FORBES, Lara Hoffmans contributed on 23/03/2012
For the first time in 26 years, I opened my eyes this morning and could see—thanks to capitalism.
Well, really LASIK. But in a world where consumers have no incentive to shop around, and goods and services don’t compete on price largely free of government tinkering, you don’t get LASIK at a relatively reasonable price.
Fifteen years ago, a precursor to LASIK called Radial Keratotomy (RK) cost about $8,000. It was done by a surgeon wielding a knife—hopefully, a well-rested one who didn’t think you looked like his ex-wife. Typically, the surgeon did one eye, sent the patient away for six weeks, then did the other—to decrease risk of infection.
Today, LASIK is done with a computer-guided laser. The entire thing takes 10 minutes, which includes about 60 seconds in aggregate of laser-in-eyeball time. I took a 3 hour nap and woke with perfect vision.
One might presume, ignoring the huge value of not having a sleepy surgeon aim a sharp object at your cornea, inflation alone would make LASIK now cost a little over $11,000. (Inflation has averaged 2.4% since 1997.) Except I don’t mind telling you it cost $3,800—less than half the 1997 cost with a much shorter recovery time and lower risk of human error. And I financed it, interest-free. (Did they securitize my corneas? Innovation!) Technology, that great deflator, no doubt played a part in drastically driving down the cost. But let’s not ignore competition.
LASIK (and other laser vision-corrective) surgeries aren’t typically covered by your run-of-the-mill insurance—or perhaps just a small portion is reimbursed. Hence, patients paying out of pocket do things like:
- Ask what the price is for the procedure.
- Shop around for the best quality at the lowest price.
Two things that generally don’t happen when someone else (an insurance firm) pays the bill and/or the government dictates price.
Providers know patients shop around, so they compete—on quality and price. And my provider put on his tap shoes—he knew I could get the $499-per-eye procedure. (A thousand bucks—88% cheaper than the 1997 procedure!) But he offered wave front-guided LASIK—the same treatment received by naval pilots who need improved night vision. Naval pilots! I have almost never needed to land a $30 million plane on an aircraft carrier, but I can now if I want to! Provided I learn how to fly. And the Navy loans me a plane.
If our dear elected politicians were truly interested in lowering the cost of both health care and health insurance (two different things), they might look at the lessons provided by LASIK, orthodontia, elective plastic surgery, veterinary medicine—anything in which consumers have incentive to shop around and providers have incentive to compete. The results, over time, are improved goods and services at increasingly lower prices.