The free market will never cover sick people

Economics Political Theory
1

“The fact of the matter is you can’t just simply say government’s good or bad; there are some things we do well and there are some things we don’t do as well. But health care is a case that we know the free market is never gonna be the way you solve every problem cause they’re never gonna cover sick people.”

  • Anthony Weiner (D)

http://www.youtube.com/watch?v=K3SV3pqItdw

Did he just claim that no sick person has ever been treated voluntarily in the market? That all treatment of sick persons in the history of the world has been funded through aggression?

2

Not well written, but I just left this comment on a new post on Krugman’s blog:

Dear Professor Krugman,

It is amazing that someone who probably strives for impartiality is so willing to accept the idea that the insurance companies are operating against the consumer. It’s amazing not just because of the fact that as companies, health insurers naturally always strive to benefit the consumer. That is a firm’s way of competing against others. So, the idea that insurance companies are colluding against the average American is nonsensical.

But, it’s also amazing because it is the politicians who ultimately pass the legislation which forces these same insurance companies to work against the customer. Perhaps if inter-state insurance wasn’t banned by the government, more competitors could enter individual markets. Or, maybe if nonsensical regulations—such as those which force insurers to cover mammograms, even if their client is not female, or the dozens of other regulations which force insurers to cover for certain events which are so unlikely that if given a choice the individual consumer would probably opt out of—were lifted, the costs of insurance wouldn’t be continuously driven upwards.

I don’t know about Obama, but I’m beginning to give up on you.

The most relevant part is the first paragraph. Companies always strive to reach out to the maximum amount of clientele, because that is how they make their money. I have never been sure of how the left believes that medical insurance is the only market where companies don’t act like companies. Instead, they act like monsters, and magically operate against market forces. It’s just beyond me.

3

To be fair to Mr. Krugman and the Honorable Congressman from New York; insurance companies don’t operate like most companies in the US; thanks to government regulations.

4

Jonathan,

I like your comment except for the part where you call him ‘Professor’. This could probably go into a thread of it’s own, but I never use titles that I don’t recognize. So I would never call someone a ‘president’ of a country. In the same way, I don’t recognize his title ‘professor’.

5

Since when is there a binary means to pay for health care products and services. There was a time in the USA and in England for that matter where there was no such thing as insurance. But somehow as if by magic people managed to get health care products and services despite the lack of insurance. See there was a time when a stay in a hospital cost about a days wages. So people would stay in the hospital very inexpensively. What was even more amazing was that OLD PEOPLE managed to get health care.

The line of demarcation on people being able to afford health care was in the Progressive Era when government started licensing medical providers and panted the seeds of regulatory agencies like the FDA that have done nothing but keep the price of medical products and services higher than they should be.

All of this became worse during WW2 when the feds stopped taxing health care insurance premiums giving employers the incentive to pay employees health care insurance in lieu of cash wages.

6

Aside from State boundaries and requiring insurance to cover superfluous stuff, what other regulations does the insurance industry enjoy?

7

Please do make this into a thread.I’d be interested to see the discussion.

I do a similiar thing.I try to avoid putting a capital “G” when writing government.They aren’t even worthy of that.

Likewise I try to avoid calling them our leaders (as if they could lead) or our rulers.

I also always describe public property as ‘public property’ since it isn’t really public property or even state property.The same applies to ‘public schools’.

8

I try to call it goverment property, instead of public property, because in reality its not public, its goverments.

9

And I would contend that only the market can cover sick people just like only the market can feed the hungry people.

What these idiots have to understand is that the market supplies everything even when the government is in charge. But it can be supplied efficiently so that consumers are satisfied, or inefficiently due to government hampering the market process.

10

A consumer base grouped by employer instead of by risk, per federal mandate.

In extremely simplistic terms, healthy consumers can’t opt out, and into pools of similarly lower risk, and unhealthy consumers can’t compete with the purchasing power of insurers, or to form buyers’ clubs which could otherwise compete on a normal footing with Medicare/Medicaid. Very complicated issue.

11

Usually, they publish my comments. There was 102 approved comments, and mine is not one of them.

12

Absolute truth. I remember that my public speaking teacher had two genetic disorders which knocked her out of the normal coverage of even Blue Cross/Shield, so she had to pay a bit more (it wasn’t impossibly expensive, just usually so for her unusual conditions). Anymore, I wonder if such a person wouldn’t do better if there were fewer regulations so they can pay cash instead for their treatments and medicines. Also having the option to try experiment drugs for rare diseases wouldn’t hurt too (cheaper w/o useless FDA regs, but with the risk as the price offset).

13

Epoch failure. I’m sorry, that’s all that needs to be said… I broke my arm once and a doctor fixed it… Therefore we must have the state.

14

I’m not sure how PPOs operate, but I know that doctors in an HMO network are compensated for their services on a “capitation” basis, e.g., on a per head basis. It is not a fee for service arrangement. This creates an incentive structure that rewards the doctors that get people out of their offices quickly and punishes those that spend a lot of time with their patients. The more they do for a patient, the more their profits sink.

The above is consistent with the following truism: When the Government interferes in the free market, the trend is for quality to drop and costs to rise over time. It’s the opposite of the free market.

15

I believe the quote provided by the OP was referring to more extreme cases of “sick” people. (If not, it should have been.)

For example there are those with such extreme or rare medical needs that the cost of their care (in today’s world) reaches into the 100’s of thousands of dollars over time, and sometimes these needs will continue for the rest of the person’s life. I have yet to see a free market solution to this particular problem (the worst case health care scenario) that will satisfy most people.

My own counters include:

The present system causes costs to skyrocket due to…

  • Lack of effective competition
  • Massive Federal regulation and bureaucracy (FDA)
  • The AMA “cartel” (medical certification requirements)
  • High cost of medical education due to government interventions into education (a whole different problem entirely!)
  • Outrageously high cost of obtaining “approval” to bring new drugs (and I’d assume medical equipment in general) to the market
  • Government subsidy of the system through programs such as medicare/medicaid, which can only have the effect of pushing prices higher (same phenomenon occurring in the education sector)

I’m sure there’s other factors as well such as high legal costs (malpractice insurance) and other things I’m not as familiar with. (Not to mention the fact that the legal costs of trials is probably jacked way up due to the government as well…)

But… is all this “enough” to satisfactorily resolve a “Christopher Reeve”-like scenario involving a poor person rather than a rich actor? Or will someone with a “pre-existing condition” have to pay such a high price for insurance that they can’t come close to affording it? What happens when an insurance company tries to drop someone because the cost of their treatment is too high? The healthy would certainly not have a problem affording coverage in a fully free market system, but I have trouble picturing what would happen to the chronically unhealthy vs someone otherwise healthy with some resolvable issue.

I have a feeling that history (as it often does) has the answer to this problem, but I’ve yet to do any research on the topic. I’d be curious to hear what others have to say regarding the most extreme medical cases, “worst case scenarios”. I’m not sure “charity” is going to be a sufficient answer, but perhaps history can prove me wrong on that count?

16

This is an impossible criterion to even measure. What is sufficient? Due to the reality of scarcity, to the naked eye of the untrained economist, it will always seem that some people are deprived relative to others. They will always relate to only what they see with their own eyes.

I can convince you that if we had a free market and “Chrisopher Reeve” like scenarios would not only entail much much lower costs for the type of treatments he has received in the past, but also more and better treatment with better outcome. But there will always be expensive cutting edge treatment that not everybody will be able to afford. To the naked eye, this will always appear to be a failure of what you describe since you can imagine that at the present conditions, confiscating the wealth of healthy and wealthier people can make these things more affordable.

So your quest for historical evidence is meaningless and can provide nothing.

The free market solves the economic problem of scarcity. Socialism doesn’t. And Interventionism simply hampers the market and creates artificial scarcity, while paving the way, in incremental steps, towards Socialsim.

So we don’t need to prove anything by relating to historical evidence.

17

I’d say opening up the market will give more money to the people in general. That will make things cheaper for sick people. Charities always will and always have exist. Giving more money to general population will make some people want to give their excess cash to charity.

18

19

This is more to just health care in general but… a comment I saw:

"I think the greatest issue in health care is not who can accuse whom of being more vile and wicked, but rather what policy decisions will lead to the greatest net increase in social welfare.

Although health care is a complex problem, it is a problem of optimization like any other. Various constraints exist and the goal is to elicit the most beneficial outcome.

Markets are generally efficient in theory, but a major concern in health care is if anti-competitive or exploitative behavior is occurring on the part of pharmaceutical and insurance companies. This is of great concern because health care is not an industry from which utility only is derived, but also livelihood.

The problem is further confounded by the fact that individuals with poor health have poor productivity. Productivity loss over something as simple as smoking can amount to billions of dollars a year.

Thus, it is in our national interest to try to have a populace that is as healthy as possible. One answer is “remove all regulation and let the market do the work.” This is an attractive answer, but you must determine if the current political and social institutions and landscape can accommodate such a solution - and the general consensus is no.

Of course the theoretical disadvantage of a government run health care program are clear (deadweight loss in the industry), a fundamental principle of economics is that sometimes government intervention can lead to better outcomes. A clear example is the government intervening to protect things such as property rights and facilitating easy entry for firms into an industry.

I’m not particularly well-versed in the health care industry, but I can assure you that the same principles apply. Of course, political pressure complicates the matter severely with interest groups, but the simple question of “what is best?” is easy to answer, given that you are explicit about what variables you are trying to maximize (in this case, total health care provided and equal access to it, to an extent)."

It’s rather vague to me. Just seems to be skirting around the issue. What do you all think?

20

My response was this:

"A government powerful enough to protect property, is certainly powerful enough to take it away. See: eminent domain. Not to mention there really isn’t private property in the United States. We lease our land from the government.

As for health care; I agree that people need to be healthy for care to be its cheapest. However, why should the government be at liberty to force people to be healthy? Just as it is with health care coverage (or lack thereof), the people should have their choice in the matter. It should be up to them what they consider healthy, not a panel of politicians or “experts”, and whether or not they want to be.

The problem lies in people who want coverage, but cannot afford it (which is a relatively small percentage of the people uncovered currently, hence the huge opposition to the health care bill in America). Among other things, I think health insurance should be much like car insurance. Unless you want to pay huge premiums, you’re not covered for the most unlikely of occurrences. At the same time, you’re not covered for things such as gas, or oil changes. Why then should health insurance cover routine doctors’ visits, etc?

Government regulation has allowed insurance and pharmaceutical companies to become the evils they are. So I fail to see how more regulation could help.

If companies so wish, they should be allowed to force people under their plans to have an annual doctor’s visit. High cholesterol? Premiums up. Smoker? Premiums up. High blood pressure? Premiums up. Obviously pre-existing conditions should be exempt. If people don’t like that, they can move to a different company, or skip having insurance altogether. Under a government plan, that would be impossible.

These changes, among others such as opening up interstate competition, would help keep costs down. Also, the hand in pocket relationship between pharmaceutical and insurance companies with the government would need to be stopped."