STAFF NEWS & ANALYSIS
Confederacy of Dunces?
By Staff News & Analysis - April 02, 2013

Why We Need to Fix Our Health care … I think you should read both Brill's essay and Goldhill's book. There are actually some points of agreement about how to reform what everyone accepts is a badly functioning, almost crooked, marketplace for health care. (Goldhill, by the way, wants universal health care and thinks the government has a big role to play, so this is not an argument for the poor to fend for themselves). My own views on this difficult issue are open. I want to read more and understand better what seems to be working in cutting costs and improving quality across the country and the world. But I do think that Steven Brill points to a very real problem in health care as a market and that these are inherent in the nature of health care. The consumer does not have the knowledge or the power to act as he or she does in other markets. − CNN

Dominant Social Theme: Sometimes markets don't work and then the efficiency of government must be employed.

Free-Market Analysis: You can only shake your head. There are so many people who believe that more government is the answer or that "markets fail." Of course it is impossible for a market to fail. The worst that can happen is that the market price is not sufficiently accurate from a forecasting standpoint because the inputs are too few. But that is not the same as a "failure."

Nonetheless, every day we are subject to a barrage of government-oriented propaganda and this article by Fareed Zakaria is more of the same. He cites two other authors in the article, David Goldhill and Steve Brill.

While Goldhill is consumerist in his approach to health care, it is fairly obvious from Zakaria's remarks that he leans toward the government healthcare model. In doing so, he ignores real-life catastrophes in Britain and Canada featuring queues that result in the death of cancer patients from lack of treatment and mothers sent home to give birth because there is no room in crowded government hospitals.

People do like "free stuff," of course, and the lure of government payments for health care is a seductive one, even if it doesn't work. The more government, in fact, the more distorted and expensive the marketplace becomes, leading to even more calls for government intervention. Zakaria's article fits into this pattern neatly. Here's more:

The central debate between Democrats and Republicans is over whether the free market works well in health care. In a new book, Catastrophic Care, David Goldhill makes the case for the market, arguing that people need to become consumers of health care so that they, not insurance companies, not the government, actually see, feel and pay the bills. That will force producers of health care – doctors and hospitals – to push down prices and drive up quality. That's what happens with groceries or television sets or computers.

In fact, Goldhill argues LASIK surgery, which is not covered by health insurance, has seen a 90 percent drop in price and a huge increase in quality since it was introduced in the early 1990s. That's what happens when consumers pay for a product.

Steven Brill makes the opposite case in a recent cover story in Time magazine. He painstakingly went through the actual bills that hospitals put out and found that they charge massively for routine procedures and medicines. He found, for example, a routine blood test, prophyrin (ph) 1, was billed to patients at a hospital at the rate of $199.50. Medicare pays for that same test, $13.94.

Brill agrees that America's health care industry's not a real market, but for different reasons than many on the right. He says that there is so much collusion, so many monopolies and so much disinformation that it cannot function as one.

"Most important," he says, "Is that the consumer, when buying health care, simply does not have the power to act as he or she does in other markets. When a doctor tells you that you need a CT scan, you are unlikely to say 'No, thanks' or to start haggling over the price." …

Perhaps that's why in every other rich country in the world, we have found that markets don't function properly in health care – and that includes very free market nations like Singapore and Switzerland, both of which score higher than the United States on the Heritage Foundation's Index for Economic Freedom.

Obviously, Zakaria is pro government and makes selective points about its efficacy. He claims that markets "don't function properly when it comes to health care," and this is a breathtakingly disingenuous statement to make.

That he does so after citing Goldhill's evidence about the private market efficiencies of LASIK surgery only makes his conclusion more baffling. It is a kind of cognitive dissonance in which the conclusion is preordained and is one reason why CNN is failing so badly when it comes to ratings.

Zakaria is held out as a "thinker" for the reasonable left; but this article's indulgence in logical fallacies is similar to others penned by Zakaria and a host of such commentators. The idea that free-market competition is going to fail when it comes to health care (but nowhere else) is a truly breathtaking assertion.

As Zakaria must know full well, the health care system in the US and elsewhere functioned no worse in the 1800s and early 20th century than it does today and without the exorbitant costs. The difference was that government hadn't interfered in the system; today it does.

As for Zakaria's citations of countries that administer their health care systems with "low costs," well … we are skeptical to say the least. It matters, after all, who does the accounting and it also matters how long the systems have been in place.

Government systems tends to become corrupt over time. When you remove the Invisible Hand, you are then trusting legislators to keep the system honest.

After Thoughts

Does this ever work? And why does Mr. Zakaria want to pretend it does?

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