Libertarians: Got any good rebuttals against this blog's take on free market health care?

[Brian Defferding]

http://allbleedingstops.blogspot.com/2011/04/why-patients-are-not-consumers.html

The blog, while I disagree with it, is pretty concise, articulate and empty of snark. What are your thoughts on it?

[JamesButabi]

The problem is that he assumes that we have a free market in Health Care. Nearly all facets of the medical industry have monopolistic features and combine for inefficiency with cost and supply. AMA, FDA, HMO, MEDICARE/MEDICAID the list goes on and on. How often do people pay cash for medical service any more? How restrictive is it to receive a doctor's license?

You can't remove nearly every facet of the market and use that as the example of innefficient cost structures. Look to our history and the progression of medicine. It hasn't always been like this, and his points don't stack up historically. It was the dilution of market forces in the system via government intervention (asserted as a right) that caused prices to become out of control.

[HOLLYWOOD]

Big Health Insurance
Big Corporate Hospitals
Big Pharmaceuticals

They own the politicians and agencies... RICO laws should apply to all of them, but it's one big fasco-corporatist conglomerate. The people will also pay the price no matter what part of the duopoly is control.

The prefect 'Lab Experiment' was the 2007 Cheap Import Drug Act... that bought and paid for Republicans killed in the US Senate. FDA recieved a $350 million payment to "ASSIST" in "MAINTAINING" Drug safety.

[ChaosControl]

Well health care is an inelastic cost, so I think he is right in saying that having more "skin in the game" isn't going to dramatically affect costs. It may yes affect the optional procedures, but not the life or death or overall major quality of life things.

That isn't to say though that the government, and insurance companies and hospitals, aren't responsible for the increase in costs. Again I think the best course of action is decentralization and competition. There needs to be more competition among hospitals, among doctors, and among insurance providers. The author is just looking at it from the different angle than it needs to be looked at. The issue is lack of competition among providers, or too much collusion among providers. I think a free market could lessen costs as a freer market would provide the conditions to increase competition. The issue I think is probably the demand for health care has gone up so much, but the supply has not kept up with the demand, along with the collusion, so prices increase at a far higher rate than normal.

Edit: This is an easy topic therefore to separate two different types of thinking among "right wingers". Those who think the problem is an issue of the consumer vs those who think the problem is the issue of the environment. I think most of us realize the environment is the problem, but those like Paul Ryan, as the op points out, think it is an issue of the consumer.

[Brian Defferding]

The problem is that he assumes that we have a free market in Health Care. Nearly all facets of the medical industry have monopolistic features and combine for inefficiency with cost and supply. AMA, FDA, HMO, MEDICARE/MEDICAID the list goes on and on. How often do people pay cash for medical service any more? How restrictive is it to receive a doctor's license?

You can't remove nearly every facet of the market and use that as the example of innefficient cost structures. Look to our history and the progression of medicine. It hasn't always been like this, and his points don't stack up historically. It was the dilution of market forces in the system via government intervention (asserted as a right) that caused prices to become out of control.

That's a good point. His example he uses does not apply logically to his theorem.

Also he ought to look at what happens when the government assumes services as a subsidized loss, it then turns into forced rationing and limited care anyway. He also assumes those in charge of the funds (the government) will apply funds appropriately in a manner that would competently contain costs. Has Medicare done that? Reality says no.

[Travlyr]

Free market principles would indeed reduce costs significantly.

My doctor charges $25 for an office visit. He is in a small town where overhead costs are minimal. I had to have a very minor skin 'procedure' taken care of, and it only cost me $50 more the same day... for a total of $75... and he has over 40 years experience.

The blog author is wrong on all three accounts. Health care costs are extreme now because fiat money distorts actual costs in favor of the privileged class who are 'covered.' Before fiat money was forced onto the people, health care costs were affordable. After the fiat money system collapses, health care costs will again be affordable.

[zerosdontcount]

Yes it's the myth of free market healthcare. http://mises.org/daily/5066/The-Myth-of-FreeMarket-Health-Care

[Epic]

Number one is just not true. Most medical care is not emergency care. It's simply a fallacy.

But it's missing the point. The comparison shopping on the consumer's end in a free market would be for an insurance company, which would already have deals with various places of medical care. So its done before anything happens to the person.

[fisharmor]

My reply:


"health care costs are driven by medically necessary procedures"

Not in most cases! I'm paying $800 a month for family health coverage. The "insurance" company is mandated to cover certain procedures - like chiropractor visits and speech therapy, and a bunch of other services we get regularly which we *could* pay for, if we weren't spending $800 a month on an unnecessary layer of bureaucracy. Plus, in some cases we're told *point blank* that there is one price for insured patients, and another lower one for uninsured.

"there is good evidence that arthroscopy of the knee provides no more benefit than placebo"...
"The functioning of a free market is dependent on the ability of consumers to vary their behavior to force suppliers to compete."

Do you not see how you nullified your point by first admitting that doctors push potentially unnecessary procedures? They know that "insurance" will cover the procedure. Whether or not it will actually help is beside the point, if the consumer has no "skin in the game". If "insurance" didn't cover it, the IMMEDIATE question is "what good is it going to do?" If the answer is "not much", then how is the doctor going to get the consumers to part with their own money? Perhaps he'd actually have to come up with a solution?

If insurance ONLY covered catastrophes, you'd see this start to happen. The majority of health care costs isn't in open-heart surgery. Insurance should cover that- and market-based insurance would. Insurance should not cover ingrown toenails- and market-based insurance would not.

"And the number of recreational colonoscopies performed is actually very low."
True - because most people prefer to take the risk, as opposed to getting a yearly roto-rooter. This exemplifies how medicine's market restrictions make it unable to meet demand. It's the 21st century and people should literally be getting star-trek exams of their bowels, but instead we're stuck with a decades-old procedure that keeps getting more expensive. Let the market determine how to do it, and having a camera shoved up your rectum will quickly become obsolete, because the market will determine a more patient-friendly way that will *sell more exams*.

[tangent4ronpaul]

Big Health Insurance
Big Corporate Hospitals
Big Pharmaceuticals

You forgot the ambulance chasers


Health care costs are extreme now because fiat money distorts actual costs in favor of the privileged class who are 'covered.' Before fiat money was forced onto the people, health care costs were affordable. After the fiat money system collapses, health care costs will again be affordable.

Not accurate. Inflation adjusted, a doctors office visit should cost $24.70 in inflation adjusted dollars. Instead health care costs are 10 fold of “normal” inflation. Medical inflation is less than 3 fold, insurance premium inflation vastly outpaces that. There are other factors.


Yes it's the myth of free market healthcare. http://mises.org/daily/5066/The-Myth-of-FreeMarket-Health-Care

AWESOME writeup! - but his insurance co profits chart is off base and he's missing a lot of stuff.


My reply:

Plus, in some cases we're told *point blank* that there is one price for insured patients, and another lower one for uninsured.

Ponder this from a provider I've been corresponding with....


I could set up a cash practice with simple charting and see patients for $30, less without malpractice liability.
[...]
for a follow up visit level 3 we get about $40 from most insurance. they make us bill out at $136.50 so you can see the savings. Any cash pay must pay the 136 price per the insurance contract to be able to be a preferred provider.

new patient bills at $315 for a level 4 visit. We get about $80.

the only reason we do ok is additional charges like:
joint injections $182 = about $80 (lots of liability)
casts $200 = $130 again lots of liability.
x-ray $60 = $50 required in ortho but slows down the office a lot.
Surgery averages at $1200 not including the hospital and anesthesia fees.

before you start adding that all up remember overhead is about $200 an hour.

many patients are no pays we are obligated to see due to taking call at the hospital to cover the uninsured that the hospital is required to see per fed law. So .... we get 3-4 payers an hour.
you can see how primary care without all the procedures gets killed.

I see my last pt at 4:30..... then I chart untill 6pm
yeah I will see you for $30 If I dont have to chart your life story to get billable points for the insurance co or for liability reasons. I spend about $3000 a month on the hated charting alone.

The stat's I've seen say the average profit is 20-30% of premiums. One insurance co threatened to pull out of a state (they were the only one) if they couldn't get 40% profit.. I believe it was Maine. The Obama Admin caved on their max 20% profit and gave them a pass on Obamacare for this. Now consider if that is 20% of what they pay providers or 20% of what is "billed out"...

HUGE DIFF!

-t

[acptulsa]

Tell him to go to his doctor's office and ask them if they accept cash patients. Ask them if they charge special rates for cash customers, and ask them if they're evading his answer because they're afraid he's going to report them to Medicare for having a paperwork-heavy price and a paperwork-light price. Then ask him if maybe this is why health care costs have outstripped regular inflation many times over.

[juleswin]

Free market principles would indeed reduce costs significantly.

My doctor charges $25 for an office visit. He is in a small town where overhead costs are minimal. I had to have a very minor skin 'procedure' taken care of, and it only cost me $50 more the same day... for a total of $75... and he has over 40 years experience.

The blog author is wrong on all three accounts. Health care costs are extreme now because fiat money distorts actual costs in favor of the privileged class who are 'covered.' Before fiat money was forced onto the people, health care costs were affordable. After the fiat money system collapses, health care costs will again be affordable.

Rubbish. The healthcare is still expensive even if you are paying in gold/silver or whatever

[fisharmor]

many patients are no pays we are obligated to see due to taking call at the hospital to cover the uninsured that the hospital is required to see per fed law. So .... we get 3-4 payers an hour.

Yeah, there's also the point that if you work with the collections industry you learn all sorts of neat things.
Like how anything under about $100 that you go delinquent on, you send a couple form letters to the collection agency telling them they're legally obligated to go jump in a lake (google "FDCPA dispute letter" if interested), and then they send it back to the original creditor with their hands in the air and a look on their faces like "What do you expect me to do on this for $10 commission?"
The creditor isn't set up to do anything about it... so it gets written off.

Couple years ago my wife had something like $1200 in lab work that got rejected by our "insurance" company.
It was a bunch of small amount services.
I called up the lab and talked to them, and the lady on the phone couldn't even give me a total outstanding balance without adding them all manually.

I called the insurance company and let me tell you, that was thinnest veil of courtesy I've ever experienced while being told to go fuck myself.

We didn't pay, because a) it actually was the insurance company's obligation, b) I knew nothing would happen if I didn't, and c) I knew the system already accounted for no-pays in the base price of the service. I had already paid for those labs in the extra cost I paid for every other lab that's ever been done.

[Travlyr]

Rubbish. The healthcare is still expensive even if you are paying in gold/silver or whatever

Not really rubbish. Before fiat money distorted the markets ... health care was affordable. Free-markets work.

My mother spent 6 months in Children's Hospital after having to undergo brain surgery in 1938. My grandfather paid for the surgery and the hospital stay out-of-pocket. It took him a few years to get it paid off, but he did it and he was a widower at the time.

[Stary Hickory]

How many millions of pages of laws are on the books concerning health care? There is no free market in health care, he is being disingenuous he has made a good argument for why intervention in the free market is ludicrous however. You could plot a graph with one side being health care costs and the other side being pages of health care legislation passed.

You would see as legislation passed health care costs rise.....there is no free market and people like this should be challenged to prove how it is a free market. The less freer the markets got the more costly it became to get treatment. A perfect argument for why intervention does nothing but destroy everything.

[juleswin]

Not really rubbish. Before fiat money distorted the markets ... health care was affordable. Free-markets work.

My mother spent 6 months in Children's Hospital after having to undergo brain surgery in 1938. My grandfather paid for the surgery and the hospital stay out-of-pocket. It took him a few years to get it paid off, but he did it and he was a widower at the time.

Theres some true to it but I think the majority of the reason why we are having inflated healthcare prices is because of the healthcare policies we have enacted in this country. Think of cell phones or say internet services where we have seen far less regulations, the prices are still affordable even with the fiat currency. That is why even when paying with gold, it still inst affordable

[Travlyr]

Theres some true to it but I think the majority of the reason why we are having inflated healthcare prices is because of the healthcare policies we have enacted in this country. Think of cell phones or say internet services where we have seen far less regulations, the prices are still affordable even with the fiat currency. That is why even when paying with gold, it still inst affordable

True. But it is not a free market today, at all. The health care industry is a controlled market and it has been controlled since the 60's. All current prices are totally distorted and un-affordable under the current regulations.

[Brian4Liberty]

A few small tweaks like Paul Ryan has proposed will not solve our Health Care cost crisis. A true free market would work, but we are further from a free market in health care than we are from a deficit-free and debt-free Federal Government.

[tangent4ronpaul]

completely agree w/ the last 2 posts!

[NYgs23]

He admits that free market allocation is efficient generally speaking: "It's undeniably true that markets do work in this way, most of the time. The auto industry and the fall of Detroit is a perfect example of the invisible hand at work."

But the medical industry is different, he says. He gives three reasons why:

1) Health care is generally not a refusable or elective service.

That's incredibly simplistic and not true at all. There are countless medical services you can refuse or substitute with less expensive services. It's not an either/or question--health care or no health care. Checkups are certainly elective, as are many kinds of "life enhancing drugs" we use.

Indeed, we use too many powerful drugs now. We opt for the most expensive drugs over much cheaper ones that are almost as effective. Doctors also subject patients to batteries of unnecessary tests and perform more expensive, more invasive surgeries, when cheaper, less expensive alternatives would be just as or almost as likely to solve the problem.

This is largely because medical consumers have been divorced from the direct costs of all these services and so do not price shop, not even for far less expensive, but nearly as effective alternatives.

2) There is an asymmetry of information

The same could be said about any other industry, including car manufacturing, in which he admits the market works. It's also true--even more true--with government. There is huge "asymmetry of information" between the government and its subjects. So how would allowing the government to control the industry solve this problem? Only if you trust the government, placing it in a category apart and above everyone else.

3) Purchasing power is concentrated in the hands of a very small number of "consumers"

He says the health care market is dominated by a few people seeking help for serious and very expensive issues who are not really able to price shop. Everyone else can but don't have much affect on the market. I don't accept this. It's true that, even in a free market, catastrophic health issues would need to be covered by insurance.

But the prices for non-catastrophic medical services--checkups, medicines--is vastly overinflated and this is due to government intervention and a third party payer system, even for those less necessary things. Were people to purchase their own medicines in a free market this would deflate the costs of medicines. That would help people with serious medical issues, as well as everyone else. It would also deflate the costs of insurance premiums is insurers are no longer covering everything but only serious medical issues. Oh, and removing laws like state trade barriers and other regulations for insurers would over greatly lower premiums too.

And, as I said, we currently overuse treatments like invasive surgeries. Take heart bypasses, for example, which he mentions. Many, if not most people, who get bypasses don't really need them. They are prescribed by doctors at the drop of a hat because the doctors make money off of them, without it costing the patient anything directly. Bypasses probably would still need to be by insurance in a free market but in a competitive free market insurance industry, insurers and their clients would be better able to distinguish between truly necessary bypasses and unnecessary ones, which they cannot do in a system in which we presume that everything must be covered.

[tangent4ronpaul]

Indeed, we use too many powerful drugs now. We opt for the most expensive drugs over much cheaper ones that are almost as effective. Doctors also subject patients to batteries of unnecessary tests and perform more expensive, more invasive surgeries, when cheaper, less expensive alternatives would be just as or almost as likely to solve the problem.

This is largely because medical consumers have been divorced from the direct costs of all these services and so do not price shop, not even for far less expensive, but nearly as effective alternatives.

Americans do use more drugs than any other nation and many are not needed.

We pay 5 times more for drugs than most of the world - thank regulations and price gouging. And sometimes the less expensive ones are more effective than the expensive ones - case in point prilosec (generic) vs nexium (Rx)

It's largely impossible to price shop - prices are generally not available.

[BarryDonegan]

The first glaring error is saying that health care services aren't elective and that you can't perform consumer checks as a result. Whether or not an item is elective has no effect on the existence of competitive market forces or consumer checks and balances or else the same would be true with food. Furthermore, much of the healthcare industry is elective because you can choose or not to go to the doctor for a vast majority of minor to moderate illnesses. I, for example, elect not to take antibiotics or really medication at all unless I have a fever worthy of going to the hospital(severe to the extent that it may be a sign of something fatal) or some kind of illness with a non-anomalous mortality rate. That aspect is elective, and whether or not something is elective has no effect, nor has anyone demonstrated how that could have an effect, on whether or not competition can drive prices down in the marketplace. Plenty of goods aren't elective and still go down in price as more providers enter the marketplace.

[Teaser Rate]

I don't think I can argue with any of the author's three points. He's right that health care does have an inelastic demand curve, that there is a an asymmetric information problem and that the majority of costs are driven by a minority of consumers.

However, I don't believe that conceding those points necessarily implies that I'd jump at the conclusion of universal coverage or more government involvement. There are market solutions to market failures, and I think it's more useful to focus on finding them than to argue about proven things like the elasticity of demand.

[Brian Defferding]

I don't think I can argue with any of the author's three points. He's right that health care does have an inelastic demand curve, that there is a an asymmetric information problem and that the majority of costs are driven by a minority of consumers.

What should be noted, though, is that many think that inelastic demand curve therefore means patients are entitled to the highest, most expensive form of medical care. And not even the most socialized of health care systems can feasibly work like that, they ration it out and have a lottery system in place, because their resources are limited. A purely private market works within its means, and that does not automatically mean it must be for profit. Non-profits work all the time, but our government has the health care system set to where it's either a loss/gain.

[fisharmor]

Big surprise, he didn't allow my comment.
Shows you how far medicine has fallen. They don't even understand that most people don't like strangers shoving things up their asses, and can't comprehend that coming up with a better procedure is about as basic as customer relations gets.

[Brian Defferding]

Another point worth making: Japan is a country that has a mostly-government-funded health care system, and clinics/hospitals are strictly non-profit. But yet they are forced to raise taxes recently to support it (http://trojanhealthconnection.com/2011/01/04/rising-cost-for-elderly-a-problem-for-japan%E2%80%99s-universal-health-care-system/). Guess what they cited for the main reason? The elderly, which is the demographic that uses the most expensive medical procedures. After taxes are raised to fund it, will that solve the rising costs issue? I doubt it. I think costs will continue to go up again, and taxes will need to raised more, goods and sales will start seeing diminishing returns. Rinse, repeat. Eventually we will start seeing the law of diminishing returns appear.

If a purely private system supposedly "can't work" because the most expensive procedures are not profitable, then I hate to break it to the person that believes that, but locking the entire nation into a partial socialized medical care system would make rising prices for everyone nothing less than a total certainty.