JHPPL 26.5 05 Sloan

The consumer of medical care is in a unique situation for several reasons. First, in general, the consumer is not well informed about health and medical care, certainly much less well informed than are physicians. Many, if not most, medical encounters are initiated, at least in part, for the explicit purpose of obtaining health information. In contrast to their roles in markets for most goods and services, given their lack of information, it appears that people in their roles as medical care consumers have no well-formed preferences. If people had the necessary amount of information to make themselves fully informed, patients would have “as good or nearly as good understanding of the utility of the product as the producer” (Arrow 1963: 951). Second, demand for care is probabilistic depending on the person’s health state, which is also probabilistic. Thus, although some consumption, such as physical exams, can be planned, demand for care following health shocks, such as heart attacks, cannot be planned before the shocks occur. Prior to treatment, consumers may be faced with choices that have important consequences for either life or death or good quality of life versus a life of disability without having sufficient time or emotional stamina for making adequate decisions. When health shocks occur, the consumer is likely not to be well positioned to search for quality and price among sellers. This set of problems would occur even if consumers