The destruction of markets in healthcare
Editor's Note: which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The series continues with this blog by Ken Fisher, MD, who is an internist/nephrologist in Kalamazoo, Michigan, a teacher, author ("Understanding Healthcare: A Historical Perspective") and co-founder of Michigan Chapter Free Market Medicine Association. The views expressed in these blogs are those of their respective contributors and do not represent the views of or UBM Medica.
Many hold the belief that markets do not work in healthcare. Recently, former President Bill Clinton—calling for more patient-directed care using markets—said, “that didn’t work out very well for us, did it? We wound up with the most expensive system in the world and we insured the smallest percentage of people.” He was referring to the American experience of the past 50 years, with many uninsured and excessive costs.
With this kind of reasoning, healthcare is unique and true markets do not work, therefore, to these political leaders, we need a government-dominated, price-controlled and heavily bureaucratic system that pays less attention to personalized care. But is it true that markets in the United States do not work for healthcare, or is it the result of unintended consequences of decades of ill-conceived federal policies?
Could it be that our federal government started the destruction of healthcare market discipline in 1965 with the passage of Medicare/Medicaid? When written, this law was open-ended (no limit on expenditures) and it did not involve the recipient in knowing or being concerned with cost. Monies put into the Medicare fund during working years are now grossly inadequate, paying approximately one-third of each person’s expenditures. The law immediately created a huge increase in demand with no effort to increase supply.
As one might expect, within the first year, costs greatly exceeded expectations and continue to threaten federal and state solvency to the present day. Instead of addressing these structural flaws, Congress has, in a series of further market destroying steps and with the approval of several presidents over the years, created a price-controlled, bureaucratically administered payment system for Medicare that uses formulas that have NO market determination. Yet with each attempt to control costs, they continue to soar. Congress does not seem able to address fundamental flaws but rather deals with this issue by adding more ineffectual bureaucracy.