How free should the medical market be?

The American Medical Association has been proposing one protectionist or statist piece of legislation after the next, and while their motives are just as impure as ever when it comes to challenging the growth of retail-store healthcare services, as Dr. Thomas Davis points out, these retail-chain clinics aren’t the free market supporter’s wet dream that some would have us believe.

The exchange by him and Tom Firey over at Cato is interesting, but I’d like to focus on Dr. Davis’s statement on what he (and putatively Mr. Firey) would like to see in a perfect world: “I would prefer a world where a patient can get any medication over the counter without a prescription, where doctors are not licensed, there is no insurance and patients paid cash at the time of service. Health care would be far more efficient and transparent in such a world.”

The problem with “perfect worlds” is that the way we develop our conception of them is flawed. We take observations of the real world, we then develop a model of real world dynamics that works under certain conditions, and then we take the model and try to extrapolate from it a vision of how the real world should be, ignoring those conditions in the process. I’ve dealt with this with market anarchists as well.

We must remember that the free market is a model, a very powerful one, but again dependent on certain conditions that never exist in the real world. To ignore the fact that those conditions do not exist in your “ideal” system is to lie to yourself.

What Dr. Davis’ admittedly appealing utopian view seems to suffer from are the myths of rationality and perfect information, necessary preconditions for a “free market” to operate under. Medicine is a complex and highly specialized subject. At least, that’s why my professors tell me that I won’t be ready to be a full-fledged doctor until I’m 30. And while I hate to come off as elitist, it is simple fact that the consumer — no matter how educated, intelligent, or motivated — would hardly be in a position to understand exactly what a service is, let alone how effective or necessary it may be.

Under such conditions, it’s hard to accept Dr. Davis’ view without a few qualifications:

  • “Where a patient can get any medication over the counter without a prescription” — so long as something similar to the Protection of Lawful Commerce in Firearms Act was established. I’m not a big fan of Big Pharma. Not of their predatory business practices, the outright lies they make about cause and effect, their connection with doctors, none of it. But when all is said and done, medicines are a good thing. And it is very costly to research new ones.

  • “Where doctors are not licensed” — where they don’t need to be licensed, sure. But I contend that licensing would become an important factor in mitigating the effects of imperfect information in the marketplace. Licensing would become a voluntary and private endeavor, and so become a form of branding. Rather than the patient having to research me with fervor, he could simply turn to my licensing agency, look at how rigorous their standards are, and then be able to make an educated inference about my own abilities.

    In fact, turning to a free marketplace would only make licensing more meaningful. Academies and Board organizations would compete to attract the most competent doctors; organizations like the ever more irrelevant AMA would cease to exist, being more dependent on the consumer rather than the provider.

  • “Where there is no insurance” — Insurance has a several thousand year old history. Even if we were to somehow make it magically disappear today, it would reappear tommorrow in some other form. What we should do is decouple health insurance from employment. It was, as usual, well-intentioned legislation that created this juggernaut. If government had never mandated that employers pay health insurance costs, employers would have never tried to buy insurance in bulk. And if that had never happened, the monopolistic systems we see could never have been established.

The key point I’ve tried to make is the importance of freedom of choice. The idea that the American healthcare system is anything resembling a free market is nothing more than a myth. The idea that the American healthcare system can be a completely free market is also a myth. A free market is like a massless string, very useful for theoretical problems and simplifications, but very hard to find in the real world.

Nevertheless, when choice is maximized, individual and organization alike must compete and with competition will come efficiency and quality. Of that I have no doubt.

As to why I — unlike the AMA — am unafraid of the ensuing competition, I’ll have to quote Dr. Davis again: “My point is not that these clinics are ‘bad.’ The competition in the short run is probably a good thing, and I can out-compete Wal-Mart on the delivery of high quality health care any day.”

One thought on “How free should the medical market be?

  • June 28, 2006 at 12:59 pm
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    no matter how many layers we involve, there will be a LOT of misallocation of resources.

    Competition is good, opening the market is good. But don’t turn a blind eye to the fact that the medical market will be comparatively inefficient. That is all I’m saying.

    I don’t believe in government intervention unless it’s a commons or anti-commons situation. This isn’t one of those. ergo, I don’t believe in government intervention. But I don’t believe in whitewashing.

    All I’m trying to do is say ‘yeah, free-er markest are good, but things won’t be as good as they might be in other markets’. It’s not a hard concept to understand.

    This is much like when a doctor tells you that yes, with hard work and diligence you can recover, but you’ll never be quite as healthy as you used to be.

    You can keep namecalling, though. I don’t mind.

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