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Why the Free Market Cannot Fix Health Care
Of course I’m the choir, but I still think Krugman preaches a damn good sermon:
There are two strongly distinctive aspects of health care. One is that you don’t know when or whether you’ll need care — but if you do, the care can be extremely expensive. The big bucks are in triple coronary bypass surgery, not routine visits to the doctor’s office; and very, very few people can afford to pay major medical costs out of pocket.
This tells you right away that health care can’t be sold like bread. It must be largely paid for by some kind of insurance. And this in turn means that someone other than the patient ends up making decisions about what to buy. Consumer choice is nonsense when it comes to health care. …
This problem is made worse by the fact that actually paying for your health care is a loss from an insurers’ point of view — they actually refer to it as “medical costs.” This means both that insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. …
All of this doesn’t necessarily mean that socialized medicine, or even single-payer, is the only way to go. There are a number of successful health-care systems, at least as measured by pretty good care much cheaper than here, and they are quite different from each other. There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. …
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20 Responses to “Why the Free Market Cannot Fix Health Care”
Kathy, my question stands: if the free market is fundamentally unable to deliver viable health insurance, why are life, auto, and fire insurance any different? Very, very few people can afford to replace a burned-down house out of pocket.
A house burning down is a pretty cut and dried affair. Very few ways to manipulate that system really. An auto wreck is an auto wreck and believe me you they try to deny paying those as much as possible too. Death [the main thrust of life insurance] is cut and dried also…and also they try to deny that when they order an autopsy [that you have to agree to beforehand] and find out you had some issue that the fine print will disqualify for.
Health insurance is a racket because in cahoots with pharmaceuticals they literally “play” people's pain, illness, disease and suffering like a crap shoot. So many different dimensions to manipulate that they hide in the grey areas and work them to drain you of all your money and into their accounts. And they edge it along too. Drug companies bribe doctors to prescribe medication that they know will shorten lives, cause more suffering and even addiction to their profiteering.
Long story short, capitalism and the bottom line are the polar opposite of compassion.. the thing the AMA wants us to believe is the foundation of the doctor/patient relationship. Our society has come to worship capitalism before God. And in doing so they put the dollar before their brother and sister. This is the essence of why our Godless free market cannot be trusted with our health care.
Because government distorted the health insurance market by passing legislation that helped tie health insurance with the employer. We do not have a free market for health insurance now because of that initial government intervention.
>>>Long story short, capitalism and the bottom line are the polar opposite of compassion..<<<
On the contrary, nothing has lifted the poor up from poverty more so than capitalism. Where the masses are worst off are exactly in the kind of societies that depart from capitalism. The record of history is absolutely clear, there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.
I agree. The free market alone cannot fix health care. But I don't think anyone is advocating a completely free market, and neither is that what we have now. The question is what regulations do we impose on the free market in order to make it the best system possible, or at least a better one than we have now.
Continuing on the lines of Dr J's comment, insurance is not antethetical to a free market. But I do think Sil is right to point out one of the differences between health insurance and other types of insurance: an adverse event related to health can be very expensive, and be a matter of life and death. If my car insurance company doesn't pay my claim, I'd be upset but it's probably not going to end my life. Additionally, health insurance pays for rare and expensive events, but in addition pays for the regular stuff–checkups and such. In that way it's not like insurance at all, but rather like pre-payment. I think all of this puts health insurance in it's own category. That's not to say the free market (with regulation) can't deal with this problem.
As for Krugman's argument that the free market can't fix health care because insurance companies have an incentive to not pay claims. I disagree. There are many things in the free market that fall into the same category to varying degrees. If I buy a movie ticket for tonight, you could say the theatre has a financial incentive to deny me entrance to the movie tonight. The could sell a heck of a lot more tickets that way. Why don't they do it? Of course, they know that if they do that, they're not going to sell many many more tickets, or maybe have their business license revoked if the situation gets too bad.
Of course, I understand that health insurance is *way* more complicated than buying a movie ticket. But the principle is the same. The problem with health insurance is that since every situation is unique, you don't necessarily know up-front what you are buying. Will this insurance you are buying cover procedure X if you have condition Y? Who knows. To help solve this problem, we should
1) Require health insurance companies to be more explicit about what they do and do not cover, and allow for an efficient legal system should they don't cover something they said they would. I'm sure we have something like this now, but it's not sufficient as there is still too much wiggle room for the insurance companies to get around.
2) Encourage private enterprises to rate insurance plans to give consumer's more information before buying. In the industry I work in, there are businesses where all they do is rate the products from a particular industry, so consumers can make a better choice. That would help answer questions such as: how broad is this coverage? How do they do with end-of-life care? Etc.
3) One way that the insurance market is unique is that I can quickly become an unprofitable customer. If my house burns down, my home insurance has to pay, but that doesn't mean I'll be unprofitable to them in the future. If I buy health insurance today, and then get cancer tomorrow, suddenly I will never be profitable to that company. So they have an incentive to get rid of me if they can, and therefore don't have any incentive to provide good products or service as the free market would normally encourage. Therefore, we need regulation to make sure people with health problems are not adversely affected by the free market (this is one of the few things I like about the current proposals). However, if we're not going to allow insurance companies to descriminate based on health status, we need to allow something in it's place–such as behavior. One shouldn't have to pay more because they had the nerve to get cancer. They should pay more because they make bad choices. This would also be a huge negative pressure on cost as people realize they can save a lot of money if they make better health choices.
Sorry for the long comment. The summary is this: you're right that the free market alone can't solve this problem, but that doesn't mean we can't use some free market pricinciples, combined with some regulation to negate the problems with the free market in this particular application, and create an effective system.
qwert321, you are absolutely right. Those who continue to demean the capitalism because we're in a recession now (which, by the way, capitalism doesn't claim to ever avoid) don't understand how good we have it *because* of capitablism. Is it perfect? No. But it's the best economic system we know of, and is responsible for bring massive numbers of people out of poverty.
As for some of the reasons why it's not perfect, I've written more about that here: http://sovereignmind.wordpress.com/2008/10/11/f…
While I think it's important to remind nay-sayers that capitalism is a great system, it's also important to not become one of the capitalism-worshippers that think that unrestrained capitalism can solve any problem (not saying you are doing this, just making a general point).
You guys crack me up..
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On the contrary, nothing has lifted the poor up from poverty more so than capitalism
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Yeah and that's why we needed to enact child labor laws because the capitalists in charge of their welfare were so friggin' compassionate. Just like they are today farming out [legally for now] menial and dangerous labor to children overseas where laws are more lenient..at wages so low that slavery is the norm and quality of life for the worker is nonexistant.
Get real, real quick.
[There are a number of successful health-care systems, at least as measured by pretty good care much cheaper than here, and they are quite different from each other]–
Uh, these ARE examples of socialized medicine. Every modern nation on the planet is more socialized than the United States by varying degrees. None of them are seeking to emulate our medical “system” as you call it. It is not a “system” because it has no central control. It is kiosk medicine that operates immorally simply to serve the God of Capitalism and the business of insurance is it's accomplice in crime.
Health, auto, home, whatever, all insurance should be eliminated because it profits from people’s misfortunes. All these can be handled by government and by the changing of liability laws.
“Provide for the common welfare—” Does not mean provide everybody in the nation a welfare check, but it does mean equal access to opportunity. Clearly the opportunity to live and to live in good health, should be affordable for all Americans as it is in virtually every other developed nation. This is exactly the meaning of “provide for the common welfare”. To bad it has been bastardized by Capitalist greed.
adelinesdad,
If a smart guy like you doesn't know the answers to your 3 questions, no wonder the liberals have no clue whatsoever about healthcare.
1. That's a nice ambiguous indictment there…..do you have a real set of facts to back that up with?
At this point in the healthcare game, I find it almost impossible to believe you can come up with a diagnosis code that does not literally have an encyclopedia of covered/uncovered procedures. Yes, you might have to dig it out of a website or make a phone call, but it is pure bs to suggest insurance companies somehow are incented to keep this information from the policyholder. And, if you have a covered procedure that was denied, one phone call to the state insurance department is all the consumer needs to have the issue resolved independently and without cost.
2. Try the NCQA website and tell me the plan you are considering that isn't reviewed there.
3. I presume you know this will never happen if your coverage is continuous……..the only valid point here would be to argue for a permanent COBRA for terminated group coverage employees where the condition is reported prior to employment termination. However, you hardly need to buy into the liberal notion of government run healthcare to fix that.
Our society has come to worship capitalism before God. And in doing so they put the dollar before their brother and sister. This is the essence of why our Godless free market cannot be trusted with our health care. ~ Silhouette
When you say “God”, I assume you are referring to moralitiy and humanity in general, rather than a specific mommy or daddy figure in the sky, and based on this assumption I DEFINITLY agree with you. Our society has come to revere material acquisition and accumulation of wealth above nearly all other pursuits, including once fashionable goals such as “honesty”, “fairness”, “unity”, “decency”, and “compassion”… to mention just a few. I suppose if being taught how to “think” was still considered important (wasn't that the original intent of the liberal arts education, meaning literature, history, etc.?) then we wouldn't have become such willing sheep for the pushers of conspicuous consumerism, not to mention a host of other distractions. Of course all this relates to Healthcare reform in fairly obvious ways, but I'll be surprised if the status quo isn't upheld in the end. Then We the People can go on to the next feeding frenzy… maybe another pop culture icon will kick the bucket and we can obsess about that for a few weeks. Afterall, governmental considerations that effect our futures and the futures of our children are so incredibly passe'…
Yes, I do mean God in that sense J Spencer. I am not religious and to define the undefineable seed of good within all of us by using the word “God” is very limiting to say the least and rife with all the associated attachements of anyone's foisted imaginings of what the image or even meaning of “God” really is..
*sigh* So you can use the word “God” and “morality” interchangeably if you like. The point is that capitalism in it's purest form is pure evil. Socialism in its pure form removes choice and thus negates this great experiement we are all involved in. The perfect combination is equal measures of free capitalism and social morality.
I disagree with you on one point though, health care is at a crises situation today and the angst and ill-feelings aren't going to disappear over night with some new distraction. There are many who carry the torch even higher than african americans in the 1960s for equal rights. You cannot throw a stone without hitting someone who has lost a dear family member to “insurance adjusters” mechanations. Death tends to be a very capitvating and lasting occupation of the berieveds' minds…
The insurance/pharmacuetical/AMA's exponentially-spiralling audacity is whipping the situation into the glaring light of the absurd, the obvious and the immoral with respect to profiteering. It further supports why pure evil never has unlimited reach because pure evil tends to expose itself with its antics and even the lull of distractions isn't enough to cover the herd of stampeding elephants stepping on your toes..
*ouch, why are my toes all black and blue? Oh, must be that herd of elephants standing on them!*
Ah the innocence and purity of the obvious..
adelinesdad -
“Capitalism is the exploitation of man by man, while under socialism it is exactly the reverse.”
Krugman is an idiot. He takes private insurance companies to task for trying to deny claims and coverage. Does he realyl believe the federal government wont do the same? If the taxpayers are on the hook for ALL the costs of EVERYONES care you better believe there will be a high level of scrutiny. If there is not, then something is seriously wrong with the system (i.e. Medicare and Medicaid). If there is no real attempt to justify claims under a single payer system, then the government will be wasting taxpayer's money (as it currently does).
As for the “free market fixing health care” its hard to say. Certainly there has been a high level of government intervention since the 1960s so it hasnt been a true test of the free market. Name for me any industry that has a high level of regulation, government interference and taxation that runs as efficiently as a free market counterpart? You cannot name one. I dont know why we think healthcare will be any different
What 3 questions did I ask and couldn't answer?
I'm not sure what gave you the idea that I'm advocating a liberal approach to health care. I'm arguing against a non-free market system by demonstrating that a free market system can work, providing there is some regulation to handle the particular issues that the free market is not equipt to handle in this case, such as the problem of the uninsurable. I wouldn't call that “liberal”, but that's just me.
It is not an “indictment” to suggest that the system can be improved. I know that there are already measures in place to help ensure that insurance companies are explicit about what is covered and what is not, and I said so in my comment. However, I do think this can be improved. I can only speak from my experience, but I've spoken to a few insurance companies and expained our situation and asked if they would cover a specific thing. The response I normally get is “well, we'd have to review your case.” When I ask them how to go about doing that, it usually starts with signing up for their coverage, getting a doctor that they approve to weigh in (and of course I can't see that doctor until I'm covered by their insurance) etc. If my current coverage covers X but not Y, and I can't verify if the coverage I might switch to covers X or Y, then it's a guessing game whether I'd be better off switching or not. Considering the free market thrives when customers can switch service providers easily, this hampers the free market. Maybe this is just me that is having this problem (to be honest, my family does have pretty unusual health care needs). But given the amount of noise I'm hearing about people having to fight with their insurance companies, I assumed it was a more widespread problem.
Many of the lists of covered benefits I've seen from insurance providers list a bunch of things with the caveat “when medically necessary”. I have personal experience that sometimes “medically necessary” is not as cut and dry as one would hope, and this is part of the wiggle room that I was referring to.
Re #3: I never said you had to buy into the liberal notion of government run healthcare to fix the problem. In fact, I was arguing the opposite. I think you misread my comment, and to the extent that I could have made it clearer I apologize. And I'm speaking of health coverage that is bought independently, not through an employer. I would support policies that diminish employer-based health care as I believe that also diminishes the effectiveness of the free market to bring down cost. (I didn't mention that in my comment–health care is a complicated enough issue that it's impossible to encapsulate an entire position into a few paragraphs)
“Get real, real quick. Capitalism is fine as long as it is yoked neck and neck with morality.”
I'm not arguing for unbridled capitalism. In fact, a bridle is a good analogy. You can go a lot faster on a horse than on foot, but without a bridle you're going to be in trouble (any horse lovers can correct me if I'm wrong). So I don't see your position as inconsistent with what I'm saying: we use the free market to the extent that we can because it is a powerful force for drive down cost and drive up quality, while imposing certain regulations in order to get the outcome we want and prevent exploitation.
“if we remove the burden for premiums from the backs of employers then they can hire more people, which means more jobs and more productivity, more GNP and more wealth overall for all of us.”
I agree on that, but I disagree that government-run insurance is the way to get there.
AustinRoth–
[Capitalism is the exploitation of man by man, while under socialism it is exactly the reverse]–
Cute but no. Our standard of living is rated 6th. All nations reated higher are more socialist than we are, but they have fewer billionairs living in Switzerland. Always a trade-off you know.
And yet, nobody has noted that in the Socialist Paradise of Sweden, the Reinfeldt Government is starting to break the bonds of Government Run Healthcare. Are we so backwards that we cannot see what even Socialist Sweden has seen, that the open market is still better for healthcare than government run health care?
I'm thinking that we're not going to be able to have a discussion on capitalism vs. socialism in a comment thread without just barely scratching the surface of a very complicated issue. Here's something interested to read for those interested in diving in deeper: http://www.fte.org/capitalism/introduction/inde… (written by Gary M. Walton, Professor Emeritus of Economics, University of California, Davis). Certainly you can probably find well-educated people on both sides of this issue, so I would just encourage you to read what he has to say and post your own links if you feel he is wrong.
This is his concluding thought: “Regardless of the fact that some areas of the world are still struggling (and failing in some cases) to move onto and along the road out of poverty by getting the institutions right, greater and greater numbers of humans are living longer, in greater ease and comfort, and with more dignity. It is noteworthy that two hundred years ago, scholars, most notably Malthus, were preoccupied with the challenge of feeding the poor, while in advanced countries today the main challenges are fighting obesity and caring for the aged. …the economic evidence and historical record provide ample reason to expect that the global progress launched by open markets and individual freedoms secured by rule of law around 1750 will continue indefinitely. The creative powers inherent in secure, stable, competitive, open-market systems are the well-spring for optimism about the future of mankind.”
I encourage you to also look at the graphs that show how Asia is rising out of poverty. The article doesn't address the Scandinavian countries, probably because their populations are small and therefore have a very small impact on the body of evidence compared to the US and Asian countries (some argue that socialism is more effective in small, homogeneous societies, and not as well in large diverse populations). And that evidence is that free markets have helped raised massive numbers of people out of poverty.
As noted in the paragraph quoted above, the very fact that we are debating about how do provide health care and end-of-life care to the poor, as opposed to how to feed and clothe them, is evidence that we have come a long way. Looking at historical and present-day trends, and relying on the expert opinions, it appears to me to be systems rooted in capitalism that are mostly responsible for this.
A great article, Dad. The folks tempted to believe these claims about the poor getting poorer should check out the comparison of the poor today versus the average in 1950.
Seen with just a few decades of historical perspective, our health care is what you might call a high quality problem. To an extent we've broken through the nutrition, labor, and medical technology roadblocks that defined our health 100 or even 50 years ago. And now we're facing the next roadblock a few miles farther along: money and resources, which are happily much more fungible. That's an amazing success.
interesting art. by Prof Walton, thanks Adelinesdad.
dr.e