Health Care Market Isn’t a Free One

The following article by Dr. Deane Waldman appeared in the Albuquerque Journal on November 16, 2014. RGF president Paul Gessing offered his own thoughts on the Think New Mexico proposal in this blog posting.

Recently in the Journal, my friend and colleague Dr. Barry Ramo spoke glowingly of Think New Mexico’s plan to improve health care in the Land of Enchantment. Unfortunately, the plan, hatched by our own homegrown policy think tank, is off base.

In fact, it brings to mind the famous aphorism, “The road to hell is paved with good intentions.” Think New Mexico is smoothing our way to a blisteringly hot place where we do not want to go.

Their plan advocates enactment of new rules and regulations to:

1. “Require transparency of hospital prices and risk-adjusted quality indicators…”
2. “Outlaw price discrimination…”
3. “Prohibit gag clauses…”
4. “Seek a federal waiver so that Medicaid will pay the same prices as private payers.”

The people at Think New Mexico say they want to restore free market forces with its manifold advantages to the “market” of New Mexico health care.

Freeing the market in health care is a very good idea. What they propose is the opposite.

A highly regulated, tightly controlled free market is a contradiction in terms. You either control a market or let it do its thing. Note the action verbs in Think New Mexico’s first three proposals: require, outlaw and prohibit. They are about as controlling as any words I know.

In the free market, there are no external controls on the two players: Consumers choose to spend or not, and sellers compete. No third party makes decisions for them.

There should be some regulation of the market as a whole, but no mandates as to what specific consumers and sellers can do or cannot do. A free market does not have some who are required to follow the rules while others are exempt.

There are no free market forces when buyers are required by law to buy a specific, government-approved product and only that; where sellers are told what to sell and at what price; and where a third party pays the bill.

The people at Think New Mexico no doubt mean well. Nonetheless, the group is paving the road to hell.

They say they want to “free” the market, yet propose to do so by increasing the number of rules, regulations and restrictions!

You cannot reduce regulatory constraints on a market by adding more regulations. You cannot cure cancer using cancer.

Getting useful comparative shopping information into the hands of consumers would be necessary in a truly free market. But first, consumers need control of and responsibility for their own money. They need to be making the spend/not spend decision rather than the government.

It gets worse. “Price” in health care is a meaningless term.

Everywhere else, price is what the consumer pays to the seller. In health care, the consumer doesn’t pay, and no one pays what the price tag reads. Payment is decided by the federal government, rather than through the balancing mechanism of negotiation between buyer and seller.

So the consumer gets useless information and cannot economize because the spend/not spend decision is made by someone else. That is not a free market.

On the supply side of a free market, various sellers compete for consumers’ dollars based on the true price (cost to customer), features, and quality. Not so in health care, where the market is tightly controlled.

The government, not the seller, sets prices and quality standards. There is no competition between the various sellers of goods and services.

There is competition in one place in health care: between insurance carriers. They compete strictly on price and then make their profit by delaying, deferring and denying the care we need.

Health care is the antithesis of a free market. Think New Mexico’s plan will not make it one. Though the group’s ostensible intentions are laudable, their implementation plan is deeply flawed. It will only smooth our descent to an overly warm clime.

Dr. Deane Waldman, author of “The Cancer In Healthcare,” is an adjunct scholar for the Rio Grande Foundation.