Markets and Health Care

First principles. - promoted by charley-on-the-mta

Republicans and conservatives have long argued that free markets are the panacea for health care.  (for that matter, they argue that free markets are the panacea for just about everything)  I recently replied to a column written by a well known journalist who supported this approach to fix the problems with the Affordable Care Act.  My argument in support of the elimination of markets was due in large part to the economic principle of inelastic demand.    (my reply is the first letter in the list of letters)

In the comments sections, and in an email I received from the journalist in reply to position against markets, there is one standard reply in support of markets and it is this:  ”Market economics have proven remarkably productive, flexible, and innovative when it comes to food, clothing, and shelter. Food is even more essential to human life than medical care, and yet no one imagines that “it is time to take the delivery of nourishment out of the market.”   And from others: Is food a right? Water? Clothing? Housing? Because without those things you wouldn’t have to worry about healthcare…you’d be dead. We need those things every single day and yet they’re very available, affordable, accessible, etc. For both rich and poor.  Some will ask, “If the government has to give us medical care, what about food?  Food is essential to life. Should food be free?”

To the question, “Should food be free?”  I say, “yes.”, but a well qualified “yes”.  If a citizen is unable to provide themselves with food, or clothing, or shelter, yes, the government needs to step in and provide food, clothing, shelter, or medical care – At NO fee-  until such time as that citizen can provide for themselves.  The government gives free shelter to its citizens when there is a wide spread power outage and the only safe housing is a local school gymnasium.  There are countless examples of where the government freely gives food, water, shelter, clothing, and more, because of the citizen’s inability to obtain this from a market OR when the market cannot meet demand.

In addition to the principle of inelastic demand, as to why free markets are not the “fix” for health care costs, I will explain why health care is different from food, clothing, shelter and ought not be placed in the market.  As I said to one person, “I can grow my own food, build my own shelter, weave my own cloth. When I can perform my own heart bypass, I will concede your point”

In 1900, the average American spent $100 (In today’s dollars) a year on health care.  $100 a year is not a lot of money and so, as with clothing, food, shelter, most citizens could buy it  on their own, without the help of government, and for that matter, without the need to purchase health insurance.  However, in the late 1800′s and into the early 1900′s, fantastic advances in medicine were made.  From vascular surgery, to anesthesia, antibiotics and more, medicine exploded with options to help treat, cure, and repair many physical ills that beforehand were either a death sentence or life long agony.

In 1900, the average American’s health care cost $100 per year.  Today, that figure is over $8,000.  It is important to point out that $8,000 is an average.  Most citizens are in need of far less than $8,000 but some citizens will need much much more at one time or another.  Heart bypass surgery typically costs about $70,000-$200,000 or more, and heart valve replacement surgery typically costs $80,000-$200,000 or more. If we were to budget the total cost to support two individuals from birth to death, we could easily calculate how much each would need in terms of food, clothing, shelter.  We all need about 2,000 calories a day, and so on.No citizen is that much different from another with regard to food, clothing, shelter.  However, it is impossible to say, with certainty what medical treatments either person may require.    It is also foolish to assume that most anyone could or should save money for heart valve surgery or chemotherapy.

As I noted earlier,  if a citizen is unable to provide themselves with food, or clothing, or shelter, yes, the government needs to step in.  The same is true of health care.  Given that the cost of health care is potentially so high that few citizens could ever afford it on their own, and given the reality that only a few will need very expensive treatments – but we do not know who among us that will be- it is only rational, equitable, and moral that our government provide medical care to its citizens in same way it provided that school gymnasium to the local citizens in need who could not provide for their own shelter.

Or, is the Republican conservative reply to those citizens to “buy your own school gymnasium” in the free market?




6 Comments . Leave a comment below.
  1. I think most people don't realize...

    …how heavily subsidized on the supply end our food already is. Of course there is such a thing as food stamps for people who need the assistance, but the other difference is that most people don’t risk bankruptcy by a trip to the supermarket, whereas they do for a trip to the hospital.

  2. Market Failures

    The health care market is also subject to an important market failure that those others are not: the lack of information for consumers to make informed choices. Those of us who have tried to contact insurance companies (or even the health care providers directly) to try to get a sense of how much a service will cost know what I’m talking about. It’s not easy. Unlike comparison shopping for a loaf of bread, a pair of pants, or an apartment, the health care market and associated costs are so opaque as to make it operating as a normal market next to impossible.

    • They don't know themselves

      Reimbursement rates vary from hospital to hospital and company to company. Part of the obscene costs cited for out of pocket costs is based on having to make up for government reimbursement rates which are often less than the cost of care for supplies let alone associated administration and salaries.

      Nursing home care doesn’t really cost $11,000 a month – that’s just what they charge to make up for the 0.033 on the dollar that Medicaid pays after you artificially impoverish yourself to stick the bill to the taxpayers, just like Greg LaPierre hypes.

  3. Market has had a doubt edge sword with food production...

    Yes, we grow it faster, cheaper and more abundantly. But at the cost of feeding us processed foods designed to be addictive by using salt and sugar, thereby making us unhealthier.

    Which brings me back to a point I first made in 2008 during he ObamaCare debate… why all the talk and focus on health insurance instead of health and the cost drivers in health care? If we focused on stopping the explosion in diabetes and obesity due to the crap the food industry feeds us, we’d actually solve the problem.

    • Food production

      …very interesting how we take a raw product, remove much of the good things contained in it, add bad stuff to it, and then sell it for more.

      It’s a lot of marketing. It’s also a lot of pressure from some in society to denigrate cooking as a chore, a waste of time, “woman’s work”, drudgery….

      All this adds up to big profits for the wealthy class and an abundant (leading to low cost) labor pool.


    who doesn’t care if I die than a corporate one whose job depends on it.

    Fred Rich LaRiccia

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Wed 26 Apr 5:50 AM