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Guest opinion: Stop hoping for market-based solutions to health care

Oct 15, 2019 | Blog, Health Care | 0 comments

By Joseph Jarvis Oct 10, 2019, 11:00am MDT
For the Deseret News

In an article published by the Deseret News, “The Christian case against socialized health care,” Kelsey Dallas reports about a perceived debate between Christians who support government provision of health care and “Christian opponents of ‘Medicare for All’ (who) place their hope in a free market.” This debate, as in the title of this article, is often characterized as contrasting socialism with faith and free markets. In fact, one of Ms. Dallas’ sources referred to “the gospel of free enterprise” as the proper pathway to solve health system problems. What’s absent from this simplistic profile of health reform is any serious effort to understand whether health care is a commodity that actually fits free market prerequisites.

Health care is not a commodity that can be efficiently distributed by a market. A market exists when a completely informed buyer can freely choose to enter into a transaction with a self-interested seller without any positive externality. Market efficiency is demonstrated when demand rises as price declines. None of these conditions exist within the health care sector.

A) Buyers of health care lack clinical knowledge (no caveat emptor) and are not free to decide whether to purchase health services (especially in urgent settings).

B) Sellers of health services are not supposed to act in their own self-interest which is why society does not tolerate physicians and nurses whose greed preempts the best interests of their patients.

C) Positive externality refers to a situation when someone other than the buyer or seller has a legitimate interest in the outcome of a transaction, such is the case when the general public has an interest in assuring the best care for a patient with a communicable disease. We have massive infusions of tax dollars into health systems because of positive externalities.

D) The inverse relationship between price and demand does not hold for health services. No one ever bought an appendectomy because it was on sale. Nor has demand for insulin decreased as the price has recently skyrocketed. Demand for health services is determined by epidemiology (the frequency of disease and injury), not by price.

Lack of accountability in our health system is not a market failure, since health care is not a commodity efficiently distributed by market forces. Rather, lack of accountability in health systems is a social failure. To spuriously label proposals to universalize public funding of health care “socialism” ignores the facts about health system financing. Public funding, including employer health benefit tax credits, easily exceeds $2 trillion each year, or about two-thirds of American health care funds. Americans tax themselves more for health care than do the citizens of any other nation. What we haven’t done is assure that these public funds are wisely used.

To pretend (or hope) that health care problems will be solved with market strategies is not just unwise, it is also the cause of health system failure. When we pretend that markets will remake health care, we create perverse incentives in health care delivery through which doctors, hospitals, insurers and all other sellers of health care goods and services optimize profit by rendering poor quality care in an inefficient manner. We can’t fix this until we stop scaremongering about ‘socialized’ medicine and start recognizing that market forces don’t work in health care. So let’s find health system solutions that encourage efficiency and high quality. When we do, health care costs will come under control.

Dr. Jarvis is a public health physician and the author of the book “The Purple World: Healing the Harm in American Health Care.”