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Gregory Nieberg
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I’m a little disappointed that Posner, Becker, and many of the comments here, are essentially advocating a “free-market” solution to the health care industry, when the health-care industry is highly resistant to free-market principles. When people say “free-market” I assume they mean “free” of government intervention. Too many people conflate the “free” in “free-market” with “freedom.” As a result, they tend to advocate for free-markets as if it is a goal in and of itself. It is not. We don’t want free-markets. We want competitive markets. By definition, a perfectly competitive market can be completely free of government intervention (because it’s perfectly competitive). But we can’t put the cart before the horse. The more competitive a market is, the more conducive it is to free-market principles. The less competitive a market is, the less effective free-market principles become. The less competitive a market is the more government is necessary to correct market failures. The health care industry is ripe with market failures: externalities, cost-shifting, lack of competition, vast differences in information, matters of life and death that lead to irrational behavior, etc. For example, if I want to purchase a television I know my budget, I know my size and weight constraints, I can go to a variety of on-line and off-line stores for the most competitive price, etc. At the end of the day I can make a rational decision based on my internal cost-benefit analysis that probably comes close enough to my “optimal” solution. A health care decision, on the other-hand, is vastly removed from this simple example. An individual is not equipped to make most medical decisions, especially the important ones. Doctors make these decisions. But doctors are generally paid for procedures. And the cost to the patient is not proportional to the amount of care. So neither the doctor nor the patient has any incentive to make a “cost-effective” medical decision. (Of course, because it’s matters of life-and-death, could we really expect a rational decision in the first place?). Moreover, insurance companies have shown little incentive – or ability – to maintain costs. Maybe it’s because the laws do not give insurance companies the appropriate flexibility. Or maybe it’s because insurance can rescind health-care policies and easily push costs off to their customers. Regardless, any way you cut it, there is an important role for government to play in the health care industry, which can never be a “free” market. Making individuals more cost conscious of their medical decisions is, in theory at least, one component of controlling medical costs. But isn’t risk-spreading one of the primary purposes of insurance? How do we ensure that costs are applied in an equitable manner? What about the positive externalities of a healthy population, and one that doesn’t lock people in to jobs for fear of losing coverage for them and their families? What about the negative externalities of an unhealthy population and the real and opportunity costs of bankruptcies caused by crippling medical costs? And how do we have a reasoned national debate on how to help individuals make both personally and socially responsible decisions when end-of-life counseling sessions – which are designed to reduce wasteful and exorbitant health care spending – are labeled “death panels” by prominent figures in the Republican party?
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Mar 29, 2010