The difficulties of free market health care

A free market in health care as called for in this video from the Mises Institute would be great, however there are three things that make it difficult:  health care is based largely on crises, competition in the industry is already very restricted and a lot of purchasing decisions are made in highly emotional situations.

Here is a transcription of the last sentence which is the main point.


“If we would just allow the free market to work, if we could eliminate the third-party payer system, the government subsidies on the expenditure side that drive prices up there’s no reason why a truly free market in health care goods and services couldn’t be just as effective in the U.S. as the market for computers, the market for software, the market for automobiles or the market for anything else.”


One of the things which distinguishes health care from computers, software or automobiles is that health care is largely based on  crises.  Generally most of us seek health care services for an emergency.  We go to a doctor because he/she has specialized knowledge that will help us out of the crisis.  This of course gives the people in the industry a great deal of power over us and creates potential for exploitation.

We go to a doctor for the specialized knowledge but we also go because doctors have a legal license to prescribe the magic pills that sometimes cure us or limit the symptoms of our illness.  To me a free market requires perfect competition   One of the ways the health care industry uses its power to exploit is to get governments to pass legislation which restricts competition.  Governments restrict competition through licensing, copyright and patents all of which are very  much a part of the health care industry.

The third factor which makes the health care industry different from  others is the deep emotions involved with injuries, pain and end of life.  When we purchase health care we are often experiencing deep emotions.  Once again this creates potential for exploitation.

So, how do we deal with the health care industry and how do we ensure everyone has proper access.

If we  were all perfect people we would reduce the demand for health care by living a healthy lifestyle.  We would also all manage our finances so that we always had funds available for emergencies.

As we are not all perfect then insurance, a third-party payer,  becomes an option to consider.  But most of us think and act mostly for the short-term and insurance is expensive and for the long-term.  For me this leaves a dilemma.  I don’t like the government saying we have to have to purchase insurance but neither do I like to see people suffering although I believe ultimately most of us have to take responsibility for our actions.

The man from the Mises Institute says “if we were to allow the free market to work”.  To try this would put us into a power struggle with health care practitioners who benefit from a lack of competition.  In a crisis situation where help requires specialized knowledge, the customer is not always right.

If we do want to take on these guys, then one approach would be to challenge the licensing.  I rather like Milton Friedman’s suggestion of certification rather than licensing.  Certification could be by different agencies and with different standards.  It would be up to customers to check the certification of the people with whom they deal.

In conclusion, it is not clear that a free market in health care is even possible let alone could it be as effective as the markets for computers, software, automobiles or anything else.  Sometimes there are no satisfactory answers.

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