Why Market Logic Can’t Solve the US Health Care Crisis

The ongoing controversy over the American Health Care Act (AHCA) — the GOP’s proposed replacement for the Affordable Care Act — highlights a fundamental disconnect in ideas about how involved the government should be in our health care.

A striking omission in these debates is the cost of health care itself. There is considerable silence on how much Americans pay, while there is considerable noise from policy makers on health insurance costs and coverage mandates. Insurance costs are a reflection of the costs of medical care, so addressing insurance costs alone is an exercise in futility.

The US health care system operates on “free-market” logics, which call for a rolling back of government-imposed regulations, tariffs and other controls. According to capitalists, in theory, this creates an ideal environment where competition and consumer preferences would drive innovation and ensure economic growth, benefiting all classes through a “trickle down.” That economic growth ideally should bring resources to everyone so they can purchase coverage they need.

In practice, despite significant medical innovations, government insistence on free-market logics in our health care system has proven fiscally irresponsible and inefficient, with disastrous results not only for people’s health and well-being, but also for their ability to contribute to the markets our government is trying to protect.

Neglecting health care costs is done at everyone’s peril.

The profit-driven model has made space for expensive inefficiencies in the system as well as tremendous abuses of consumers unaware of how the market operates. Those issues affect all of us.

Americans spend exponentially more of their own money for care than any other country in the world. The US government spends a greater proportion of public money on health care through government insurance plans (Medicaid, Medicare, military) than most other countries with universal health care coverage.

For less than it costs per capita for the US to cover only 37 percent of the population eligible for government plans, Canada is able to provide universal coverage.

You might expect with that level of spending, our health care system would be more efficient, or have better health outcomes. Our health outcomes are among the most paltry of all high-income countries. Of the 55 countries Bloomberg assesses in terms of health care efficiency worldwide, the United States is one of the least efficient. Only Jordan, Colombia, Azerbaijan, Brazil and Russia rank lower.

Ethically questionable profit-driven practices of health care companies exist. Mylan NV, the pharmaceutical manufacturer of the life-saving EpiPen, has a near monopoly on the drug which, by federal law, all public elementary schools must have on site.

In 2016, Mylan’s chairman Robert J. Coury received a combined $162 million in salary, retirement benefits, cash retainers and stock units. Mylan is currently embroiled in a lawsuit with a rival drug company, as well as a class-action lawsuit for egregious pricing increases.

A Blue Cross Blue Shield (BCBS) report released this month shows a 285 percent increase in the price of patent-protected drugs since 2010 alone. BCBS members have seen a 73 percent increase in prescription drug spending, mostly due to a small number of patent-protected drugs for chronic illnesses, which mean big business for drug companies.

Meanwhile, there are many other ailments that companies won’t fund research for, specifically because these ailments aren’t good investments. Many health care innovations provide less therapeutic value than existing treatments, but as consumers, we’re not made aware so we can request the most bang for our buck.

The issue goes beyond pharmaceuticals. Hospitals and providers charge hidden fees or include egregious pricing into their billing. You may go to an in-network provider, only to receive an enormous bill because the lab they used was out of network.

Granted, people who are wealthy, who have excellent insurance or who have sufficient savings may not be concerned by rising health care costs. But they should be concerned, both in terms of how the government spends their taxes, and in terms of the rising costs of their excellent insurance.

In the United States, 20 percent of our health care expenditures are wasted in some way. Improper medical billing is so rife that even with the Government Accountability Office looking on, we spent $41 billion on improper bills for Medicare and $33 billion for Medicaid in 2016, an increase from the previous year.

Additionally, the Emergency Medical Treatment and Labor Act of 1986 requires hospitals to provide care for emergency medical conditions regardless of whether or not the patient can pay. The more people without coverage, the more likely they’ll wait until their health issue is an emergency before seeking care.

If that patient can’t pay, hospitals eat the cost. So, to defer those costs, hospitals will increase the costs of their care to their other patients — to the insured. That makes insurance costs go up. Fewer people with coverage not only costs the government more, it’s going to cost you more, also.

US spending on health care administration is the highest among high-income countries. A profit-driven health system with so many different providers, insurance agencies, coverage policies, vendors and state legislation makes achieving transparency, accountability, efficiency and efficacy incredibly difficult to achieve. Certainly, neither Obamacare nor the AHCA will accomplish this.

The culprit that critics point to about Obamacare’s skyrocketing insurance costs entirely misses the boat. Of course our health care spending is out of control, as there’s been no control on the market from which we’re purchasing.

According to the 2017 Index of Economic Freedom, the United States ranks 17th globally. Strikingly, the vast majority of countries ranking higher in economic freedom also have universal health care of some sort. Universal health care and economic liberty are not mutually exclusive.

Fixing the US health care system is not only critical to our personal health and well-being, it’s also crucial to our national economic health. The US government needs to start looking at universal health care models; it’s not just the moral thing to do, it also makes good economic sense.