What would a free market in health care look like?

Great Debates
21

Look, is this going to be a libertarian bashing thread, or a thread about what a free market in health care would look like?

Free market economics is not identical to libertarian ideology.

Fact is, without the rule of law, or custom so strong it has the force of law, a free market is impossible. If Dak wants to trade his baskets for Thag’s chickens, but Thag can hit Dak over the head with a club and just take Dak’s baskets, we don’t have a free market.

So a free market requires some sort of rule of law, it requires a police force, it requires a judicial system. It requires a system for determining property rights, which are an arbitrary human construct and don’t exist in a state of nature.

Originally marketplaces were under the protection of the nobility, who enforced certain standards–no robbery, no fraud, etc. This was not done out of generosity, but rather because enlightened despots understood that more trade meant more wealth, and more wealth meant more for the nobles to take for themselves.

So the customs of Europe in the middle ages were where our idea of markets come from. And when countries establish democracy and representative government, they don’t throw out the already existing body of law and start from scratch, they mostly keep what exists and throw out the parts that were there for the benefit of the aristocrats.

So the antonym of a “free market” isn’t a “regulated market”, since each and every market must have some sort of regulation or another, or it isn’t a marketplace but rather a mob scene. Saying that you aren’t allowed to shoot someone, you aren’t allowed to label rat poison as baby formula, you aren’t allowed to use dishonest weights and measures, you aren’t allowed to promise to pay later but then refuse…these things are all market regulations, but without them the market couldn’t exist.

The difference between a free market and other systems isn’t that there are no regulations, it’s that the customer and the supplier and able to negotiate the price between themselves. If regulations set the price of the good, then there’s no free market in that good. You either buy and sell at that price, or you do without.

So we don’t have a free market educational system, we have a public school system. Sure, you can choose to attend a private school, but you have to pay taxes to support the public schools whether you use them or not. And the price set for attending public school is zero.

And the reason we have public schools is because we’ve determined that having a bunch of illiterate peasants makes things worse for everyone. Education for the peasants has strong positive externalities. It’s not just the peasant himself who benefits from being able to read, but his neighbors also benefit when he can read.

So what would a “free market” health care system look like? It would look like what we had around the turn of the century. There would be doctors and nurses, and if you needed the services of a doctor, you’d send for the doctor, the doctor would come, and do his doctor thing, and then you’d pay him his fee for his services. Or, if you couldn’t pay, you’d owe him. That’s a fee for service model.

But what that model doesn’t include is health insurance. And the problem with health insurance that sends the free market model out of control is the problem of third party payments. You could have a system where the patient pays for services–first party payment. Or a system where the doctor pays for services–second party payment. Or a system where someone else pays for services–third party payment. And the system of cost containment that would occur under first or second party payment doesn’t exist. And it doesn’t matter very much who that third party is, you’re still going to get the same problem.

So it doesn’t matter much whether that third party is an insurance company or a government agency, you’re not going to see much difference. And of course, insurance companies have to have a high degree of oversight, because otherwise their natural inclination is to defraud their customers at every step–to take the premiums, but then not pay out. The difference between a highly regulated private insurance company and a public insurance system isn’t going to be noticable.

And when we look around the world and compare places that have government insurance systems, compared to the private insurance system here in the US, we find that in actual fact the government systems tend to provide better service for less money. We could argue about why that is, but the hard cold empirical fact of the matter is that they do.

And this is why I’ve given up on looking for a free market in health care.

22

I think that sums up the problem pretty well. This idea that the market manages to regulate itself.

If you want to see this in action, take a look at a can of tuna. That can of tuna contains a low level of mercury, albacore tuna contains even more. But why do you suppose that isn’t mentioned on the can of tuna?

Were you aware that it contains mercury? Do you like that it contains mercury? Is your next question, “how much does it contain?”

Well, the government hasn’t decided to regulate it yet, probably because the tuna industry REALLY doesn’t want to have to put a number greater than zero under the “Mercury” column on the ingredients list. Or maybe they’re worried voters are tired of the government being involved with grocery items.

Are you planning to go through the trouble of sending each can to be tested?

What would it take for the tuna industry to “regulate itself” and start putting the mercury levels on the can of tuna? I know they were happy to put dolphin free, but when the can ISN’T mercury free, what do you suppose they’ll say? “Choose Star Fresh Tuna, the one with less mercury.”

Fresh and farmed salmon can also contain small amounts of PCBs, try asking your fish guy about it some time, see how much information is available in this unregulated area of the market.

And if your response is simply, “I don’t eat canned tuna.” I can run through a dozen other examples of low levels of things in your food that neither the government nor industry bothers to regulate.

By the way, did anyone have a bottle of water recently? Did you make sure to test it, or did you assume it wasn’t refilled by a kid trying to make a couple of bucks?

23

I’d say it’s a libertarian bash-fest, as usual.
As has been said, a free market health care system would be one with an open market…plain and simple. It wouldn’t be a libertarian system, it wouldn’t be anarchy, it wouldn’t be only for the rich, and everyone else would be going to witch doctors or using coat hangers for abortion or other dippy shit like that. In fact, you could have a free market health care system and still provide care for the poor out of direct funding and reimbursement from the government. Are you poor (defined in whatever way you like). Fine. Go see a doctor. Get a bill. Submit bill to government. Government pays the bill at the market price (or, perhaps, even cuts a deal and gets some kind of bulk discount…also allowed in a free market).

Basically, all a free market health care system means is that the government doesn’t distort the market…which it does with both in our current system and in this new theoretical world we are moving to. Currently (and in whatever we get) the actual cost is distorted…in fact, it’s so distorted that people have no idea what stuff actually costs. How much does an MRI cost, really? Gods know. So, the decision to get one (or not), from a users perspective, is based not on cost but on whim…or perceived need…or whatever. Because the actual price is distorted for everything, and since there are so many different ways it’s distorted, covered, gamed, and whatever, else, it’s difficult for people to make informed decisions.

Or, it could all be because libertarians are mean and junk, and they hate the poor, etc etc. I mean, that’s what this thread is REALLY about, ehe? So…bash away…

-XT

24

The thing is, the technicians performing the MRI have no idea how much that MRI will cost, either.

It is pretty much impossible to get a quote from a health care provider about how much a service will cost. Even if they know how much they bill the procedure at, that number is completely arbitrary and bears little relation to how much the procedure will eventually be compensated.

The only exceptions are elective procedures, like cosmetic surgery. Then you’ll get a hard number. But otherwise, forget it. So you can’t just walk into a hospital, ask how much it will cost to set your broken leg, and bargain. If you don’t have insurance, you’ll be billed two or three times the amount. Nobody will know how much it costs. The whole system is designed to obfuscate costs.

A free market reform at this point is pretty much impossible.

25

Yes, it does, because anarchic libertarianism is what the people calling for free market this and free market that want.

You are contradicting yourself; having the government paying for health care will distort the market.

Because medicine is too complicated for non-professionals to understand. And because “what the market will bear” is pretty much “anything” when your life and health are on the line. And because the entire health care process is unpredictable.

The holy "free market’ simply won’t and can’t work properly with health care. Never has, never will.

Yes, it is; “free market” is political code for “libertarian amorality and corporate greed”.

26

Well, people do - buy adulterated heroin from unscrupulous assholes at least.
Cite.. That was from a two second google. I know this doesn’t happen in your libertarian fantasy world. In your fantasy world, people go around with assay kits, and don’t get high until the drugs have been checked by a lab.

And to answer your question directly - anyone buying Columbian cocaine is doing so from an unscrupulous asshole by definition. You might as well ask if you’d buy sex from a woman who wasn’t a virgin.

27

Steel workers probably don’t have a good grasp of how the real costs for a given steel pour either, nor do I imagine a worker at 7-11 has a good grasp of the real costs for Slurpees, for that matter.

Given the current setup? You doubt. It’s so hidden behind layers of government regulation, costs, reimbursement and a Byzantine maze of other things, and so, yeah…the price bears little relationship to the actual costs, and those costs (either absolute or actual) are almost completely hidden from the consumer…who, in turn has no idea what the real costs are for any of this stuff.

But that is how it IS…this thread (aside from the obvious libertarian bashing) is supposed to be about how it COULD be. It COULD be set up to be both a free market system and not be some draconian liberals nightmare to. The key though is that it’s pretty obvious that few people in this thread actually seem to grasp what a ‘free market’ actually is (hint: It’s not ‘OMG! CORPORATE GREEEEEEED!’), and they can’t put their ideology aside long enough to listen to the few people in this thread who DO seem to have a clue.

I guess I didn’t realize we were talking about making a free market reform to the system. In fact, it was never even discussed or debated…people just assumed that ‘reform’ has to equal ‘the government jumps in and saves the day’. I pretty much agree that, short of nuking the entire system, you couldn’t get what we had (or what we are going to be getting) to a free market system. You MIGHT be able to shift it there after years or decades of reform, but I doubt it’s possible. Doesn’t seem to be what the OP was asking, in any case.

-XT

28

No, not really. You don’t seem to grasp what a free market really is. The government is free to buy things in a free market, just like anyone else…and they are free to use their greater buying power to negotiate a better price. So, you could have a completely free market health care system, where the government simply buys a group policy (as if they were a large company) and enrolls citizens who meet some mutually agreed upon standard into the system, either free of charge or at some discounted rate.

Networks are too complicated for a non-professional to understand. Plumbing is too complicated for a non-professional to understand. The mysteries of the internal combustion engine are too complicated for a non-professional to understand (which is why I take my care for service instead of try and do it myself). Any number of things are too complicated for non-professionals to understand. It’s bullshit to single out medicine and say that it’s too complicated for any non-professional to understand, so we need the government to tell us what’s best for us.

We don’t know what the price of things are because they are hidden from us almost completely. This has nothing to do with how complicated medicine is, and everything to do with the Byzantine system we currently have in place. So, there is NO market forces at work in health care, contrary to those who claim our current system in any way resembles a ‘free market’. The costs are hidden by the government, by private insurers, but various regulations, by doctors, by quasi-government health care agencies, but just about everyone involved in the process…and so, people don’t have any idea of what the costs ARE, or how to make even the most rudimentary judgment. Putting it all on the government just makes it worse, since it puts the final decision process in the hands of a bureaucrat, as people will have even less idea what the real costs are, or be able to judge what care is necessary, reasonable, or unreasonable. So, someone asking for a hip replacement at 94 will question why they were turned down, without really grasping what the reasons were, or what the costs and trade offs were, because someone else will have made that decision for them, and it will all be completely opaque to the end user.

Oh…well, I’m glad that’s settled then. Since you obviously know what you are talking about, and can simply make such a statement out of your ass and all…

…oh, wait! You don’t have a clue what you are talking about, and you are speaking through the lens of your skewed ideology! :smack: Such as…

…this gem.

-XT

29

What do you suppose a free market actually is? Because in my economics class, it had nothing to do with buyers knowing the costs the sellers incur - the “actual price”. All the buyers have to know is how much they’ll have to pay for what they get - which in the health care market they do (or can), assuming the insurance company doesn’t bail on them or screw them over over a previously unknown technicality.

So, if the health care market is unfree, it’s not becuase of that. So, what’s making it unfree? Well, last I heard to be a free market buyers have to be able to choose amongst sellers, and sellers have to be able to choose amonst buyers - freely engaging in the transactions, and people have to be able to engage in transactions freely based on mostly accurate information. And the current system allows this. So technically the health care market is free (give or take that it’s regulated - not everyone can be a doctor.) It’s just that much of the business is done between patients and insurance companies, and insurance companies and doctors, rather than directly between doctors and patients. This alone doesn’t make the market(s) unfree - though it does make it confusing.

It is true though that the insurance companies like to mess around with contracts so that patients aren’t getting what they thought they were paying for. Which would mean that information breakdown is one area where the freedom of the market is truly impinged.
Of course, this puts aside whether the free market works for health care - which would depend on what you mean by “works”, I suppose.

30

Good posts. But I disagree with your conclusions.

As I’m sure you have figured out, a lot of elective procedures have price tags on them because they aren’t covered by insurance. And therefore, consumers need clear price information in order to weigh the costs and benefits, and make the tradeoffs accordingly. Just like buying a stereo or a box of Tide.

Your other posts suggest insurance is part of the problem. I disagree. I think insurance policies will arise naturally and be far more improved in an unregulated market than they are today. In some of the freer state insurance markets, high-deductible policies have become enormously popular, quickly. Those policies actually kill two of our birds with one stone - they are affordable in that they generally only cover catastrophic occurrances above some large deductible, and the presence of the large deductible itself is causing more and more price information to be revealed to consumers.

The big problem is over-regulation of insurance…that reduces competition and choice for consumers. Over-regulation drives up the cost of policies and/or outlaws certain types of policies altogether. Some states have banned high-deductible policies. States like New York and New Jersey which have high premiums are invariably the heaviest regulated - smaller, entreprenurial insurance firms can’t compete so they don’t bother to.

There is nothing evil about insurance. Insurance has naturally arisen in free markets since the Middle Ages to transfer risk from those who want it and can manage it, to those who don’t and cannot, in exchange for a premium. I think you’ll find that over-regulation of insurance is the true culprit, if you dig a little deeper.

31

Personally I think the ability/tendency of insurance to drop people who have serious problems is the real killer, since it removes the risk management aspect completely - the whole point of insurance is to cover you in cases of catastrophe (or whatever it is they contract for), which insurance no longer reliably does.

32

History and science proves you wrong. People don’t know what is best for them when it comes to medicine. Without the government stopping them, they go for “treatments” that don’t work or are outright dangerous.

No, it has plenty to do with that complexity. No one knows how expensive medical care is going to be beforehand. And the typical consumer has no way of rationally choosing between options. And in a free market for health care - which is largely what we have, which is why it is so bad - the real answer always is “how much can you pay”.

Nonsense. Market forces are very powerful in health care; namely, the market force known as “pay or die”. The nature of a free market in health care is that you will always be forced to pay whatever can be squeezed out of you because you can’t just walk away.

Nonsense. First, because at least a government bureaucrat isn’t making his profit margin by cheating you as badly as possible. And second, because all over the world we see the exact opposite. You are just indulging in the standard right wing faith statement that government is automatically bad.

Oh, please. You are then one making the ridiculous claim that is clearly contradicted all over the world and throughout all of history. Free market health care has always boiled down to scams and extortion. Snake oil, homeopathy, faith healing, insurance companies denying payment. That’s why the civilized world has moved away from it; it just doesn’t work. You are the one making the baseless, dogmatic claim that the magic free market must - MUST - be superior, despite all the evidence.

33

The interesting question is how could we change the current system in the direction of freedom (whatever that means) without causing (more) social harm. I have a choice of two insurance companies and 3 plans, but that restriction has nothing to do with the government and everything to do with my employer, who had more choice to select a plan than I do. My company clearly negotiates a better deal with insurers than I could, in fact my old company got acquired by a bigger one, with more buying power, and my new insurance plan is a lot better, with lower percentage payments and lower co-pays for drugs. I don’t see any lack of a free market, for me.

Now, if I wasn’t covered by my employer’s insurance, the free market allows any insurer who wants to to pick me up or not allow me to buy insurance. I suspect I wouldn’t be able to get any. Exactly how would I benefit from this freedom? The insurer does, certainly. You may laugh at us being worried about corporate greed, but in fact an insurer has an obligation to its owners to maximize profits, and has no obligation to cover people who represent a greater risk than they are willing to bear, especially considering competitive pressure. Call it GREED or call it good business practices - the guy with the pre-existing condition is just as screwed.

In your answer to DerTrhihs it sounds like you are advocating a public option. I agree with your point there, but you remember the great uproar about this. The problem is, if the government ran it as a business, it might out compete private insurers. (I think they would be forced to be more efficient, but some conservatives seem to have little faith in competition.) If the government was the insurer of last resort there would clearly be a tax hit, and I don’t see conservatives liking that either.

Now, as for pricing, we have a market in elective surgery because it is elective. It is rare to need an emergency boob job. Expensive procedures don’t allow shopping time. We have a large population of people now with either no insurance or high deductible insurance - I’d love to see a study showing them as better consumers while not affecting their health and outcomes. The fact is that in our current system our insurance company is our agent in negotiating prices with providers, and does a far better job than an individual, especially an individual in a crisis situation. As an analogy, do you think a tow truck operator gets a better prices from a random guy stuck on the road and calling, or from AAA when the guy is covered? Even with Google on your phone, do you think calling around to 3 places is going to get you a better deal than AAA can negotiate? I’d love for anyone making claims that forcing consumers to act alone to give a mechanism where this would reduce prices without harming health. You are asking us to believe that a guy with a chest pain can negotiate a better price than an insurance company offering millions of dollars of business, being willing to negotiate for weeks or months, and armed with mounds of statistical data. Yeah, right.

34

I think you are falling into their trap, that of calling it a free market only if every person is in it for him or herself. Buying insurance from a large insurer with purchasing power is every bit as much a part of the free market as buying it on your own. The problem is that so many Americans are excluded from participation from this part of the market for reasons of not having enough money, or being self-employed, or having a pre-existing condition. That is where the market breaks down, assuming you think it is wrong for people without access to insurance to go bankrupt or die. There were only two choices - forcing insurers to take people or letting the government take over. Since the latter was so horrid, we have the former.

35

Now this is a plan I can get behind, where do I sign up?

All joking aside, I actually wrote up a thread about a year ago suggesting this.

It is for these very reasons I absolutely DREAD health care being privatized and part of a free market. Maybe you have better experiences with your mechanic, but the whole thing is based on one way information flow. Taking your car in to the shop is a license for them to FIND something wrong. And how would you know? Unless you are a trained mechanic you are at their whim. But the free market, which is supposed to regulate itself, seems happy to have an entire world full of crooked mechanics. Even worse is when they know you NEED them. If you tow your car to the shop, they’ve got you by the balls, what can you say? Uh, no thanks, I’ll tow my car around from shop to shop until I get the best price? And this is where price gouging comes into play.

Let’s extend this to the medical world. You have a pain in your abdomen. What is it? Could be gas, could be diverticulitis, could be colon cancer, could be a blocked artery. How are you going to find out what it is? How are you ever going to trust the person you see?

Just like the mechanic case, if it’s gas, in a free market a doctor will have no problem telling you it looks serious and that he should operate.

Now, imagine your doctor waking you up, mid surgery to say he found some other stuff, and it’s going to cost $10,000.

What recourse do you have? Uh, no thanks doc, if you could just stitch me up I’ll get my buddy to look at that when I get home. Now, obviously they wouldn’t wake you up. But if your loved one was in the OR, and the doc comes out and says (just like mechanics always say to me), “we found some more stuff, here is our new price chart for when people are already in the OR.” What are you planning to do? Let your loved one die and write a strongly worded letter to the Better Business Bureau?

The reason I fear free market being applied to health care is that I can’t imagine it playing out any other way. How are you supposed to negotiate prices, choose what best suits you, when you are unconscious and wheeled into an ER?

Okay, one final example: I was a lifeguard for a number of years, and had pretty significant number of rescues. In a free market, would I have been able to paddle out, and begin to negotiate?

What I really want to know is that when your life is on the line, at what point does “free market capitalism” become extortion?

That’s what I’m hoping libertarians, in between bashings, can explain to me.

36

True, if you have a breakdown. If you are in a collision, and covered by insurance, your company has negotiated a fair price with the body shop - and they will even pay to have your car towed if it winds up in a place they don’t have a deal with. More or less like health insurance today.

The difference between cars and people are that there is a reasonably low cap on how much you will pay for car repairs, and a garage knows it. I’m lucky in having an honest mechanic. When my old Saturn was losing water I brought it in, they looked at its biggest problem first, and told me it would cost $1800 to fix, so I might as well drive it home and shoot it. I did, and it didn’t cost me a penny. If it was a person, the story would be different.

Look at vets. People who place an excessively high value on their pets pay a ton for open heart surgery and the like. Most people have an upper limit on what they can afford, and that keeps the costs down.

37

A few other differences.

There are alternatives to fixing that car, or even having one; you can borrow one, take the bus or a cab. If I have a heart attack, I can’t ask my brother if he’ll loan me his heart like he’d loan me his truck. They just don’t have you over a barrel with vehicles the way they do with your health. You don’t just have to pay what they ask like you say; you also often can’t put it off or find a workaround.

If they cheat or stonewall you on the repair work done to your vehicle, you’ll most likely still be there, angry, and in a position to sue them if necessary. With health care, they can put you off until you die. They can wait you out.

You are a lot more capable of becoming violent if pushed to the edge. Insurance companies wouldn’t be nearly as ruthless I think, if they weren’t typically preying upon people in no condition to go berserk and attack one of their offices. And no I don’t think I’m exaggerating things; we are talking about threatening people’s live and health here. And related to that:

The people doing the actual work are more likely to have to face pissed off customers screaming in their face, or at least be in hearing distance; instead of having a secretary of a subordinate of a subordinate deal with it.

38

Care to address the rest of my post?

Do you see the potential for extortion (price gouging) or is this entirely an irrational fear I have?

39

But what’s the difference between the government deciding to buy everyone private insurance, and the government self-insuring everyone.

Small or medium size companies never self-insure because they aren’t large enough, but very large ones often do. So why involve private insurance companies in the first place? What value does the private insurance company add to the transaction?

If the risk pool is the entire country, the government is the most effective risk manager. And if people want health care that the public insurance doesn’t cover, they’re free to pay out of pocket, or contract with a private insurer. But the empirical evidence shows that countries that provide universal health insurance provide better health care for lower cost.

It would be one thing if we looked around at France and Germany and Britain and Japan and discovered that they had sky-high medical costs, or worse medical outcomes. But it turns out that these countries spend about half what we do, per capita, despite covering everyone. And it turns out that on almost every national health statistic they do better–infant mortality, life expectancy, and so on.

So while a real free market system might concievably be better than the public health systems that other first world countries have, the cold hard facts show that a public health system would provide better care and cost much less than the bastard system we currently have, which combines the worst of all worlds.

We aren’t going to get rid of health insurance, and mandate a fee for service model, which is the only way to contain costs. We aren’t going to toss sick people out of amublances when they can’t pay. We already pay for health care for the poor, just not in a systematic way. So a public insurnance plan for the poor, funded by taxes looks to me like the only fair way to handle it, and there’s no particular benefit to handing poor people a voucher they can use to purchase private insurance.

40

I agree with the rest of your post. I thought that was clear. Without the insurance company behind you you are clearly subject to price gouging, especially if you have no alternate transportation in the car case. There are good mechanics, but there are plenty of rip off ones also, especially if you seem ignorant of how cars work. I think the main point is that unless you have some market power, you are going to get walked over as an individual. That goes for insurance companies dealing with doctors or garages, and employers dealing with insurance companies. Unlike the cases of Dopers with individual coverage, my health insurance company never gives me any crap - because if they did, they’d have to deal with a 1,000 pound gorilla.