The Free Market by any other name….
Filed Under Economics, Health, Jeremy
Health Care Reform…..
Okay, just calm down and put your torch and pitchfork away…we are not forming an angry mob yet!
Care does, however, have to be taken when discussing this topic because it has more sides to it than all the sides in a bag of dice. I like to think that saying one will fix the health care system in American is the same as say one will cure Cancer or the Common Cold. In none of the cases is there a single dragon to be slayed. I would like to think of this entry as one in a series in which I attempt to address this issue from an economist’s perspective. While I do not plan on offering any solutions, I do hope that it spurs a (civil) discussion among those of us on The Porch (and please, no loud barking or biting).
My first foray in to this is actually rather short, but I think it is an issue that is getting lost in all the noise. Failure to pass some type of reform leaves us with what we have and, given the latest poll numbers, this is what the opposition says people want. So what do we have now? We have a system that is based on competition between insurance providers and hospitals, or what might be called a “free market” system. Insurance companies can drop clients if they meet certain “exemptions” and can deny initial coverage for pre-existing conditions. The premium prices are (presumably) set by the market place as is the amount paid to hospitals and doctors for their services. And yes, for the most part, this system is (sorta) working.
That said, does anyone NOT realize that the “free market” system that is running health insurance is the SAME “free market” system that was (is) running the financial industry? You know, those bank things that created, expanded, and crashed the sub-prime loan market. That same system that led to the evaporation of almost half of the value of the stock market in a matter of months. That same system that pushed (or at least helped pull) the U.S. economy into the largest hole since the Great Depression. Yep, the invisible hand that caused all of this is the same one running the health insurance industry. So if we can not trust the invisible hand of the free market to hold our money, why are we so ready to trust it with our health?
I am NOT saying that the government is going to do a better job or even that it should try. I am just asking why the call for a strong, private health insurance system (read: “free market system”) is okay in this case but a strong, private banking system is demonized as Wall Street getting rich off of Main Street. The only difference is that the latter was the most recent to burn us? [If you don't believe the "free market" system is demonized, then explain how Mr. Greenspan can go from being the next best thing to God to spawn of Satan in a matter of months?]
The point is this: what we saw in the banking industry is the full color spectrum of any free market. Free markets can make lots of money and be very efficient, but they can also develop bubbles and distribute money and wealth (or health) in ways where the rich get richer and poor get poorer (i.e. not equitable). Additionally, when the market corrects itself (i.e. the bubble pops, and as my three year old knows…they all do), no one is safe! The market is ruthless when it corrects itself and it does not care who is in its way. Grandma lost just as much (if not more) than several Wall Street-ers.
We were just slapped by the invisible hand in the banking and housing markets….do we really want to get slapped in the health insurance market as well?
Just something to think about.
-J
