Thursday, February 26, 2009

Market Based Health Care Doesn't Work

To function correctly, free markets require information to be distributed more or less symmetrically between all the parties that are participating in a transaction. In addition, free markets assume that the parties to a transaction have an alternative to doing a deal - hence the use of the word "free". Unfortunately, when you or a loved one have a serious medical issue, you don't tend to ask many questions and you don't have much choice. You rely on your medical service provider to help you, and you will pay virtually any price to ensure a speedy recovery. This makes health care a uniquely challenging problem for those of us who believe in free markets. In recent years, I have come to the conclusion that a health care system that assumes that all health services can be freely bought and sold on the open market, is probably sub-optimal in that it cannot guarantee coverage to everyone nor can it promise efficient medical outcomes.

Several months ago we had a medical emergency and needed to take our son to the emergency room. Through a long and ridiculous turn of events which I will not recount here, we had to use two ambulances to get him there. Thankfully, our son's the medical problem was resolved within 24 hours, but in the months since that incident we have been battling a ludicrous number of medical bills. The ambulance services each billed us separately, the hospital sent us a bill, the doctors each sent us a separate bill, our medical insurance sent us a check, then demanded it back. It has been a complete and utter mess. Each one of these service providers demanded payment for an amount which we had no way to check, challenge or negotiate. As far as I am concerned the numbers on these bills were completely arbitrary. Here's further proof: yesterday we received a check in the mail for $200 from one of the ambulance services. I have no idea why they sent us the money or why they asked us to pay it to begin with. No one can explain.

Without symmetrical information or choice, free markets cannot exist. Even if the information were theoretically available to me, is anyone seriously expecting me to shop for emergency medical services when my son is having difficulty breathing? There is no real free market in emergency medical services, and acting as if we have one simply causes distorted and morally reprehensible outcomes. I don't necessarily advocate that we move to a nationalized health care system, but we should look at this option carefully and at the very least move to limit some of the excesses of the system we have today.

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plonkee said...

I read about this in a popular economics book (possibly The Undercover Economist). Other issues with using a market system are that no one is really going to let the market take its course - even in America you don't just willingly let people die on the streets if they can't afford medical care.

Some kind of 100% insurance that covers essentials with the risk pooled across the entire population and token co-pays, and then a market for elective stuff seems to be the best choice to me.

Of course, you can't do that in the UK because *healthcare free at the point of use* is an article of faith amongst all political parties over here. (And Americans think I'm a liberal!)

Shadox said...

You and I agree on the outlines of a health care system that would be workable.

frugal zeitgeist said...

Your experience is exactly why I'm scared to death of getting big-time sick.

I think you and plonkee are on target with a better way of managing health care. The current way sure isn't working.