Release Free Market for Affordable, Accessible Medical Care

By Deane Waldman, MD MBA - 16/05/20

There are several lessons we?have?learned from the CoViD-19 experience such as: the unreliability of predictive models; the danger of depending on foreign supply chains; over-reaction can be a deadly as under-reaction; and the need for better contingency planning.

There is one lesson we have not absorbed: to get timely, affordable care, Americans need the private sector, the free market, not government-controlled healthcare.

When the CoViD-19 crisis began, it was private companies not government agencies that quickly produced diagnostic tests, personal protective equipment, ventilators, and developed ideas for both curative medicines and vaccines.

The hallmark of a free market is freedom of both buyer and seller, who interact directly. A consumer, the buyer, is free to buy or refuse, what to buy, from whom, and for what price. The seller is free to sell what he thinks consumers will want, and sets the price of products or services in competition with other sellers.

The U.S. has not had a free market in healthcare since the 1930s. There is a third-party decision maker, either government or insurance, that disconnects buyer (patient) from seller (physician, hospital, pharmaceutical company). The third party decides what consumer must buy and dictates the seller's price.

A "market" can be defined as a gathering of buyers and sellers for the purchase and sale of products or services. A market is where supply and demand are balanced.

In a free market, supply and demand are balanced by millions of individual decisions made by buyers and sellers. In U.S. healthcare today, Washington balances supply and demand.

Federal government controls supply of dollars by pre-determined prices through reimbursement schedules and dictates demand for care by limiting available facilities and personnel, mandating prices.

The question for Americans is this: who do you want to achieve balance in healthcare-the federal government through a centrally controlled economy or you yourself in a free market? The answer will also determine who is responsible for your healthcare decision-making: a bureaucrat or you?

There is ample evidence of the effects of government-controlled healthcare in various countries. The U.S.S.R had the ultimate form of single payer healthcare. Their interminable waiting lines for care are well known. One study documented its failures calling Russian healthcare, "The Soviet Medical Nightmare."

Great Britain's government-controlled healthcare system, National Health Service, strictly rations care, decides life or death, has substandard medical outcomes, has had doctors on strike, and provided the model for the infamous Independent Payment Advisory Board (IPAB) within the Affordable Care Act. The IPAB was so unpopular here that it was repealed before the board was ever constituted.

There is a single payer healthcare system functioning within the U.S. today. It is called the Veterans Administration Health System or VA. When it was alleged that no less than "47,000 veterans [may have died] while their health care applications were in pending status," a 2015 internal VA audit could neither confirm nor deny. The report concluded, "As of September 30, 2014, over 307,000 pending ES [Enrollment System] records were for individuals reported ..., we cannot determine specifically how many pending ES records represent veterans who applied for health care benefits or when they may have applied."

Many believe that the U.S. has a free market of private insurance that provides our medical care. This incorrect in two ways. First, it has been shown that having health insurance coverage does not assure patients will get care in time and Americans will experience death-by-queueing like Britons and our own veterans.

More fundamentally, the market for private health insurance is not private at all-it is public, or government-controlled. The market is not "free." The buyer doesn't decide what care he or she will get, the third party does. The seller doesn't set prices for goods or services, the third party does. And that third party is Washington, either directly through reimbursement schedules or indirectly through insurance rules and benefit mandates. By disconnecting buyer from seller in healthcare, the third-party payment structure eliminates free market forces: need to economize and competition among sellers for consumer purchases.

What would a truly free market look like in healthcare, with no third-party decision-maker disconnecting buyer from seller? Sellers compete for buyers' business. Buyers choose products and services based on quality and price, and pay their own money. In 2018, the average American family expended $28,166 on healthcare, more than 80 percent to insurance companies. As most were healthy, they paid a third of their total income for... nothing. Imagine if they could put that money in an HSA and it could accumulate.

Insurance returns to its original function: protection against financial catastrophe. Americans could buy catastrophic insurance with very high deductible, say $10,000, making health insurance very inexpensive. Just like buying a car or legal services, people shop for medical care and pay at time of service from their family HSA up to $10,000.

Prices would plummet as they always do in a free market environment. Bureaucratic burden would be eliminated for patients, and particularly for physicians. Physicians would offer timely, compassionate care to their patients-those who don't would quickly see empty waiting rooms. The same would be true for those who refuse to compete for buyers' (patients') dollars, by advertising both results and price.

There are options for a safety net for those with pre-existing conditions, medically vulnerable Americans, such as high-risk pools or state-supported HSAs. Such decisions should be made at the state level, not federal. This is called StatesCare.

In 2018, the U.S. wasted on federal more than $1 trillion per year on healthcare bureaucracy. With StatesCare, that amount would suddenly be available for patient care or to keep in our wallets.

The private market's response to the CoViD-19 pandemic has shown that the U.S. should have less, not more, government control of healthcare. We need the precise opposite of price controls. We need a free--not controlled by Washington--market in healthcare. If Americans want affordable, accessible medical care, they need to kick Washington to the curb and release the power of the free market.