Home › Forums › Discuss Austrian Economics, Step by Step › 'Healthcare' and the free market › Reply To: 'Healthcare' and the free market
Well, we agree completely that outrageous fees can be expected from healthcare providers, regardless of the extremity of a person’s need or the array of choices that he has in the healthcare ‘marketplace’. So you’re certainly right… there is nothing special about my example. As you say… “prices are outrageously high across the board in health care.” Whether it’s for a sudden, severe heart-attack, a necessary colonoscopy or an entirely elective knee-replacement, the consumer of healthcare (or his designated ‘third-party’) can expect to get screwed. It’s unique to the sector.
And I also agree with what you say about insurance… “Medicare, medicaid, ‘health insurance’ and so on drive up demand.” The fact that most people are insulated from the price that they are paying both drives up demand (by which I assume you mean that it makes people more likely to go to the doctor) AND I would say, allows the medical provider to steadily increase prices without anyone noticing. Better, it seems to me, that all services be simply paid ‘out of pocket’ like nearly every other good or service that we buy. Fat chance of that. People would be forced to make very hard choices and it would not be a perfect world, but at least it would be imperfect in a real way. This idea would seem to go against my original premise that prices will naturally rise in this sector if free market conditions were present. But this market would not be entirely free because what would need to be missing from this ‘out of pocket’ scenario would be insurance. Insurance is the most distorting influence on prices and for this idea to work, the government would have to make it a crime to cover inevitable medical costs in a ‘risk-pool’. Unlike a house-fire, illness is not a ‘risk’ but a marginal certainty. Another fat chance.
Certainly there are many factors at work to make healthcare prices consistently and increasingly ‘outrageous’. And the government certainly adds its poison to the mix. But it seems to me that the most important and basic force bearing on these prices is not an economic one at all. In nearly all cases except childbirth (no picnic), at the core of the ‘demand’ for these services is pain, suffering and fear. This is a very unique transaction in that way. On the one hand you have a ‘priceless’ commodity (health and life) and on the other an ‘ultimate’ demand (‘Free me of my pain’. ‘Save me from death’). Such ideas and factors are not part of the normal economic calculus. But a true understanding of healthcare inflation needs to take these forces into account, it seems to me.
In any case, it appears that some handle needs to be put on the issue soon, because the impression I’m getting from UTubeU is that healthcare costs are doing their serious share to bankrupt the greater Western world. So where’s the ‘outrage’?… I suppose it’s covered by Medicare.