By Carter Bundy
The central argument over health care reform is whether free market solutions can solve American health care’s massive access and cost problems.
Over the last few columns, I’ve tried to make the case that normal free market principles and assumptions simply don’t work in the field of health care. The first four assumptions that fail are:
• Assuming consumers know what products and services they’ll need.
• Assuming consumers know anything about the products and services they buy.
• Assuming that consumers have a choice.
• Assuming that private insurers have a motivation to provide good services.
There are literally dozens of other necessary assumptions for market forces to work in any given market, but in the interest of moving on to discussing what market failure means, I’ll limit my list to only a few more.
Assumption No. 5: lowering costs will result in higher consumption
For the most part, this is as simple a truism as there is in economics, at least with regard to commodities. You lower costs, people will buy more. The flip side of this assumption is that if you raise costs (by taxing health premiums, for example) you’ll reduce consumption.
But health care isn’t a commodity — it’s a unique, vital, literally life-saving service for which normal rules of economics and markets don’t apply. No matter what the cost, if it will save my life, I’ll ask for it. No matter how cheap, if it’s health care I don’t need, I won’t ask for it.
For example, if the cost of chemotherapy dropped dramatically tomorrow, even if there’s a chance of my getting skin cancer in the future, I’m sure as heck not going to start undergoing chemo.
If the cost of surgery for a torn Achilles tendon is lower, am I going to intentionally snap my Achilles again to use the product? Of course not.
This is an important concept because much of the opposition to a public choice is based on the idea that if a public option is less expensive, use of health care will skyrocket and we’ll all be waiting years for that crucial operation.
My guess is that most people’s experiences fit with friends of mine who are doctors. They say that the uninsured are the ones who often “over-use” the system, using more emergency room care than insured people.
Well, of course they do. They don’t have the less expensive, easier-to-access coverage that most of us do.
Want to end over-use of scarce health resources? The solution has more to do with giving the uninsured and underinsured access to primary care than with “encouraging overconsumption” by making health care affordable.
Finally, who thinks that the insured, sick person is even capable of changing his or her consumption patterns? The vast majority of us, including myself, trust our doctor and will get, or not get, tests based on his or her advice. So how will a less expensive public option result in overutilization of health care again?
Assumption No. 6: parties have bargaining power
In the field of health care, another basic assumption of markets fails: that users of the product or service being purchased have any kind of ability to bargain over the terms of the product or service being offered.
The practical reality is that end users have almost no ability to bargain. First, because most people purchase insurance through their employer, there literally is no point at which they can influence the terms of the deal.
Second, even employers don’t have much clout. As noted previously, in most metro areas of America — and in many rural areas — insurance is effectively offered by one or two companies. Monopolies and duopolies give insurers all the power. They have hundreds of lawyers, accountants and clever claims folks who write the policy.
The two or three people at each employer who get to review the options being offered have no realistic chance of changing the terms being offered.
Third, policies are so incredibly complex that only the people who design them — those hundreds of lawyers and accountants employed using your premium dollars — really know how many loopholes the insurance company is giving itself. Those loopholes allow them to reject people who have ever been sick, to deny claims, or to shift costs back to the employer, employee or taxpayer.
Conclusion
There is simply no way to say with a straight face that the solution to health care access, cost and quality problems is to put health care in the hands of the free market. There are far too many ways in which the inherent nature of health care guarantees that normal market principles and assumptions don’t work.
Brilliant Albuquerque Journal business and health columnist Win Quigley recently wrote that reform advocates should focus on the moral issue rather than the economics. But understanding that market forces don’t apply to health care is critical not just for a cost analysis, but for understanding why so many people can’t get care at all, even if they have insurance.
The normally beautiful checks and balances of free markets don’t — and can’t — work in the world of health care.
Bundy is the political and legislative director for AFSCME in New Mexico. The opinions in his column are personal and do not necessarily reflect any official AFSCME position. You can learn more about him by clicking here. Contact him at carterbundy@yahoo.com.