I just went across the street from CEI’s offices to pick up some more pairs of eyeglasses. Amidst a generally dysfunctional health care system, the American system (or, rather, the lack of a system) does a great job with eye care. There have been enormous innovations–LASIK surgery and disposable contacts most prominently–and plain old eyeglasses have gotten cheaper. A few months ago, I came across an invoice saying that, in 1989, my parents paid $120 for two pairs of eyeglasses PLUS $95 for an eye exam for me. I just got an eye exam and two pairs of glasses for $69.95. I’d suspect that the provider lost money on this but, so what? They got me in the door to buy and had a good chance to sell me a $300 pair of glasses.
But the downward pressure doesn’t end with simple, routine needs. When I looked at it a few years ago for my then boss Bill Frist, I found that the price of LASIK surgery (which eliminates the need for glasses or contacts for most people) has gone down in absolute terms over the past decade even though the procedure has become better.
So why has this happened? Well, because we’ve let the market work. Lots of people need eye care and pay for it out-of-pocket. Except for Medicaid eyeglasses provision in some states (pretty trivial), there’s rather little government interference with pricing. As a result, not surprisingly, we get an everyone wins situation:
- There’s a lot downward pricing pressure on everything but particularly the absolutely routine care that most people honestly do NEED. The most basic piece medical care related to eyes, the eyeglasses exam, is quite often picked up by the stores that provide glasses. (Although, of course, it works its way into the cost of the glasses.)
- People make selections. I’ve never seen the enormous aesthetic advantage of the anti-glare coating that most people get on their lenses so I skip it. Most people seem to want it and they pay for it themselves out of pocket.
- Price correlates with things that people value. If you pay more for eyeglasses, you’re almost sure to get some combination of much faster (one-hour) service, lighter, better lenses, and/or frames from a big fancy designer.
- Health insurance, likewise, covers truly serious eye surgery. Most people pay out of pocket or have “vision” insurance that’s really just a pre-payment plan. Our system also provides some VERY basic “welfare” services for the poor through Medicaid and, just as importantly, the Loins’ club national eyeglasses donation program.
The absence of big companies and big group insurance plans for eye care also tends to help ordinary consumers too. Right now, for most health care, big employers tend to put the squeeze on insurance companies and big insurers tend to force providers to accept lower rates. In other markets, that would be unambiguously good for consumers, but when government regulations make it nearly impossible to join a big plan unless you work for a big employer, it tends to make the individual and small business market even more inhospitable.
We’d be a lot better off if hospitals and doctors functioned a lot more like vision stores.