In George Akerlof’s 1970 paper named The Market for ‘Lemons’, he spoke about how lemons drive out peaches in the market for second-hand cars. Lemons refer to defective cars, while peaches are the top-quality ones. A defective car may have a faulty engine, an AC that doesn’t work, a shaky suspension, but none of that information can be understood by a buyer simply by seeing the physical structure of a car.

For the case of a new car, the information available to both the buyer and seller is practically identical. They are aware of the model, the specs, and how the car is ‘supposed’ to run. So there is a common ground for both of them as neither party may have superior information about the car. The issue arises when the conversation shifts to the future quality of the car, and any understanding of that must come from usage. Once the buyer buys the car and uses it for a while, they obtain information that can only be found after use, such as the said engine issues and electric system faults.

Now when the owner of the car tries selling the car in the ‘used’ car or second-hand car market, there is asymmetric information between the buyer of the second-hand car and the seller (the owner of that six-month-old car). This means that the seller could sell a lemon at the price of a peach without the buyer understanding if it’s a lemon or a peach.

Therefore, leading to a problem where the buyer is reluctant to pay the correct value for a peach because he believes the given car is a lemon. Trying to avoid overpaying for a lemon, the buyer eventually ends up undervaluing the peach, putting the market price somewhere between that of a lemon and a peach.

This causes a price failure, where it overvalues the lemon but undervalues the peach. The owner of a peach sees the undervaluation of his car, and ends up exiting the market, leaving behind only lemons.

In my understanding of the healthcare system, I feel that a similar process occurs where prices fail to reflect the true value of healthcare.

Let’s say you break a leg, and for the argument, assume that the breaking of a leg is suddenly a fatal ailment that needs immediate treatment. There are two hospitals in the area, a lemon and a peach.

The peach offers you quality treatment at the right prices, while the lemon offers you treatment too, but the experience is sketchy, the nurses don’t check on you, the beds aren’t clean, and the equipment at disposal is also probably dying its last few breaths. The parallels of the situation are that you are not aware of either the peach or the lemon when your leg breaks.

It is after the ‘experience’ that you obtain the information that the peach is a peach. However, in the car market, the prices are set somewhere in between the peach and the lemon, since the costs of ‘a defect’ and the cost of a good car are the same for the seller.

But in the case of a hospital, the peach incurs a cost when it becomes a peach, meaning that the prices cannot be set in the middle ground of both the hospitals. This results in a double whammy for the patient as the lemon, which is already inflated and overvalued, is an alternative to a naturally expensive peach. Another fundamental aspect about healthcare is that it is a credence good (meaning determining its truest value is really hard).

There are multiple implications of the situation. One of which is more visible in the less developed areas of Dhaka. Consider the situation where you don’t break a leg, but instead an infection develops from a wound on your leg, then place yourself in the streets of a slum in some remote area of Dhaka.

Here, you have three options, compared to the previous case where you had two. The peach hospital, the lemon hospital, and that pharmacy run by Shafin bhai at the end of the street.

It is also worth noting that the first two options are unlikely to be anywhere nearby, so account for the transport costs in addition to the fees charged. Realistically, Shafin bhai is the best choice in this situation. You walk up to Shafin bhai, who has a stethoscope around his neck as he sells medicines. You remember the time when he came to drink tea at your stall a few months back, and he spoke of his time working as a plumber back in the day.

The years of savings have now brought him the joy of owning a pharmacy. The day-to-day experiences have given him what he believes is an MBBS degree.

You tell him about the wound on your leg, and he takes a good look. The wound doesn’t seem any different to him than it would to the butcher, the confectioner, or his old plumber colleagues. The only difference is that he has seen more such wounds than any of the other people mentioned, but that gives him a grand total of zero extra expertise on the matter.

He expertly offers you an antibiotic, one that fails to work, because why would it? Medicines only work when they are prescribed by a proper doctor. A few weeks later, the pain has grown so bad that you do eventually visit the lemon. The lemon diagnoses you again, but lacks the treatment for your now aggravated injury. At last, you end up at the peach, but you are charged for a third time. By now, your finances have worse injuries than you do, and a line forms above your head called the poverty line. A line below which you reside now.

The WHO calls this situation ‘the poverty-illness trap’. About 63-74% of all healthcare expenditure in Bangladesh is made up of out-of-pocket spending, which is three times higher than the WHO-recommended maximum level of 20%. On top of that, 26% of households face catastrophic costs (if defined as exceeding 10% of annual income), and around 57% of people face financial distress in cases of hospitalisation.

Also, multiply the number of Shafin bhais across the city, and have them all prescribe antibiotics. What you have at hand is another growing concern called antimicrobial resistance, which happens due to excess usage of antibiotics.

The reasons include a few more topics, but excess repeated usage is a key one. The entire mechanism of the healthcare system is burdened with asymmetric information, resulting in this domino effect which goes beyond individual damage and affects the entire country collectively. While the implications of a problematic car market are that you get a bad car which affects your living standards, a problematic healthcare system results in a more severe effect which impacts your life itself.