Comments on: Can a free market in health care really exist?

By: jsmith

jsmith — Sat, 05 Sep 2009 15:43:54 +0000

Med student, I’ve been a family doc for 20 years and I do favor universal HI. Positive externalites certainly exist in HC (if everyone had HI my professional life would be easier, for one!), but, at bottom, economic arguments can be given on either side of the issue and the main argument for universal basic HC is a moral one. HC economist Uwe Reinhardt agrees. You might be interested in what he has to say: http://www.pnhp.org/news/2009/april/statement_of_uwe_e_.php

By: Evinx

Evinx — Sat, 05 Sep 2009 04:10:17 +0000

@Med Student
Your argument is simplistic – govt should do something. You fail to see how govt DID the somethings that have caused the problem. Bottom line: I suspect if you were a Congressman, you would have voted for HR3200. Am I wrong?

By: Medical Student

Medical Student — Fri, 04 Sep 2009 22:17:13 +0000

Evinx,
To be honest, I’m beginning to believe that you’re not reading what I’m writing. My blind faith in government reminds you of a religious fundamentalist? My point has always been that, just as other markets need regulation to prevent monopolies and externalities, the health care market needs the same. Think about the natural monopolies and externalities in the health care market… now think about how to prevent them. I’m not arguing for a specific plan, just a concept that should be obvious. A deregulated health care market is not the solution to our problems.

Jay,
I see what you’re saying in theory, but I’m afraid it doesn’t make sense in practice. You’re talking about private ownership of the ozone layer? A more sensible answer is to enact a cap-and-trade system, I think. How would your idea apply to the externalities of the health care market?

Jsmith,
Thanks for the clarification on pareto efficiency. Do you think that mandating and subsidizing health insurance is analogous to mandating and paying for K-12 education with respect to the externalities of those markets? In both cases americans outside of the respective markets are benefited by living in a healthy and educated country, and harmed if they live in a sick and uneducated country.

By: Evinx

Evinx — Fri, 04 Sep 2009 22:15:22 +0000

@Jay
Your are very right – in fact, that is what happened with trees. For years, there was the concern that we would chop down all trees and then there would be no more. Didn’t happen. Why? Just like you siad. The large forestry companies needed to establish comprehenisve re-planting programs; otherwise, they were going to disappear. So they did and the result has been more, not less.

By: Jay

Jay — Fri, 04 Sep 2009 21:23:32 +0000

Medical Student.

The tragedy of the commons comes when property lacks an owner or is owned by “the collective”. I stated above that under property rights based systems protection is built in. In a system of ownership the tragedy of the commons is avoided because there is no commons. This is why we do not worry about the extinction of cows but we worry about the extinction of whales. when things are owned they are protected. The stumbling block is switching from a system of current collective ownership (tragedy of the commons) to a system of purely private ownership. Make sense?

By: Evinx

Evinx — Fri, 04 Sep 2009 21:11:57 +0000

@Med Student
Let’s not be purists. We are going to have Some regulation – everyone knows that. The question is What Regulations?

You say you want more regulation so the market can be more free. I tink that is called a non sequitor. You offer no specifics. Come on, you know full well, its all about details and policies.

Do you favor allowing insurance companies to sell accross state lines?
Do you want community rating?
Do you want to mandate every person in the USA buy or be given health insurance? What about HSAs?
What do you propose to do about people who do not buy health insurance even though they earn enough to pay for it (like the 14% who fail to buy auto ins)?
What about illegal aliens? If you give it to them, what about the externalities in terms of promoting more illegal immigation? If you do not, what about the externalities of them still going to ERs and having hospitals eat the cost? And what effect will this have on litigation?

You remind me of the traditional religious who believe God will take care – only you seem to be saying Govt will take care. The fact is neither will. We need a system where we can take care of ourselves and help those who are too incapacitated to do so for themselves (but not those unwilling to do so).

By: jsmith

jsmith — Fri, 04 Sep 2009 20:07:29 +0000

Med student, Pareto efficiency refers only to market participants. It says nothing about whether a given transaction affects the outside world. Externalities, by definition, are things that affect market non-participants. So a perfectly competitive Pareto-efficient market can have no externalties, positive ones, negative ones or both positive and negative ones.
But wait, it gets worse. The Wikipedia article on free markets seems to suggest a free market need not be competitive (Ie need not be free of monopoly or monopsony power). It says the essence is no gov regulation or intervention. I’m sure others have their own definitions, hence the reign of confusion on this topic.

By: Medical Student

Medical Student — Fri, 04 Sep 2009 18:45:16 +0000

Jay,
Without regulation the free market does not have built-in environmental protections. This is a well-known fact, it’s called the tragedy of the commons. If profit can be made by damaging the ozone layer, then the market incentivizes corporations to damage as much as possible, because if they don’t do it, then somebody else will. As for monopolies, history clearly shows us that in the absence of outside regulation free markets develop monopolies. The health care industry has its own built-in problems of externalities and monopolies, which require that it be regulated.

Evinx,
I’m not proposing specific policies here. My point is that this debate is equating “free markets” with “unregulated markets”, and I think it’s a little naive. If your idea of a free market includes perfect competition, then the market must be regulated. Likewise, if you think that transactions in a free market should be free of externalities, then regulation is also required. I think that the health care market can be made more free, but not by deregulating it.

Sam,
Your point is well taken, but it’s an issue inherent in our political process and not an economic problem per se. I am a little tired, though, of the right-wing claiming that the government can’t run anything (not that you’re necessarily saying that). As a veteran of the army, I think that we do a pretty good job of winning our nation’s wars. The NIH has funded the best science in the world for decades, NASA got us to the moon… Frankly, it’s ridiculous to say that the government can’t do anything. Is that how we became the dominant nation on earth, because our government can’t do anything?

By: Sam Adams

Sam Adams — Fri, 04 Sep 2009 17:53:48 +0000

The problem is that there is a tendency in politics today to shift the pendulum, nay teleport it, to the opposite extreme. So instead of an intelligent (ha! DC!), appropriate set of measures we’re going to get hyper-regulation – and still numerous root causes are going to be glossed over, as patient rights, right to choose, tort reform, etc.

By: Jay

Jay — Fri, 04 Sep 2009 16:54:17 +0000

“Do you believe in antitrust laws and environmental protection? ”

Not to get off topic here… But no. the market is built to protect these concerns as well if allowed to do so. Private property and support of common law are great solutions to environmental issues.