Does free market capitalism make healthcare cheaper or more expensive?

Recently, the CEO of hippy-dippy Whole Foods made a very Republican-like statement that Obamacare is a 
"fascist" approach to healthcare, explaining in defense of his remark that in fascism the means of production are in private hands but are controlled by the government.

To me, his first mistake is that of describing healthcare as a "product" (a "means of production" produces a "product"). I think it's a service.

A free market works when you (a) have time to make a choice, (b) understand your choices, (c) know your specific needs, and (d) there is meaningful price competition.

Based on those terms, I think healthcare is clearly NOT a normal market.

(a) is hindered by (b). When selecting a way to protect oneself, there are so many complicated choices one can hardly understand them all well enough to make an informed choice. As for (c), your specific needs lay in the future, and since almost all choices in health insurance involve making some guesses as to what your future needs will be, whatever choice one makes is likely to prove wrong, When one needs healthcare, one frequently has no real choice because one is in an emergency situation. You need relief NOW. There is no time for second opinions or shopping around for a cheaper CT scan or NMR, or if there is time, that time also allows the condition to worsen.

We all see the need to get a handle on healthcare costs which go up at a rate far in excess of the rate of inflation, but people who think that the free enterprise system and the free market are the key to bringing them down are delusional. Healthcare, as a market, is almost totally detached from the controls the govern the price of groceries, home appliances, automobiles, etc.

Only by socializing healthcare can costs be got under control.

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Permalink Reply by Sophie on January 18, 2013 at 1:35pm

The health industry is a play park for rich people to sell something for $5,000.00 when it really costs $100.00.

Permalink Reply by Denis Robert on January 18, 2013 at 2:47pm

Anyone with any experience with health insurance knows that the free market inflates the cost of health care. It's not just the fact that they need to make a profit: it's that the core incentives are to reduce services and increase prices, and there's little to no counter-incentives. You can reduce costs in the health industry by doing one of two things: find ways to be more efficient, or delay/deny interventions. The first is far, far more difficult to achieve than the second, so the second wins, every single time. The problem is that delaying or denying interventions do not remove the need for said interventions; and eventually, the patient will either die, or need a more costly intervention to fix what could have been fixed earlier at lower cost.

And if you believe that insurance companies will take the long view that earlier interventions will lower costs in the long run, think again. Overall, it's a matter of take a known profit now vs an unknown profit at a later time; and the short term, known profit will always win. Some insurance companies do invest in preventative medecine, where it is cheap, but where expensive interventions are needed, no insurance company in their right (capitalist) mind will ever go for prevention.

So no, there is simply no incentive for health insurance companies to do the right thing, short of regulations.

And anyone who tells you otherwise has never set foot in an insurance company...

Permalink Reply by Dale Headley on January 18, 2013 at 6:15pm

The short (and logical) answer is that the government will always provide services at a lower cost, simply because it has no need to make a profit.  Just wait until the Republicans succeed in eliminating the U.S. Postal Service.  You can be sure that whatever private entity takes over it will leave you with only distant,  fond memories of when you could mail a letter for only 47 cents.  

Permalink Reply by Marc on January 18, 2013 at 8:15pm
Not to mention the fact that both FedEx and UPS take advantage of the Post Office's **requirement** to deliver mail such that that take it to the point that it is profitable for them and then dump it on the USPS to take it from there, depriving the Post Office from many of the more revenue generating deliveries.
Permalink Reply by Cathy Cooper on January 18, 2013 at 6:45pm

As a Canadian, I have free access to most avenues of health care.  If I need surgery, or have a heart attack, I can go to hospital without having to pay out of pocket.  The reason why our system is more efficient for the overall populations (as opposed to the typical "free market" system, where only those that pay receive adequate treatment, and those that cannot receive sub par treatment) is that the government caps costs and wages.  All expenses etc. are regulated by government bodies--which keeps prices from skyrocketing.  This is one of the most important factors which helps government regulated health care work.

Permalink Reply by Marc on January 18, 2013 at 8:24pm
I have many friends who work in healthcare (primarily laboratories) both here and in Canada. I have yet to hear from any of them that these cost and wage caps are depriving them from a proper and significant wage. Even understanding the higher percentage of taxes being paid in Canada, when people start comparing wages, at least in the Laboratory Diagnostics arena that I am familiar, the difference is accounted for by a routinely higher wage when comparing similar experience and responsibility.

For MD's I have no idea. But if you look to Germany, physicians earn significant wages even though they would be way under your typical Hollywood plastic surgeon.
Permalink Reply by Marc on January 18, 2013 at 8:11pm
As someone who works for Big Pharma, I whole heartily agree with this. I will also add the the insurance model is a completely inappropriate way to pay for and distribute healthcare.

Insurance is based on a risk-pool and an assumption that it is not inevitable that every policy holder will make a substantial claim. That is ridiculous when virtually all participants in the system will have significant care expenses at the end of life and that compounded with the fact that young and healthy low risk patients are way less likely to contribute and participate. Add to that the fact that the profit motive of an HMO is to deny healthcare, we are guaranteed a system of high costs and delivery issues.

I laugh when every I hear the 'best healthcare in the world' line. We might have exemplary medical technology, and the potential to deliver quality care in a cost effective way, but we are failing miserably in the current structure. Add to the picture defensive medicine practices, the profit motive of a hospital to keep beds full of patients covered and paying as long as possible, poor end of life planning and DNRs routinely ignored in reaction to well intending and vocal families leading to more costs that do very little extend life or the quality of it, and the under utilization of hospice, the outcomes are inevitable.

When we are no longer ranked 34th in the world in infant mortality, and the worst of any wealthy country in the world, we can pull out the braggadocio regarding our healthcare system.
Permalink Reply by Ed on January 18, 2013 at 8:45pm

Is it representative of a sane society that a wage earner is forced out of necessity to pay more for healthcare coverage than keeping a roof over their family's head? An industry that benefits and thrives on the physical  misfortunes of it's clients is most despicable.

Permalink Reply by Strega on January 18, 2013 at 9:04pm

@Ed Except undertakers?

Permalink Reply by SteveInCO on January 18, 2013 at 11:47pm

Is the client miserable?

It is a one time purchase, per each.

Permalink Reply by SteveInCO on January 18, 2013 at 9:15pm

Why the presumption that we actually have free market health care in the US?

It is heavily subsidized (half of all health care spending is already by the government) and regulated now, and administrative overhead due to insurance accounts for a huge part of the costs--for no value added.  (How many people in your doctor's office have as their job either "coding" for insurance or submitting paperwork?) 

As Marc alluded to the insurance model really doesn't fit well.  If car insurance worked like health insurance, you'd be covered for your oil changes--but they would cost someone a hundred bucks because someone at the oil change place would have to file the paperwork and someone at the insurance company would have to process it--and that someone is ultimately you as the cost would be passed along in huge auto insurance premiums.  It may not work well, but it is encouraged by the tax code, to the point where we've long had a cultural presumption that health insurance will be bought by the employer and will cover everything.

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