Our Private Capitalist Healthcare System- Not Even Close

Many people often refer to our healthcare system as private or capitalist. Unfortunately it is nothing of the sort. Many by now who read my blog may feel I am a hippy living on a commune campaigning for the socialist party. However, I am a firm believer in capitalism and the power of the free market. I even read Alan Greenspan’s book The Age of Turbulence and enjoyed it and agreed with almost all of its conclusions. Capitalism works for the economy because it allows natural forces created by supply and demand to adjust for product shortages and oversupply in an efficient and seamless way. With countless transactions going on every day there is absolutely no way a government can set quotas for supply or prices without collapsing an economy. When they do this they will inevitably set some prices or supply too high and some too low creating shortages or oversupply that cannot be easily corrected. But the free market does this every second of every day constantly adjusting supply and demand by price feedbacks on suppliers and buyers.

This system has no relation to what is going on in US healthcare today at all. First, a free market capitalist system cannot work well in healthcare because a reasonable price cannot be set on someone’s life. What is the price of chemotherapy for someone who has cancer, or a ventilator for someone who is dying of shortness of breath from pneumonia. They will pay anything in that circumstance because if they don’t they will die. Even if Bill Gates were to get sick, if he were actively dying the doctor or hospital could then set their price based on what is willing to be paid and of course Bill Gates would give his entire fortune if need be to survive. This takes away the feedback on the supplier (the doctor or hospital) of decreased demand that comes from prices that are too high.

Secondly, in our current system this is all irrelevant anyway because we have intermediate people standing between the supplier (doctors and hospitals) and the buyer (patients). Insurance companies usually see the price of the care provided not the patient. And often the doctor is also unaware of what was charged and paid for his or her medical billing service or the hospital does this for them. This leaves healthcare with no price feedback what so ever. Patient’s don’t care what it costs, all they care is if it is covered or not. The insurance company does not really care about the quality or amount of service provided as they are not the ones receiving the care. This whole process completely distorts price adjustment as should happen in a normal free market system.

Third, a large percentage of healthcare consumed in this country is paid for not by private insurance companies or out-of-pocket, it is paid for by the government. Hence that portion is essentially socialized medicine. This includes Medicare, Medicaid, Tricare, the VA system, and now with Obamacare, government subsidized private insurance.

I am NOT proposing we go to a completely capitalist, free market healthcare system. And for anyone who purports to want that, just imagine what that TRULY means. For it to be truly capitalist and free market hospitals and doctors can charge whatever they want, and if you can’t pay, you die. Emergency Rooms would be able to deny care to anyway even if they are brought in after a car accident and found not to have insurance. That is if the ambulance would even transport you when they find out you can’t pay. This is not a system I think anyone could tolerate. It is not humane, civil or ethical. And even this system still would not truly capitalist because as I stated earlier, there would still be no price feedback to the supplier because patients will pay anything. They are desperate.

However, I am not supporting socialized medicine either. As I mentioned earlier, the government is too slow and ineffective to set prices and supply for things without completely creating market distortions. Any veteran or any of my colleagues who have worked at a VA hospital can attest to the inefficiency of government-run healthcare.

I am not pretending to have some magic answer. If I did I would currently be in Washington telling everyone who would listen. But our current system is a mixture of the worst parts of socialism and capitalism. The rest of my posts show how the profit driven part of our healthcare system has deprived us of cheap effective remedies that go unstudied. And healthcare bills send thousands into bankruptcy every year. Yet we don’t get the benefits of capitalism for the reasons I delineated above. And we have millions of Americans covered by what is essentially socialized medicine through Medicare, Medicaid, Tricare and the VA yet these programs are inefficient and costly and there are still leave millions of Americans without health insurance. These programs do not collectively barter for better drug prices (something the pharmaceutical industry has made sure of in every healthcare law written). They do not streamline care such as in Taiwan making administrative costs low. These programs drain our tax payer dollars while delivering close to the worst healthcare outcomes of any industrialized country while costing us more per person and more per percentage of our GDP than any other country in the world.

We need instead more competition amongst insurance companies so their rates have to be good to stay in business. This would require them competing across state lines. They also need to be nonprofit. We simply cannot allow insurance companies to continue to make BILLIONS in profits which are nothing more than dollars taken from us for a rainy day for safe keeping and not given back to us in our time of need. If they are non-profit it will take away that drive but they still will want to do well as it will allow them to keep their jobs and possibly get a better salary. If this competition works well then we can start getting rid of Medicare and Medicaid and instead subsidize low-income people enough to pay for private insurance. These private insurance companies will have incentive to find ways to get their patient’s healthier to help keep down cost. Currently Medicare and Medicaid do not have that incentive. But, as long as we are stuck Medicare and Medicaid they MUST bargain with pharmaceutical companies for better rates on drugs. It is unacceptable that we continue to pay so much more for drugs than those in Canada simply because our government gives into the will of that industry and pays them whatever they want. If they weren’t making money at Canadian prices I am sure they would have stopped selling to Canada long ago.

Also, tying healthcare coverage to employment is a relic of a bygone age and has no place in a capitalist or socialist healthcare system and needs to be done away with immediately. I think we can all agree the unemployed deserve healthcare coverage as well. And tying your current insurance to your employer is ridiculous because as a physician I have personally seen thousands of people who were insured but of course when they get really sick they couldn’t work, they then lost their job and presto, they don’t have insurance any more, precisely when they need it.

We need a healthcare system that has universal coverage for all like a socialized medicine system but with the price and quality improvement that comes from competition in a free market type system.

Here is another blog that I felt was well written and stated on this topic


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