Health Care is Not a Market

“Where it is impossible to create the conditions necessary to make competition effective, we should resort to other methods of guiding economic activity.”
-Friedrich Hayek, The Road to Serfdom, p.37

Here’s a simple solution to our health care mess. Eliminate all the insurance companies, government subsidies, and other intermediaries and let people purchase medical services directly from a provider of their choice at the going market rate.

Believe it or not, this is actually a popular concept on the Republican far right, and not just from Ron Paul. Call it the “Chicken Plan” after Senator Tom Coburn’s nostalgic comments on how well this program worked in the old days, when people bartered livestock for medical care.

Republicans still struggle to promote a credible ownership culture largely because we refuse to wrestle honestly with the hard-cases; the situations in which market forces fail to allocate value effectively. Medical care is probably the most frustrating example since it stubbornly resists market solutions and affects everyone deeply.

Health care is not a market. It lacks any of the vital features of a market. Treating health care like a market means living (dying) without modern medicine. To advance the ownership culture we need an alternative to state-owned health care that keeps key decisions in personal hands, preserves market triggers where appropriate, and rids us of the strangling influence of the massive Federal bureaucracy. Republicans cannot do this until we abandon some cherished fantasies about the unquestionable, divinely-ordained righteousness of markets.

In a free market, goods and services are allocated through transactions entered into with mutual consent. No one is forced to buy from a particular supplier. No one is forced to engage in any transaction at all. If a price cannot be agreed, then a transaction simply does not occur.

The medical industry exists to serve people who have been rendered incapable of representing their own interests in an adversarial transaction. When I need health services I often need them in a way that is quite different from my desire for a good quality television or a fine automobile. As I lay unconscious under a bus, I am in no position to shop for the best provider of ambulance services at the most reasonable price. All personal volition is lost. Whatever happens next, it will not be a market transaction.

Insurance is the obvious solution, but an insurance-funded medical system means abandoning an unregulated free market for health care. The insurer-model creates a three-party managed market in which the patient has surrendered their buying power and much of their discretion to an entity whose interests are not aligned with their own. This arrangement can actually work quite well, but not under unregulated, free market conditions.

We cannot maintain an insurance-based system of health care unless there is some force aligned with the consumer that has the superior authority and financial backing to hold the insurance providers to their end of the deal. What if my insurance company refuses to pay? What if the company with which I contracted for insurance services collapses and cannot pay for my medical care when I need it?

Patients, at the moment they make their insurance purchase, have no way to be certain which provider will actually deliver on their promise. They will only discover the answer when their life, or the lives of their family members, depend on it. Under an insurance system without regulation, the market forces that would exist in a face to face transaction between consumer (patient) and supplier (doctor) disappear, replaced with a grim gamble in which the provider has every incentive to cheat.

Modern health care with all its fancy instruments, amazing methods, and success in extending life and happiness only exists because we started abandoning the free market in medicine a century ago. Go back to paying your doctor with chickens and your doctor will go back to being a part-timer who learned his craft from a book in order to augment his income from farming.

Does that mean we will eventually have to submit to single-payer health care controlled entirely by the federal government? No, the developed world includes a kaleidoscope of different approaches to health care from single-payer to almost exclusively private-insured that deliver better care at lower cost than ours. There are alternatives, but so far conservatives have refused to even look at them.

It will take more than one post to discuss the options. However, it should be noted that until Obama got elected, the most popular health care proposal among conservatives was the Heritage Foundation’s plan for an insurance mandate, formulated in 1989. Republicans in Congress proposed an individual mandate in 1993 as the Nickles-Stearns Bill and it was supported by such notorious RiNO’s as Jesse Helms and Trent Lott. That plan was adopted by Massachusetts under Mitt Romney and eventually formed the core of the Affordable Care Act. It is hard to imagine any Republican now who could survive while dealing so honestly with health care issues.

The biggest long-term structural obstacle to the progress of the ownership culture is our health care system. It punishes entrepreneurs, chains employees to traditional work, and leaves millions of Americans without access to care. We count on conservatives to deliver pragmatic, sensible solutions, but when it comes to health care Republicans are off their meds. Until Republicans are ready to move past their free market fundamentalist fantasies, the spread of the ownership society will remain stalled.

Chris Ladd is a Texan living in the Chicago area. He has been involved in grassroots Republican politics for most of his life. He was a Republican precinct committeeman in suburban Chicago until he resigned from the party and his position after the 2016 Republican Convention. He can be reached at gopliferchicago at gmail dot com.

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Posted in Economics, Health Care, Ownership Society

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