Why Health Care Markets Can Never Work

Suppose I want to buy a used car, and imagine there’s no Cars.com or Craig’s List, and professional used car salesmen are the normal way to buy. So I go to a dealer ask him about maybe a 1998 Honda, thinking that’s what I can afford.

“Oh, no,” says the dealer. “That would be totally wrong for you. You need a 2009 Lexus.”

“But I can’t afford that. I’ve only got $4000.”

“Look. If you don’t get that Lexus, you could die. Or have a terrible accident. Or at the very least, you would have to stop driving after two or three years.  Yes, it’s expensive. But this is your future we’re talking about.”

“Well, I guess you’re the expert. If I really need it, I’ll sign the papers and worry about paying for it later.”

Of course, this conversation would be insane. The seller can’t decide what the buyer pays for. That would be the ultimate sellers’ market, in which prices would spiral endlessly upward, and everyone would be driving around in much more car than they needed or could afford. Soon, many buyers would go bankrupt and stop driving entirely, and the system of car-based transportation would collapse. Besides, nobody would allow a car salesman’s opinion to override their own in the first place.

But substitute “doctor” for “car dealer” and “treatment” for “Lexus,” and you have the exact situation that exists in American medicine now. The sellers – physicians, hospitals, drug companies, medical equipment makers – tell the buyers – us and our insurance providers – what we need. We can say no, but the professionals are the experts. They know far more than we do. (Or at least we think they do.)  Sometimes they bully and threaten (“You could die!”) So the sellers have more input into the final purchase decision than the buyers do. And as a result, costs are spiraling upward, people are being over-treated and going bankrupt, and the system is collapsing.

Markets are good for things like cars. The buyer looks for what he wants. When he finds something close, the seller makes an offer and the buyer decides whether the price is acceptable. Eventually they agree on a price, or they don’t, in which case there’s no sale.

But health care is completely different. The sellers are in control. They’re steering purchase decisions. With or without “health care reform,” it makes no difference. Prices will keep going up; unnecessary services will keep proliferating.  Individuals, companies, and governments will continue to be bankrupted. Millions will be denied care for lack of funding. And free market advocates will keep saying the market is the answer to our health care crisis.

Our society can decide that everyone is entitled to appropriate medical care, or not. But we can’t provide care to any except the very rich under this topsy-turvy anti-system. Costs will continue to spiral if sellers set the prices and make the purchasing decisions. Eventually we will run out of money, and eventually came about twenty years ago in the US. We’ve been paying medical bills on credit ever since.

A sellers’ market can’t control costs. Instead, costs should be controlled, as they are in Europe, with rational, evidence-based decisions on what treatments are effective and affordable, and what they should cost. Of course, such a system will be open to corruption and abuse, but, unlike the present system, at least we would have a chance to do things rationally.

Alternatively, we can deny care to ever-larger sections of the population who can’t pay the escalating prices. Either way, we should stop pretending that the ultimate seller’s market will fix itself.  It can’t.

David Spero RN writes books, columns, and blogs about the social dimensions of health. He edited the paper Green Consensus for the California Greens. He can be reached at: david@www.art-of-getting-well.com. Read other articles by David, or visit David's website.

One comment on this article so far ...

Comments RSS feed

  1. Deadbeat said on March 22nd, 2011 at 9:40am #

    Why limit the critique of markets to health care? Markets do not work because markets create inequality, inefficiencies, unnecessary waste and needless competition. Take a look at housing where its always a “seller” market because it is not the “house” that is being sold but the need to carry DEBT that is being sold by the government via the banks in order to pacify citizens. Now this crushing debt is a source of displacement and homelessness. What good is health care going to do when you are constantly too stressed out from bills and debt service or even lack of shelter due to foreclosure.

    The problem here is the cherry picking of issues rather than analysis that combines these issues into a critique of the entire system.