The market can’t save health care — Medicare-for-all is a must
I, for one, am glad that health care policy is taking — and holding — center stage. It gives us the opportunity to realize that any market-based solution for healthcare is impossible. A Medicare-for-all system is not only the moral thing to do, it is the financially conservative thing to do.
Commentary on the healthcare crisis is everywhere, and so I was going to write about something else. But some personal items arose last week that reminded me just how preposterous the idea of the healthcare “free market” is.
My wife and I are expecting our second child within a few weeks, and we just received the estimate for the cost of baby two’s birth. The billed charges are more than $17,000. More than $6,300 in out-of-pocket costs after insurance covers its portion. A few weekends before that, our 2-year-old had her rite-of-passage trip to the emergency room. One (well-done) stitch at the ER will cost more than $2,000 out of pocket after insurance.
These unwelcome bills were a reminder that health services don’t perform like consumer goods or services on the “free market,” in three important ways:
1. No price transparency. We don’t know how much stuff will cost until after we buy it, so we can’t decide whether to forego medical treatment if too expensive.
2. No competitive pricing. Because costs are hidden, competitors can’t set a competitive price for the same service, and we can’t shop around for a cheaper alternative. When is the last time you heard, “We honor all competitors’ coupons!” at a hospital?
3. Inelastic demand. People will still buy medical care even if the cost goes up, just like with gasoline for cars. But stranger still— we buy services even without knowing the cost, or even if we know we can’t afford it, because we risk death if we don’t!
The market can work out pricing for ordinary goods by measuring demand at different prices. This isn’t merely difficult for health services: It’s impossible. So why do well-respected commentators — of all political stripes — keep urging a “market-based approach” to healthcare?
Quite plainly, anyone claiming to be a “policy wonk,” or having even an elementary understanding of economics, cannot with a straight face call for consumer-centered, market-based solutions to high health-care costs. That’s just now how economics works.
Globally, the U.S. spends the most per person on health care — and it’s not even close. As political elites continue plotting to pull the rug out from under the ACA, millions have renewed the call for a Medicare-for-all system to accomplish what a health-care “market” cannot: guaranteed access to low-cost medical care.
Cornell economist Robert H. Frank’s recent New York Times op-ed “Why Single-Payer Health Care Saves Money” made the argument plainly and convincingly. In essence: We will pay more in taxes for Medicare-for-all, sure, but that’s an irrelevant objection. We will pay much, much less for better medical care — both as individuals and together as a society.
First, price of services: Government entities negotiate better prices on medical services than private entities.
Next, fluff costs: Medicare’s administrative costs are 2 percent of its expenses, which is one-sixth the average of private insurers’ costs (12 percent). Medicare also spends nothing on competitive advertising, which is approximately 15 percent of private insurers’ total expenses. In plain English: At least 27 cents of every dollar you give to health insurers pays for things you didn’t buy, and don’t need.
Finally, a healthier pool of insureds drives cost down: A Medicare-for all system would cover the whole population, most of which has only minimal health needs. The current single-payer components of the U.S. system cover groups with the heaviest medical needs: older people (Medicare), low-income and disabled (Medicaid), and returned service personnel (the VA). A parallel hypothetical: what would happen if insurance companies had to sell fire insurance at affordable rates to people whose houses were already on fire?
Deafening public outcry over Medicaid cuts just killed the GOP-authored “repeal and replace” bill. A solid majority of people nationwide want to expand Medicare and Medicaid. Let’s go a step further. It’s time to take the bold — and patriotic — step: Take care of our own, and save the entire population money while doing it.
The argument that there is any “market-based solution” to the health-care crisis is untenable. The economics objectively do not work. If a country as rich as ours doesn’t have the dignity to take care of the sick and elderly, what’s the point of being rich?