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Comment by mbreese | Hacker News Reader

> example of the benefits of free market economy

Healthcare is rarely a good example of the free market. Medical decisions aren’t made by comparing costs between providers. And if you’re in rural America, you’re lucky if you have any provider. Price transparency would be nice, but maybe not as helpful as you’d like. Let’s say you’re in the middle of a rural area and the ER says you need stitches — but they cost $6000. What are you going to do about it? Are you really in a position to negotiate? Your choices might just be 1) get the treatment, or 2) go without.

Many things in rural areas cost more than they should. Usually on this forum we talk about the high cost of internet access and the lack of options, but medical is very similar in that regard. Services are hard to find, providers are covering a very large geographic area, and many costs are higher.

It’s not a good example of how a well functioning free market would work.

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I’d go as far as to say the healthcare market in America is the opposite of a free market. Everything about it is anti-free, from the information asymmetry, to lack of local choices, down to an inability to even assent to participate in the transaction (due to incapacitation etc.).

It’s hard to even call this a market, let alone a free market. According to the Wikipedia entry on markets, “the usage of the price mechanism to convey information is the defining feature of the market”. It’s notable that in The American healthcare market, the price of your treatment is usually discovered after you’ve agreed to purchase the treatment (or it’s been administered without your consent). In fact, often it’s impossible to figure out what you will pay until after the fact due to how complicated answering that question is.

And even if it were a free market it’s debatable we wouldn’t want to keep it that way. In a commodity free-market of peas for example, a mismatch of supply price and demand price means that some people will pay a suboptimal price for peas while others will be priced out of the market entirely, and they will have to go without peas.

In a healthcare market, when someone is priced out they go without healthcare, which means worse and more expensive outcomes down the line. The old adage about how an irrational market can stay irrational longer than you can stay solvent comes to mind — a healthcare system motivated to maximize profit will price you out of the market longer than you can stay alive.

But that's exactly how a free market does work.

It's exactly what any rational person would expect from a corporate free-for-all designed for maximum extraction potential based on maximising political power differentials.

Good state-owned care smooths out the inequalities, so farmers in the middle of rural area will at least have affordable access to basic care, and more advanced care will be within easy travelling distance.

This ends up being far cheaper for everyone who needs medical care - which is basically everyone.

The only losers are profiteering shareholders.

Of course you still pay for it, but you don't pay as much. And you won't be bankrupted by bills for which you either have no cover at all, or limited insurance cover which still leaves you with a huge sum.

Healthcare is ripe with market failures - everything you are describing is well studied. Those who argue for a completely unregulated market, in my limited interactions, have not usually studied economics or the concept of market failures. Market failures are generally associated with public goods or government regulation.

To name a few with healthcare:

Information Asymmetry. It should be expected that a patient does not know what a Level IV emergency is and the complete ins and outs of how they are going to be charged. I'd argue that the industry has intentionally amplified this market failure. Furthermore, patients are often left with the final decision, but who is going to disagree with a trained professional on their required treatment? It's like going to a mechanic when you have no idea what's wrong with your car. You kind of are trusting the mechanic isn't taking advantage of you (and that is regulated). Or you have to reduce the asymmetry by learning about the basics of cars.

Medical research has the attributes of a public good: Non-excludability and non-rivalrous - when something is discovered it's generally known to everyone without dropping in supply and the information is available to everyone (yes the product which results is rivalrous and excludable in the same country, hence it works as a private good - but then that product has non-competitive markets).

Non-competitive markets with respect to rural areas are also mentioned in the article. Much like the issue with utility companies and broadband providers (the latter of which was shown to be a partial public good in the US with the infrastructure bill).

You've also got the Certificate of Need system, introduced in the Nixon years on the theory that if allowed hospitals to compete with each other it would lead to redundant capacity and thus higher costs.

And then there's the Medicaid reimbursement rates, decided by a committee using the labor theory of value rather than something sensible like cost benefit analysis and negotiation. And since it's illegal to charge someone else less than you charge Medicaid these tend to have a cascade effect.

Our healthcare system is a huge sequence of "make it so complicated that there are no obvious deficiencies" legal systems with layers of ad hoc patches its amazing it works as well as it does.

Normally I'm in favor of free markets but if nationalization is what it takes to clean up the current mess of a system we have then so be it.

The way Medicare is artificially restricted from driving down cost is atrocious. Medicare + Medicaid combined costs about as much per capita - NOT per patient - as the UK NHS. Except the UK NHS provides universal cover.

Now the NHS is an aberration and under severe pressure, but it is a good indication of just how inefficient Medicare and Medicaid are - and it's not that they can't do better, it's that they're legally prevented from using their market power.

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