Health Care and the Free Market

Obamacare really isn’t the best legislation, but it was some better than doing nothing … which is all the Republicans were doing. It was an attempt to get as many folks insured as possible. It was NOT an attempt to take on the tough issues related to bringing down health care costs. Very few leaders have the guts to even touch these, largely because there is far too much money being made by far too many parties.

With Paul Ryan proposing a major change to Medicare and Medicaid, one of the themes being sounded is that a free market in health care would bring out the best possible care at the least possible cost. This is an example of a statement being made many times, and somehow becoming true. It isn’t … and I can’t quite see how health care will ever be anything close to a free market place.

To get a handle on this, let’s look at elements of a free market:

You are purchasing a known product, at a known price, you are the one who is willing and able to pay the price and you can choose between suppliers based on price, quality or service. Think of buying gasoline. You know that the product is produced within certain standards, you usually can see the price from the road and you can quickly choose which provider you will go to based on your own criteria.

Now, let’s look at your visit to the doctor. The clinic you go to is likely one of only one or two in your area, unless you live in a larger city. You’re likely go to a given M.D. because you have a history with them. While you occasionally go in for a given service, it’s more likely that you go with some set of symptoms. You rarely have a guess about what tests will be made, what services or drugs will be provided and have no clue at all what the related costs will. Even the physician won’t know what the costs will be. Even for a given test, different people pay different amounts depending on the rates that their insurance company has negotiated. Lastly, you’re usually not the one who pays the tab, at least not directly. It usually comes through the insurance company. Even if you do pay it yourself, the bill comes any number of weeks after the service has been provided, making it pretty difficult to make any price-conscious decision.

As you see, it has essentially none of the attributes of a free market. It should be no surprise to learn that profitability has driven health care. For example, a community clinic has to go out and purchase a very expensive MRI machine, even though it won’t be utilized very often. Cost per use becomes very high. If they don’t buy it, more of their patients go to the next community. So that it can be utilized more, the doctors know that it will work out better if they prescribe a MRI for every ache and pain. Though patient outcomes improve only slightly, there are higher costs for insurance companies, which get passed on through higher co-pays, higher deductibles and higher premiums … not to mention higher costs for Medicare and Medicaid. There are thousands of examples like this. Countless ways to lengthen life by an ever-so-tiny amount. These techniques are extremely expensive. Yet when it comes to good preventative care, care that is tremendously cost effective, we cut corners. The reason? … very little profit motive. The big money comes when that child is born 15 weeks prematurely, or when the diabetic has an out of control infection in their leg. When the doctor sees a patient for a given condition, they order 8 tests instead of the 4 that would probably do the job. This expands revenues and covers their back sides when it comes to questions of malpractice. This is the natural of our health care system.

Somehow turning this over to the free market is going to cure these problems? … really?

Just a thought … DonC


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