The Market Has a Place in Health Care But It Also Has Its Limits

Every leading health care proposal today includes a place for the market. Some believe government should run it all and then there are those who believe the real solution lies in just letting an unfettered market get it all done.

Health care is not like buying a set of tires. We lose our market-driven objectivity pretty quickly when we are faced with scary medical decisions for ourselves or for someone in our family.

The notion that if you just let an insurance plan rate consumers for their risks, with no rules, is market simplicity taken to the ridiculous.

Two Cato authors recently proposed just letting the market take its course:

"If companies [insurers] can charge more to cover people who are likely to need more care — smokers, the elderly, etc. — then it won't make any difference who does or doesn't buy insurance."

Two of my good friends, Joe Paduda and Richard Eskow, both highly familiar with the advantages and disadvantages of the marketplace quickly pointed out the deficiencies in such a unilateral approach.

From Joe's recent post:

"One of the more puzzling arguments against universal coverage is that advanced by the worthies at the Cato Institute. They argue that if insurance companies could just charge people based on their risk profile, the market would solve the problem of coverage."

This from Richard's recent post:

"The Invisible Hand does many wonderful things, but the notion of the free market as a Universal Solution Machine is closer to theology than it is to economics. The United States has the most deregulated and privatized health system of any OECD country, and we also lag in virtually all major health measures. Don’t think there’s a correlation? Then you have an argument to prove. The Cato authors don’t succeed."

Joe's full post: 'Free markets' in health insurance just don't work

Richard's full post: Daydream Believers: Libertarians and Healthcare

If it's raining where you are this 4th of July, their posts are worth a read.

Have a safe and fun holiday.

My take on the right mix of government and private markets: There is a Health Care Reform Plan That Doesn't Duck the Big Issues--and More Than 100 Heavyweight Stakeholders Support It!