Why American Healthcare is Not a Free Market System

 

American Healthcare is not a free Market

 

The reason the American Healthcare system is so expensive is because it is neither a free market system or socialized medicine.

The best thing that the American Government could do for the American people is not to force upon us Socialized Medicine, but to instead force upon us a free market healthcare system.  The word forced sounds like the antithesis to a free market model, but it would clearly need to be forced into existence by laws that provided for competition and forbid a third party paying for certain health services.

Many Americans believe we have a free market healthcare system.  Nothing could be farther from the truth.  To be a free market system the individual must be able to know the price of treatment, the alternatives and finally must have some skin in the game.  In other words, if a person is paying their own bill, then the consumer has lots of incentive to shop around and negotiate.  More than any other thing this will drive down costs as provider s will be forced to compete for not on the best service, but the best service at the best price.  It also forces consumers to be a more informed consumer.

What we have in America is known as a Third Party Payer Healthcare System.  The patient doesn’t see the costs and most don’t care what the cost is.  The attitude of most healthcare customers is, “I paid my premiums or the government is paying this, so the costs, except my out of pocket cost, don’t concern me.  That is the payers problem.”  This is why we pay more for healthcare than any nation in the world.

In all other areas of American life the free market system works and provides us great products and services at reasonable prices.  That is not true in healthcare and it is because we do no have a free market system.

Here are the reasons why.

  1. We don’t pay our own healthcare bills.  A third party insurance company or government agency pays them.  See related article on The Fundamental Flaw of American Healthcare System.  Unfortunately, the American Public has been trained to believe healthcare expenses should not come out of our own pockets.  This belief is extremely difficult to overcome.  Though most Americans believe we should save for a house, a new car or a college education, we believe someone else should pay our healthcare bills.  A possible solution to this is to require mandatory savings to go into health savings accounts or allow the use of social security funds to pay certain unexpected medical costs.  Health Saving Accounts would allow us to buy high deductible plans.  These high deductible plans and transparent pricing would force free market competition and force down prices.  Singapore already does this and their cost of healthcare is 40% below the U.S.  Also see Privatization of Social Security will Help Solve Healthcare.
  2. The Price system is not transparent.  A transparent price system is mandatory to a free market system.  We must know what the costs are and the alternatives if we are to make an informed buying decision.  This is one area where the government can step in to make laws that force adequate pricing information along with alternative treatment options that allows for competition among doctors and other healthcare providers.
  3. Our healthcare supply is artificially limited to force higher prices.  The American Medical Association artificially limits the supply of physicians.    Let the market forces and not some central planning group determine how many is enough.  Do we have an organization who says how many people can get a degree in chemistry, law or business.  We don’t and neither should we in medicine.

To read another excellent article regarding healthcare solutions go to The Atlantic article on  Switzerland and Singapore solutions.

Americans need to be going to school on elements of the healthcare systems of Switzerland and Singapore.

 

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