Let’s look at perfect competition as a guiding idea for what a well functioning free market should look like. Where perfect competition doesn’t exist, something is breaking down and the market may not function correctly. These are the kinds of markets where being more free doesn’t result in it functioning better. I won’t go over everything with perfect competition, but let’s cover why “free market” healthcare is insane.
- Perfect information
- Currently, there is almost no information about prices available for hospitals. We could legislate it so it is required that this information be published and available for a service and then make an estimate be binding.
- Barriers to entry or exit
- As a consumer, I can’t decide to stop having a heart attack or bleeding to death. I guess I can choose to die, but if I am unconscious that isn’t even true under our current system.
- Participants must be price takers (vendors can’t set their own prices)
- Until I have time to call every hospital in the country and have them compete over who sees me for my heart attack, I am guessing this one is intractable without government involvement again. They get to set the price and I have no bargaining power. An insurance company could help here, but they have been ineffective up to this point in keeping hospitals from setting their own prices based on evidence.
So, we could solve the first and third one above by forcing doctors and hospitals to publish their prices publicly. Number two is going to be unsolvable though. I don’t think there is any way for a “free market” healthcare system to operate as efficiently as one that admits that people don’t choose to get sick and admits that that fact means market forces are not helpful in healthcare.