do is to buy the spare parts.
The mechanic, you believe, is more knowledgeable about your car than you. Let us leave out Google for now.
The two situations have led to “my mechanic” or “my doctor.” This creates a situation of trust. They at times overcharge you, too aware you are unlikely to counter check with others.
That is how one hospital recently found itself exposed as having prolonged patients’ stay to make more money, same as holding your car at the port so that you pay more demurrage.
Medical practitioners could also make more money by ordering unnecessary tests. They even have a term for it, defensive medicine.
My analysis suggests one of the most costly items in healthcare are lab tests. I once paid about Sh9,000 for lab tests but only Sh600 for drugs.
I keep wondering why the government thinks doctors are the cause of rising medical costs.
This raises an important question: should healthcare be treated like any other industry, where the laws of economics are allowed to play?
Should we raise the price of face masks because of coronavirus? Should we raise the price of drugs if the demand is high and therefore keep it out of reach of poor people?
Such hard questions bring in the government and its subsidies to ensure the vast majority of people access healthcare either for free or at reasonable prices.
Competition among various players rarely brings down the cost of healthcare. It is inelastic, remember?
To stop the exploitation of patients because of information asymmetry, this sector is highly regulated.
What happens when this regulation fails or is compromised? Few doctors have been to the dock for malpractice because patients may never know whether the doctor was at fault. We also rarely question judges’ judgement, though we can appeal.
With more Kenyans becoming aware of their rights, we could find more doctors in the dock and raise their malpractice insurance.
What we can’t dispute is that this sector needs reforms beyond what is proposed in the Building Bridges Initiative (BBI). Going by the number of acquisitions, it is still a virgin territory, with mainstream doctors competing with witch doctors, faith healers and charlatans.
There is a shortage of quality hospitals and medics and sadly, the sector can’t escape the maladies of the wider society, including nepotism.
The fact that all our bodies are the same, open to sickness and the great equaliser – death – means good healthcare should be available to all - irrespective of their social-economic class. The new cabinet secretary in charge of this docket has his tray full.
-The writer is an associate professor at the University of Nairobi.
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