[joseph.aman]

CSA1861, your restaurant illustration is perfect. Think how inflated restaurant prices would be if the majority of customers decided to spare themselves excruciating menu choices by participating in ‘socialist collectives’ like the one you describe. The restaurant sector would boom, but anyone without ‘coverage’ would be eating at home, unable to afford or justify the outrageous prices. Medical insurance, in whatever form, private or public, is inefficient and inflationary. It leads, inevitably, to a state-controlled system… Socialism (or the well-intended fascism of Obamacare). And so it should, since private insurance drives the cost of medical services up beyond the reach of all but the ‘well-employed’ elite. As the ranks of this elite shrink, some form of public insurance is required to balance the moral equation even while leaving the economic one ever more distorted… a downward economic spiral to match the upward one in this ‘booming’ sector.

[joseph.aman]

It’s certainly understandable to want to keep insurance for the more catastrophic (and therefore expensive) health issues that might arise. But it seems to me that insurance of any kind is poison when applied to healthcare and that there is no place for it at all in a free market economy. It will drive up costs wherever it’s allowed to operate.

Healthcare is full of difficult choices, often with life and death importance. Insurance simply maintains the grand illusion that those choices are not necessary. In a free-market economy, each person and family should have the freedom to finance their own healthcare with services available at a reasonable cost or on reasonable terms if ‘out of pocket’ payment is not possible. Simple as that.

Any and all insurance applied to healthcare is already socialism, it seems to me, even if it is provided by a private, for-profit enterprise. State-sponsored insurance like ‘Obamacare’ simply takes this ‘free market socialism’ of private insurance to its logical conclusion…. genuine socialism. And this may probably be even better than the half-baked ‘private’ version that we have now. The rest of the ‘socialized’ developed world can’t be completely wrong.

It’s simply not possible in the matter of healthcare, it seems to me, to have our insurance and a free market, too.

[joseph.aman]

The page is packed with relevant ideas. Thanks. I’ll be doing some computerless travel in the next days, so I printed some of these articles to read. I especially liked what Hoppe, Block and Berdine had to say on the subject of insurance. When misapplied to healthcare, it seems that insurance creates a vicious economic circle. First it drives up prices for services to the point where even fairly common medical procedures can spell economic ‘catastrophe’ for a family. Then, as this happens, of course people naturally feel that they need to protect themselves from catastrophe by buying insurance… and so on… until the government feels the need, as it now does (and aren’t we late to this party, every other advanced economy having already done it), to step in and protect everyone equally. It’s a complete mess.

Government forms of insurance might be the worst and most extensive case of this, but isn’t private insurance just as much to blame here? Shouldn’t ‘health insurance’ itself be outlawed as encouraging the abusive squandering of resources? Rather than mandate insurance, outlaw it! That would be a welcome and appropriate role of government, it seems to me. Or would a free market economist insist that the business of insurance should be allowed to freely operate in the the health sector as it does now?

[joseph.aman]

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.

[joseph.aman]

Spot on book. Thanks for the reference. I’ve not read it but just reading the few pages that are available at Amazon gives me the impression that this guy has the great good sense to suggest that cost should be a very strong, even a central consideration in decisions about healthcare… etiquette be damned. After all, resources are limited. Since when are they not.

[joseph.aman]

>Aman, you started by asking how the market can provide necessities.
Not just ‘necessities’ but ‘absolute necessities’ of the sort that are unique to medical services and the goods that support them.

Indeed, food, water, housing, clothing are necessities that can gently find their reasonable prices based on normal market forces. They are for the most part in ‘enormous supply’ from a vast array of suppliers. Of these ‘necessities’ we can take our pick in a developed society. We are awash in the ‘necessity’ of food to the point of obesity. We dine at the ‘Heart Attack Cafe’ every day. But the necessity that I’m talking about is of a qulitatively different sort. It’s what happens when the ‘consumer’ of all this food does indeed have the inevitable heart attack. At that moment, a different sort of ‘necessity’ comes into play that requires a different economic reckoning than the ‘normal’ one that determined price of his burger, from grassland to fuel to the wages of the person that served it to him. At that moment this poor consumer enters an economic twilight zone where aspirin sells for $1 a tablet, band-aids cost $3 and a room rents for $1500 per night. He and his family are going to become acquainted with a whole new economics in the days and weeks to come. And I would say that the price of the goods and services that he is about to ‘consume’ are determined, driven, at least in part, by the absolute necessity of his ‘demand’. A completely unique demand.

In this rather typical scenario, this consumer has no particular choice in physician or hospital or set of services to be received, at least insofar as it concerns his bill. When was the last time anyone saw an advertisement for medical services that touted their ‘low price’. Can you even imagine it?… “Come to Northern General, the cheapest hospital in town”. No. In fact, it’s quite a violation of the etiquette of medical care to even discuss its cost. After all, isn’t health ‘priceless’? Indeed it is. And ‘priceless’, it seems to me, is a very interesting economic idea.

[joseph.aman]

I see what you mean in principle, but aspirin and bottled water? Their price in pennies would not, it seems to me, be good examples of the monstrously expensive ‘healthcare apparatus’ that has taken on an inflationary life of its own in the last 30 years. The same market principles may apply to a degree but there must be additional forces at work to drive the price of a sector of goods and services through the roof.

How much is a ladder worth to a guy who has fallen into a pit and can’t climb out? If you were to equate getting sick with falling into such a pit and suppose that all the ladders in the society were controlled by ‘highly trained professionals’, then wouldn’t the price of a ladder be subject to forces of inflation beyond what would be the case if they were only used for house-painting and gutter-cleaning? Isn’t it ‘natural’ that in a free market the supplier of ladders would take advantage of his customer’s predicament and charge him more… and more… and more? Isn’t this what is happening in fact in our society as the free market is allowed to be ‘in charge’ of delivering healthcare to people? And isn’t that why there needs to be a way to get ladders to people that puts the human-natural tendency to ‘gouge’ one’s fellow man out of play?

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