Tag Archives: free market economy

A little departure

I have posts on the details of the PPACA queued up, so don’t fret – we will get back to that. But I wanted to take a little departure to explore a topic that came up while reading Facebook in the car on the way to work this morning. Don’t worry – I carpool, so I wasn’t driving while reading. That would be a public health failure.

One of the threads I was reading contained the comment that the best way to correct the problems in the health care system would be to get rid of Medicare/Medicaid and all private insurance, and go with strictly free market capitalism for health care. I’m sure that the commenter was not the only person in the country who thinks about this as a possibility. After all – it works (with caveats) for cheese and sweaters, why shouldn’t it work for health care? So – let’s explore that concept, and see what we conclude.

To start with, we have to figure out what people mean when they say the “free market” system. Do they mean a market that upholds the assumptions of Perfect Competition, a theoretical construct in economics used to define the most efficient market? Do they mean laissez-faire economics, where there are few, if any, government regulations, including those preventing Monopolies (which by the way, are the antithesis of Perfect Competition). Do they mean no government ownership of any resources of production? Or, more cynically, do they mean that the government just doesn’t do anything they don’t want it to? The question matters, because all understanding any system starts by clarifying the assumptions you have made about that system. This is especially true in economics, where we don’t do ANYTHING without an assumption of some kind.

Since finding out what this particular person meant, assuming he or she could clarify it precisely, is not possible, we will make an assumption based on what little information we do have – that the goal was to get rid of all private insurance and Medicare and Medicaid. First off – that in and of itself defies the free market. In any case where you have a product that has risk associated with it – such as whether or not your house will get hit by a hurricane, whether or not that drunk driver will hit your car, or whether or not you will develop a devastating health condition – the free market will create an insurance system to make a profit by spreading your individual risk out over large groups of people. But I’m pretty sure the person in question didn’t think about that. So, we will continue to consider a world where – by some magic that doesn’t include government regulations preventing the very thing that the free market would invent were we to get rid of current health care provision system (are you still with me?) – there is no Medicare, Medicaid, or private insurance.

So – you get sick, and what? You go to a doctor, and they charge you money. Ok, so what happens if you don’t have enough money? Well, under a truly free market system, if you can’t buy cheese, you don’t get cheese. No money, no sweater. Logically following then, if you can’t pay your doctor for their care, or the pharmacist for their drugs, then you stay sick. You might get better on your own. Or you might not. In the end, a free market system, with no insurance, would mean that if you got hit by a car, or you got a severe infection, or if you developed a disease like cancer, then unless you were a multi-millionaire, you would die. That’s it, end of story. Most people simply cannot save enough money to pay for health care if they have a disease that is much more complicated than say a minor cold, even if prices were to drop to a fraction of what they are now. Health care is a million times better than when it was possible to pay for services with a chicken and some canned goods. The procedures, the machinery, the devices, the drugs, everything. That’s, in part, why an insurance market for health care was developed in the first place. Because health, and health care, aren’t just cheese and sweaters, where the middle-income people just get lower quality versions of, and low-income people do without. If you get hit by a car, and you don’t have the money to pay, in a truly “free-market” world for this good, you die.

Now, even in our current world, before or after the PPACA, this is still a possibility. We haven’t the addressed the questions of whether it is ok with us as society that anyone dies from a lack of health care. There are questions of personal responsibility versus luck of the draw, etc. There are probably people out there that think it is just fine and dandy if people die if they can’t pay. We can think about those issues in later posts. But what I can say is that the idea that there is a free-market system, that doesn’t include private health care insurance, which would allow anyone except the super-wealthy to survive, is patently ridiculous.


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