What Free Market in Medicine?
Joseph McHugh
November 20, 2009
One of the most typical tactics statists use to gain control of an economy is to claim that the free market has failed, and that government intervention is necessary to correct alleged flaws and deficiencies of the market. Commonly they declare that they want to fight "the greed" of industry.
The latest instance of this is in health care, where it is claimed that the market has created chaos, high prices, and insufficient or overly costly services.
But do we really have a free market in medicine in the United States?
Well, what is a free market and how does it work?
A free market is an exchange system where individual consumers are free to buy whatever product they want from individual producers of goods and services. The producers, in turn, are able to offer whatever products they want, in whatever quantity, at the best price they can get.
The essence of a free market is that individuals evaluate reality and make choices based on their evaluations.
Thus, if I want a new car, I need to assess my budget, and look at the prices of cars to determine if I can afford one or more.
So too, the producers of cars must make decisions. How many cars should I offer for sale? What price should I offer? Do people want them?
The guiding principle is reality: What makes sense from the point of view of cost.
So, now that we´ve sketched what a free market is and what it does, the questions is, have we had a free market in medicine in the U.S?
So, if I want insurance, do I look at my budget, decide what I can afford and then go out and buy it? How about when it´s time to decide how many and what kind of medical consultations to make? Do I sit down and decide? Do I check the prices of my doctor, my hospital?
The answer is no. The company takes care of that. Why? Well, long ago the government instituted wage and price controls (the 1930´s) and companies couldn´t compete for labor based on wages, so they started to compete with benefits. Then Uncle Sam came in and gave businesses a big fat tax break for providing health care. Voila. We have an employment based system. There´s a government created system. There's not much resmblance here to a market. To make it clearer, when´s the last time you negotiated with a doctor over price?
How about if I can afford to buy insurance? Do I have the ability to choose my plan? Guess again. The government forbids me from buying insurance out of state. How about if I pay my doctor directly? Nope again. That´s forbidden. Can young, healthy people buy catastrophic coverage? No way. Forbidden in many states.
How about the medical producers: medical staff, pharmacies and insurers? Well, they have no idea what people can afford or not afford because they have droves of elderly and poor who come into their offices courtesy of the government. They also have droves of people coming in courtesy of their company; these are not people budgeting their medical expenses. They are not people making decisions based on cost. If someone offers me a free car, it´s a virtual no-brainer that I´ll take it.
And of course, insurers do not set the terms of their services. They are required to cover an enormous number of conditions that they otherwise wouldn´t.
Prices? No one has the ability to set prices based on people´s actual preferences and budgets.
How do we ensure that we can have access to quality medical care at a price we can afford? The answer is simple. We can do it in the same we ensure that we get enough food on the table .
Everything gets distorted and confusing when the government interferes with the individual´s choice. The free market is the human informer of economic decisions. But it completely depends on non-coercion. It depends on people using their brains to evaluate what´s real. But reality does not conform to government edict. Government edicts and interventions simply mask what is happening with the supply and demand of a product.
Consumers don't shop, and producers don't control their services.
And that´s not a market.
The latest instance of this is in health care, where it is claimed that the market has created chaos, high prices, and insufficient or overly costly services.
But do we really have a free market in medicine in the United States?
Well, what is a free market and how does it work?
A free market is an exchange system where individual consumers are free to buy whatever product they want from individual producers of goods and services. The producers, in turn, are able to offer whatever products they want, in whatever quantity, at the best price they can get.
The essence of a free market is that individuals evaluate reality and make choices based on their evaluations.
Thus, if I want a new car, I need to assess my budget, and look at the prices of cars to determine if I can afford one or more.
So too, the producers of cars must make decisions. How many cars should I offer for sale? What price should I offer? Do people want them?
The guiding principle is reality: What makes sense from the point of view of cost.
So, now that we´ve sketched what a free market is and what it does, the questions is, have we had a free market in medicine in the U.S?
So, if I want insurance, do I look at my budget, decide what I can afford and then go out and buy it? How about when it´s time to decide how many and what kind of medical consultations to make? Do I sit down and decide? Do I check the prices of my doctor, my hospital?
The answer is no. The company takes care of that. Why? Well, long ago the government instituted wage and price controls (the 1930´s) and companies couldn´t compete for labor based on wages, so they started to compete with benefits. Then Uncle Sam came in and gave businesses a big fat tax break for providing health care. Voila. We have an employment based system. There´s a government created system. There's not much resmblance here to a market. To make it clearer, when´s the last time you negotiated with a doctor over price?
How about if I can afford to buy insurance? Do I have the ability to choose my plan? Guess again. The government forbids me from buying insurance out of state. How about if I pay my doctor directly? Nope again. That´s forbidden. Can young, healthy people buy catastrophic coverage? No way. Forbidden in many states.
How about the medical producers: medical staff, pharmacies and insurers? Well, they have no idea what people can afford or not afford because they have droves of elderly and poor who come into their offices courtesy of the government. They also have droves of people coming in courtesy of their company; these are not people budgeting their medical expenses. They are not people making decisions based on cost. If someone offers me a free car, it´s a virtual no-brainer that I´ll take it.
And of course, insurers do not set the terms of their services. They are required to cover an enormous number of conditions that they otherwise wouldn´t.
Prices? No one has the ability to set prices based on people´s actual preferences and budgets.
How do we ensure that we can have access to quality medical care at a price we can afford? The answer is simple. We can do it in the same we ensure that we get enough food on the table .
Everything gets distorted and confusing when the government interferes with the individual´s choice. The free market is the human informer of economic decisions. But it completely depends on non-coercion. It depends on people using their brains to evaluate what´s real. But reality does not conform to government edict. Government edicts and interventions simply mask what is happening with the supply and demand of a product.
Consumers don't shop, and producers don't control their services.
And that´s not a market.
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