A Free Market Solution To Universal Healthcare Is Mission Impossible

Free markets are a wonderful thing. They are better at providing a wide variety of goods and services than any other system. They move resources to those areas most in demand and which provide the highest returns. They do it automatically and swiftly, far faster and better than even the most advanced computer could possibly do. Markets have provided us with a standard of living that even Kings just a short time ago would envy. One meddles in markets at grave risk of reducing their effectiveness in providing us with wealth.

But one thing markets have not provided us with is universal healthcare. Markets are not perfect and, more to the point for healthcare, they do not meet all demands for a product or service. Nor are they meant to. Markets exist to allocate and ration resources, not to see that everyone gets whatever they want but may not be able to afford. Resources are finite and there is a cost associated with them that rises as more is provided. Thus, there is a point at which no more can be provided because there is no one left who is willing to pay. And there is a point below which no one is willing to provide the good. Inevitably, there are some sellers who cannot sell and some buyers who cannot buy. This exists as certainly as any law of nature.

So what does this mean for healthcare in America? It means that, under the present system, some percentage of Americans will always be unable to buy healthcare in a free market. Others will only be able to afford partial coverage, while most will be able to enjoy the best medical care in the world. The bottom line is that there will be those who will continue to suffer from treatable conditions, who delay treatment for less serious problems until they turn into serious ones, and who die prematurely because they could not get treatment or got it too late. No matter how you set up a free market healthcare system, you will have these negative outcomes. It is locked into the system as surely as the sun will rise tomorrow.

Why is universal healthcare our preferred outcome to the current system which means some do not get sufficient healthcare and others are locked into place by fear of loss of access to healthcare? Beyond the moral imperative of providing for our fellow Americans, there is an economic cost to the current system and potential economic benefits from expanding coverage. People who do not have access to healthcare are less productive due to not being treated. Workers cannot change jobs or start new enterprises for fear of loss of access to healthcare. In a free economy, many workers are stuck in place and unable to maximize their contributions to the economy. Universal healthcare, available to all regardless of where they work, will increase the economic efficiency of the US.

It is worse, even, in healthcare than in other markets because there is not really a secondary or a used market available. In most markets there are alternatives based on price or a used market with lower prices. Neither really exists in healthcare. You cannot recycle an operation and there usually are no gradations in price for a medical service. One cannot even provide it oneself, such as cutting one’s own hair. Do it yourself heart transplants tend not to have positive outcomes. The next closest example of such a market, education, is still way ahead of healthcare because it is possible to teach oneself many things or become educated in a variety of ways. Self-treatment in healthcare is rather limited.

There exist, now, some ameliorations to help those without access to healthcare. Many hospitals, doctors, and other care providers charge above market prices to those who can pay to cover the costs of those who can’t. This is possible because of the fragmented nature of the current health system and limitations on competitors. A move to a free market system, ironically, will remove the ability of healthcare providers to subsidize nonpayers. They will only be able to charge at cost because other competitors will do so and payees, such as insurance companies, will not pay more. The only way for providers to help non-payers is for them to achieve excess returns by charging above average costs. That can happen only when they have pricing power, such as a monopoly or oligopoly. In a free market there will be no excess returns. Free markets will lower costs and expand treatment somewhat, but that will be offset by fewer non-insured patients being treated and some higher cost providers dropping out. A free market could thus end up with less care provided rather than more.

There also exists a secondary market in health services in the many clinics around. Of course, most of these are government run or funded and moving them to a free market basis would make them unaffordable for the very people they are designed to help. Again, a free market would provide less health care than we now have, not more. And certainly not universal coverage. Overseas treatment is another option, but still for a limited few who can afford the trip.

What then does this mean for healthcare? If our goal is to make our medical system into a free market and to not “socialize” it, that can be done quite simply by doing nothing – unless, that is, we dismantle Medicare and Medicaid and make them free market programs, too. (Reducing the amount of care provided in the process.) Whoever chooses this way, however, must justify the unnecessary suffering and premature deaths which will result as acceptable outcomes. This is not some abstract capitalism versus socialism debate. It is literally life and death for a significant portion of our society.

If our goal is universal healthcare, as it should be, then a free market system alone will not suffice. There must be a significant non-market component or even a totally non-market system. There are any number of different approaches in countries around the world that could be adopted – some more market-oriented than others. All have a major non-market component of universal provider, universal payer, mandated coverage, regulated operation, or a combination of these approaches.

To choose we need an honest debate and open minds. The current debate has descended into some kind of Boschian Hell that has terrified many into total opposition to any change. We can provide healthcare for all Americans if we are willing to address the gaps created by our current market-based system. That will require an acceptance of a role for non-market-based programs to provide care that the market cannot. Given the current level of the debate, though, that appears to be an uphill climb. Getting to a common starting point on the problem, that the current system cannot succeed as structured, would at least lay the groundwork for a solution.