What would a free market health care system look like?

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People accuse the US of having a free market medical care system. If you’re going to accuse someone of something, try to show some evidence.

Our system is hardly free market. We have a heavily regulated, heavily subsidized, heavily limited health care system. I won’t even try to show the ways our system is not a free market, so let me show instead what a free market system would look like.

First up, medical professionals. Where would they come from? What training would they have? At the very least, the government would have nothing to say about it. Anyone could start a medical college. Anyone could call themselves a doctor. There would be no restrictions at all.

How would you tell you are seeing a doctor who knows what they are doing? The free market would provide mechanisms to certify the quality of doctors. There are examples of this in the real world, albeit in different industries. You may notice that your electric devices might have a “UL” logo stamped on it. Go to their website to see where that comes from and what it means. It isn’t hard to imagine concerned doctors getting together to form a private company that would certify doctors. I would imagine there would either be one company that dominates the market by maintaining the highest level of professional standards (as UL does) or there would be competing ones reflecting the various philosophies of medicine. IE, chiropractors would have their own certification company, acupuncturists, natural medicine practitioners, etc… each have their own as well, in addition to modern medicine.

Whatever the solution to the certification problem, we would be certain that it would be up-to-date and relevant. If ever the certification company grew out of date or out of step with modern practices, doctors would be quick to remedy the situation.

Certification would extend way beyond doctors. I am sure there would be companies for certifying drugs, devices and medical procedures as well. Right now, we look to the FDA to tell us what is and is not safe to experiment with. I’ve often wondered why we want the one organization we entrust with the power to kill the bad guys to have the same power to tell us what is healthy or not. I would much rather prefer individuals think carefully about what level of medical care they would want to receive, and private organizations certify that level of medicine. With government operating, by force of law, the one institution with any power to declare what is safe or unsafe, we run the risk of people losing faith in that system and having no alternative to turn to. If instead we allowed certification companies to compete, they would advertise, heavily, why their methods are best and their competitor’s lacking, relying on the power of persuasion alone, not force, to convince people of the rightness of their cause. The FDA simply sucks at this.

So, going full free market by removing government restrictions on what is medicine and who is allowed to practice it wouldn’t remove certification programs with strict requirements designed to protect the public. If anything, it would usher in a renaissance of innovation and safety, with not the least of the benefits being that the organizations involved would have to rely solely on persuasion to convince people of the rightness of their methods.

Let’s continue delving into what a free market system would look like.

Next stop, insurance companies. Insurance companies today are heavily regulated. They translate these regulations into onerous requirements that often interfere in the doctor-patient relationship. I can’t think of a reason why someone would want to have a medical insurance policy in a free market system. After all, any insurance policy would, at best, only smooth the spikes of unforeseeable events. If you lead an unhealthy lifestyle, or if you were genetically or culturally predisposed to higher medical costs, the insurance company wouldn’t be able to forgive you for that. You would, of necessity, end up paying more because you cost more. In that system, medical insurance doesn’t seem like much of an advantage.

Nevertheless, those who are risk-averse would probably prefer some sort of insurance policy. In my mind, the kind of insurance policy I would like to have would look more like a disability or life policy. I get paid a lump sum when it is discovered I have a rare disease. The money would reflect the cost of treatment and the loss of freedom or opportunity due to the disease. This is what an actual insurance policy would look like.

That’s not to say that the other function of health insurance policies would go away. Today, health insurance is more of a “health club” membership. Oftentimes, they want you to do an annual checkup or give you advice on how to be healthier. I assume that this function could be relegated to a separate entity that people contract with. I don’t know what that would look like, but I do know that people are willing to pay for actual health club memberships, so it seems natural to extend that to regular medical care as well. Imagine what it would be like if your physical fitness coach worked for the same company as your primary doctor.

One of the reasons why so many people have health insurance is because it is provided by the companies they work for. The reason for this is because government heavily regulates businesses, and all but demands that employers offer health insurance at reduced rates to their employees. In a free market, this connection would be severed. People would compete with each other in a broader health insurance market, if they decided to participate at all.

I think the effect of free market on health insurance can be summarized as follows. One, we would see innovations in what health insurance even meant. Two, we would see innovation in how people choose to manage their health. And three, we would see a broader market with more choices and opportunities, including the choice of not participating at all.

Finally, let’s look at the heart of medical care: The doctor-patient interaction. In a free market system, the only reason a doctor would ever see a patient is because the patient could successfully bid for their time. The only reason a patient would see a doctor is because the doctor offered a price low enough to satisfy them. The price of the interaction would be determined almost completely by free market forces. Doctors would be encouraged to keep their prices very low, slightly above cost, and patients would be encouraged to seek out the best doctors. If prices start to rise, signalling a greater demand for doctors and a diminishing supply, then you’ll see doctors will sacrifice more time or more people will be encouraged to become doctors. At the same time, patients will reduce their consumption of medical services. On the other hand, if medical prices are falling, then patients would increase their consumption and doctors would give less time and fewer people would be encouraged to become doctors. It would all balance out such that the price would reflect the demand and supply of medical services.

I don’t think people realize this, but as it is now, there is little in the way of basic supply and demand interactions, and the prices are not set by market forces. This leads to shortages when the prices are too low, meaning you can’t see the doctor when you want to. It also leads to problems predicting exactly how many doctors we’ll need in the future. But most importantly, since the prices are not set by mutual agreement between patient and doctor, we see all sorts of other inefficiencies and perverse incentives. If doctors and patients alone determined prices, then there would be incredible market forces that would keep prices down by reducing cost and increasing efficiency.

To truly understand what I am saying, consider the smart phone you have in your pocket. The only reason you can even afford such a device is because of market forces. The companies that produce those devices know that if they can lower the price slightly, they can capture more of the market and make even higher profits. In order to lower the price, they look for ways to manufacture the phone even more cheaply, while maintaining some level of quality control. As these same forces play out throughout the entire supply chain, each component and sub-component’s prices gradually fall, and eventually, you get what you have in your pocket.

These same forces can work for us to reduce the cost of the doctor-patient interaction. It can play out throughout the entire medical industry, from medicines to medical supplies, to colleges and certification boards. That is, if we truly embraced a free market approach.

Now, a few final considerations. What of the poor and the needy? The elderly and the sick? One, a free market would keep prices low while keeping innovation high. Thus, poor and needy people would have more medical care available than any other way. The elderly and sick likewise. But as in all cases, capitalism cannot work, and indeed does not work, unless the people are themselves charitable. As has been done countless times in countless ways, a small, voluntary sacrifice on the part of those who “have” is all that is needed to supply all the needs of those who don’t have. However, and this is key, it can only work if there is an oversupply and abundance, and that can only happen in a free market. So the very problem that free markets introduce is solved with free markets as long as people have some modicum of charity in their hearts. Since the American people have proven themselves to be the most charitable in the world, I declare that we should be the first country to truly embrace a free market approach to medicine.

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2 Responses to “What would a free market health care system look like?”

  1. mglennie (@mglennie) Says:

    There is your problem… “we should be the first country to truly embrace a free market approach to medicine”. In other words, there isn’t a single example of free market health care system that works in the world. Yet there are plenty of universal government mandated health care systems that do work, and work well, and at half the cost of what the U.S. pays of their hybrid system with gaps. Go with what has been proven again and again.

    • Jonathan Gardner Says:

      If everyone jumped off a cliff would you do it too?

      It is true that the world today is very, very socialist. This is not by accident. However, socialism still doesn’t work. I don’t know why you think socialist health care systems “work” or why you think they are cheaper (hint: hidden costs are still costs; someone still pays external costs, too).

      What has been proven again and again is that socialism is a complete and utter disaster. If socialism worked at all, Venezuela would be the strongest economy right now. The only thing keeping the US medical system alive is the few parts that are quasi-free market. The same goes for the US economy in general. It has been a very long time since anyone has seen anything close to a free market. The last time I saw a really free market was the internet back in the late 90s and early 2000s.

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