Health care reform is one of the hottest topics around Washington these days, because it is such a critical issue. That the health care system in the U.S. is broken few people doubt. There are around 50 million uninsured people in this country, we pay far, far more per capita than any other industrialized country on health care, and our outcomes are generally worse. We aren’t living the longest, we don’t have the lowest infant mortality rates, we aren’t curing everything. How we got to this point is not really important now; what’s important is how we fix it.
There are two major philosophies when it comes to what we should do about the health care system. The first states that health care needs to be highly government-regulated, if not outright government-controlled. The second states that there is already too much government interference with health care, and that we need zero government regulation so that the free market can take care of things. I believe that the first philosophy is the correct one, not just because every other industrialized country does it that way and does it better than us, but more importantly, for the reason that there is no such thing as a free market in health care, and there never will be.
By and large, I believe in the free market and free trade. For lots and lots of things, the free market is, by far, the best way to allocate scarce resources and put a price on goods. Whether it is food, cars, televisions, toys, even necessities like housing (though to a lesser extent), the free market works and works the best at allocating resources in a way that (buzzword time) maximizes social surplus. But the free market does not work for everything. It fails in some situations, and even true adherents have to acknowledge these failures, lest they see the free market as less of a tool to better humanity and more of a cult to which slavish devotion is all that matters.
In a free market where there isn’t an infinite amount of a good (that is to say, every market), there will be some who may want that good but can’t afford it. I may want a 70” plasma TV, but since there are people out there who are willing to pay more than I am for the supply of those televisions, I’m not going to get one. Ditto for any number of things that I can’t afford (or don’t value enough to pay the market price for). Although this may leave me disappointed that I can’t have these items, in general society at large does not believe that I, or anybody else, is entitled to a plasma TV. Again, this applies to almost all goods, even many goods that are necessities. We are content to let the market distribute these goods in the manner in which it is seen as most efficient, knowing that not everybody will be happy with the results.
When it comes to health care, however, people are not so willing to think that people are not entitled to it. Nobody will shed a tear or intervene on my behalf if they hear that I can’t afford a yacht, nor will anybody argue that we have an obligation collectively to provide me with that yacht. However, if asked whether somebody who has suffered a heart attack but is poor deserves health care, the vast majority of people will say yes. In fact, we believe so strongly in this, that we have passed laws requiring hospitals to provide care regardless of the wealth of the patient (and thus we are already interfering with the market). Truly letting the free market work would require the repeal of such a law, and would inevitably lead to people being turned away from care, and hence dying, because they could not afford it. Society would be find such an outcome pretty repulsive.
There’s another reason, apart from our shared beliefs, why a free market doesn’t exist for health care. A free market requires competition. For most goods out there, the market has ample competition. Grocery stores, restaurants, cars, computers, televisions, phones…you name it, there’s generally a lot of competition out there for you. Competition ensures that no single actor will be able to hold a stranglehold on supply and use that to their advantage to create a monopoly.
In contrast, there is very little competition in health care. Insurance policies are incredibly difficult to understand and compare to one another, and even then, insurance companies will do whatever they can to find ways to not pay out the benefits you are supposed to be receiving. It’s as if you go to a restaurant, can understand the menu items, and after you purchase something, you are told that you won’t be getting the food anyway. When it comes to health care deliverers, like hospitals, clinics, and doctors, there is a similar lack of a free market. Not only can you not compare prices (how many times have you been to see a doctor and received a list of the costs of service before you receive the bill?), but many times the need for health care is an urgent matter that does not allow one to comparison shop. When you want to figure out what car to buy, you can take your time, test drive a few, and figure out which car gives you the greatest value. When you have had a stroke, you need to get to the nearest hospital as quickly as possible; you aren’t going to call around to see who has the best deal on clot-busting drugs today.
A free market means that not everybody gets what they want; sometimes it means not everybody gets what they need either. While society may have no problem when those wants and needs are things like jets and jewelry, when it comes to health care for their loved ones, not being able to get that care becomes unacceptable. Thus, it becomes necessary to look for solutions to providing health care other than a purely free market approach. There are certainly hurdles and pitfalls that can occur with these other systems, but other countries show us ample evidence that such systems can exist and provide good care at lower costs. It’s time for people to get rid of the belief that the free market is the total solution to the health care problem.
Next up: why a public insurance option is necessary for any meaningful health care reform.