Healthcare cannot ever be a totally market-based system
Of the many structural weaknesses in the USA revealed by Covid-19, none is more crucial than the failure of its public healthcare system. The current privatized care for those who can afford it is focused on sickness, adequate but overly costly, while millions are left out and uninsured. One of the basic problems is that healthcare cannot ever be a totally market-based system.
Adam Smith’s famous conditions for markets to exist are that buyers and sellers meet each other in marketplaces with equal power and information and that their transactions must not harm innocent bystanders. The U.S. healthcare system meets none of these requirements for the operation of markets! Buyers (patients) have little power and information, while sellers (providers, practitioners) largely control the system’s functioning whatever harms its outcomes may cause to patients or the general public. Examples include insurance companies gaming their Medicare Advantage plans for extra profits, as reported in Bloomberg BusinessWeek, Oct18, 2021. In addition, many thousands of private medical practice groups are now owned by private equity firms.
I discovered the next big error while serving as a member of the cabinet-level Technology Assessment Advisory Council of the U.S. Congress Office of Technology Assessment (OTA) from 1974 until 1980. By then it was clear that placing most healthcare insurance policies within control of companies and employers, was failing in many ways. These policies took root after World War 2, where they were used to attract employees with these “benefits” while often given in lieu of wage increases. These policies allowed enormous power to accrue to insurance companies to dictate what kind of medicine was practiced and reimbursed, while stultifying job mobility and empowering incumbent corporations.
Massive lobbying by incumbent companies thwarted efforts to provide other choices to employees and patients or to offer publicly-funded options and reduce monopoly pricing power of incumbents and pharmaceutical companies. Libertarian-minded actor, Ronald Reagan was recruited in the 1980s to promote existing market-based healthcare in advertising spots, as a key aspect of U.S. “freedom”, labeling public options as “socialism”. Even after the narrow passage of “Obamacare” in 2010, this battle over the provision of U.S. healthcare persists unabated. Providers and countless intermediaries still use their pricing power to provide today’s unaffordable 18% of U.S. GDP for healthcare, with often poorer outcomes than most other industrial OECD countries which are much less expensive. Still millions in the USA have no access to this system, which even the conservative Peterson Institute and many others, claim is no longer sustainable. Continue reading