Column: Healthcare and the Free Market
This series titled “Column: US Healthcare System” is sponsored content from our partners at Axene Health Partners. AHP offers highly specialized health care actuarial and consulting services across a number of states. We have curated this content because we think it adds value to the work our readers are engaged in. As always, we welcome your feedback on this series.
Most observers would agree that the United States economy is largely composed of free market transactions. This generally means that prices for goods and services are determined by supply and demand with little interference from government forces. The US is certainly not a pure free market or capitalist system, as various regulations at the state and federal levels influence the operation of various markets.
The arena of healthcare presents some unique challenges for policymakers. Constructing and tailoring an economic system that reaps the rewards of free market systems (innovation, aligned incentives, continuous improvement) while recognizing the emotional and ethical nature of healthcare delivery requires striking a delicate balance. This challenge is aggravated by influential stakeholders who largely disagree on both desired priorities and the impact of various healthcare policies, and oft en have financial stakes or other biases shaping their views. Recently, the dialogue has become openly rancorous with bold accusations implying nefarious motives of other stakeholders. The focus of this paper is to discuss the uniqueness of healthcare delivery in a free market environment, highlight various perspectives, and provide some principles and insights regarding solutions to accumulated problems and current challenges.
Healthcare in the Marketplace: Different than other goods and services
In a civil and empathetic society that values human life above all else, it is impossible to properly value a life-saving treatment. Ethical and financial considerations conflict when decisions are required to choose performance of heroic, untested, and expensive procedures. In these scenarios, who should be granted decision-making authority? Who should be obligated to pay for these services? Should the payer determine which services should be performed? What role should the government play, if any?
As this article is being written, a high-profile story of a dying British infant is circulating around the world and generating significant debate. His parents are advocating an experimental treatment in the US; they have found a doctor willing to perform it, and have offered to pay for it themselves (partially through raised donations). It’s hard to argue, absent obvious cruelty, that parents do not have the best interests of their children in mind or that they should not have the freedom to purchase unconventional services and explore different healthcare solutions. Would anyone deny them the right to this experiment when there is no other life-saving alternative? Should the same choice then be made available for families that are not well-financed? If lines are not drawn, at some point we eventually run out of “other people’s money”. These ethical/financial dilemmas that exist today will become even more prominent in the US as the population ages and new, expensive, technologies rapidly increase our ability to prolong life.
The ability of healthcare delivery to improve life and save lives in some circumstances places healthcare in a different category than other goods and services. There are constant reminders that healthcare is different, and that it is perhaps inhumane to view healthcare through a market-oriented lens. At the same time, many of the advances in healthcare have spurred from free market innovation. This innovation has benefited the world, even economies without free markets. New cures and progress from experimental treatments are difficult to attain in government financed systems with strict protocols, prescribed procedures, and limited budgets.
The US leads the world in medical and pharmaceutical breakthroughs, and Americans are the first to benefit from new treatments. Unfortunately, we also pay significantly higher prices. High prices are combined with overutilization of services due to improper incentives in the health system, resulting in the primary recognized and discussed problem of today: the high cost of health insurance.
As most of the healthcare delivery in the US is financed through various types of insurance mechanisms, the remainder of this article focuses on the free market challenges related to health insurance and the unintended consequences of insurance regulation.
Continue reading the column here.