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December 12, 2014 11:00 PM

10 reasons why healthcare isn't a free market

Merrill Goozner
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    Goozner

    The mass resignations this month at The New Republic, the sometimes-liberal journal of opinion, caused quite a stir. Its 31-year-old sugar-daddy owner, whose fortune derived from having roomed with Facebook's Mark Zuckerberg at Harvard, took the magazine from biweekly to monthly and vowed to bring it into the digital age.

    New York Times columnist Joe Nocera, waxing nostalgic for the fading era of feisty policy-wonk journalism (we do a bit of that around here), sniffed how one of the new-breed executives brought in by owner Chris Hughes had suggested to Michael Kinsley, a former editor at The New Republic who suffers from Parkinson's disease, that he “come up with a listicle, à la BuzzFeed.” His suggestion: “10 reasons why healthcare isn't a free market.”

    Kinsley demurred, but what a great idea. This Hughes fellow is on to something. Here you go (listed in reverse order of importance in my desperate pitch to be used by David Letterman on his last show before giving way to Stephen Colbert):

    10. Most care is delivered locally and will remain that way. Forget medical tourism: Foreign competition, which spurs better products at lower prices in manufacturing, barely exists in healthcare.

    9. Physician assistants, nurses, lab techs and other specialized personnel labor under overly restrictive licensing laws put in place by government officials seeking to protect the public from gross incompetence. The result is a straitjacketed, inflexible workforce.

    8. Doctors belong to professional guilds whose power would make medieval glass blowers in Venice blush. The doc guilds limit access to their profession through licensing, restrict training opportunities and establish protocols for treatment with little regard for the underlying cost.

    7. Pharmaceutical and medical-device firms use patent monopolies, granted to foster innovation, to impose huge price premiums on their life-saving products, giving those companies the highest profit margins in the world. While they're at it, they use the same patent monopolies to charge high prices for things that aren't so innovative.

    6. Most non-routine healthcare is delivered by not-for-profit charities or groups of charities that dominate their local markets. Their service mission is all too often interpreted to mean that there can never be too much of a good thing, and where doing well financially—in some cases, very well—can be justified in the name of doing good.

    5. Comparison shopping is complex for patients, as well as confusing and nearly impossible, because outcomes are variable, success isn't guaranteed (compare your expectations for medical care to the purchase of a car or refrigerator) and different therapeutic approaches have different outcomes for different patient populations. Even when comparison shopping is possible, the layperson—not to mention many physicians—have inadequate information about pricing, quality, outcomes and what works best on whom.

    4. The law says no one can be denied healthcare when needed. Yet there are laws restricting the establishment of new capacity to provide it and no federal or state laws requiring universal health insurance to pay for it. The resulting “marketplace” has the poorest people being charged the highest prices, with elaborate cross-subsidies sending false price signals to every other payer.

    3. Patients, even those in high-deductible insurance plans, pay for only a fraction of the cost of healthcare. Doctors who prescribe healthcare do not face price-sensitive customers. Neither has the foggiest notion of the true cost of providing care. Where there are no prices and no understanding of the true cost of services, there can be no market.

    2. Insurers can pass along all costs in the form of higher premiums on employers (or higher taxes or deficits when the payer is the government). Thus, healthcare largely remains a price tag-less department store where customers have an unlimited credit card.

    And the No. 1 reason why healthcare isn't a free market is:

    Nobody in the middle of a heart attack shouts, “Let's go shopping!”

    Follow Merrill Goozner on Twitter: @MHgoozner

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