YUP, HEALTH CARE ISN'T AND CAN'T BE A FREE MARKET

(h/t several recent health care posts by Andrew Sullivan, starting with this one)

The Free Market Fairy approach to health care costs won't work for a number of reasons, some of which I will mention in this post.

1) Karl Smith at Modeled Behavior provides evidence that people simply aren't affected by more or less efficiency, some the FMF clowns ignore:

We can see that as they are exposed to the market mechanisms – compare private insurance to Medicare – they spend more money. Spending more money on health care seems to be inline with satisfying consumer preferences.

Yet, couldn’t this all be a waste. Don’t outcomes matter for efficiency? No, they don’t.


They don’t because patients themselves do not look at outcomes and satisfying consumer preferences is the gold standard of efficiency.

2) Let's say we increase personal awareness of medical efficiency. Sadly, that still won't help because most of the cost in the system comes from a small minority of the population. This graph comes from an ER physicians blog, Movin' Meat:

Most of this care is not optional, at least if one is concerned about saving or dramatically improving lives, according to Movin' Meat:

1.

Health care is generally not a refusable or elective service.

By this, I mean that in most cases, the health care costs are driven by medically necessary procedures. ... the demand for medically needed care is not going to be terribly price responsive. When your doctor tells you that you need chemotherapy, you don't make the decision to proceed based on the cost, but on the need.


3.

Purchasing power is concentrated in the hands of a very small number of "consumers"

For most, when they are confronted with a major or life-threatening illness, their entire focus shifts to survival, and they could care less about the cost. Further, many who are in this sick/expensive category have some diminished capacity with regard to their information gathering and decision-making. I'm thinking particularly of the elderly and those who have had strokes or any one of a multitude of illnesses which impact cognitive function or other functional capacity.