The ACP Advocate Blog
by Bob Doherty
Tuesday, October 11, 2011
Free market health care is the answer? Then show me.
Critics of the Affordable Care Act argue that it involves too much government, and have vowed to repeal and replace it. For the most part, though, they haven’t gotten much past the part about repeal of “ObamaCare”—the replacement piece usually involves some vague promises to use market-based reforms, not an actual plan that could be contrasted against the ACA. As the country heads into a presidential election year, it will be important for conservative critics of the ACA to more clearly explain how market-based reforms would actually do a better job than the ACA in expanding access to care, controlling costs and improving outcomes. Then let the voters decide.
I understand the philosophical argument for market –based reforms: that given the ability to make free choices among competing health plans, providers, and treatments, patients will make wise and prudent choices, better choices than the government would make on their behalf. That if patients have to pay more out-of-pocket instead of being insulated from the cost of care by low or no deductible plans, they will have an incentive to use care more judiciously. That removing price controls—and allowing patients and their physicians to contract freely for services rendered—will introduce price competition and sensitivity, lowering overall costs. That without price controls, there will be more physicians to take care of patients, because physicians will be able to charge what the market will bear and stay in business, while discounting charges for patients who can’t afford to pay the full freight and charging more to those who can.
I actually agree with much of this line of reasoning. I think patients should have more choices—of physicians, hospitals, and insurance companies. Price controls do distort markets and create shortages. Patients should have more skin in the game.
But . . . and it is a big but . . . I haven’t seen any evidence that such market-based reforms can solve the two biggest challenges facing our health care system: out-of-control costs and almost 50 million Americans without health insurance, without the government being involved to subsidize care to those who can’t afford it and using its purchasing power to drive down spending. In other words, I’d like to see a conservative plan that shows me how and where market-based reforms would work—absent a major role for government:
Show me: Is there any country in the industrialized world where market-based reforms have ensured access to care for all of their residents, without a major role for government? When I co-authored a paper for ACP comparing U.S. health care with 12 other industrialized countries, we didn’t find a single one that had a system that relied on markets without substantial government subsidies and regulation.
Show me: Is there a state within the United States that has a developed a viable plan to ensure access to all of their legal residents, without a major role for government in subsidizing coverage? If states can do it better, then why is it that states that are most hostile to government tend to lead the pack in the percentage of their residents without health insurance? Massachusetts is the one state that has near-universal access to health coverage, and as we all know, it does it by government regulating insurance underwriting practices, spreading risk, subsidizing coverage for people who can’t afford it, and requiring people to buy it.
Show me: how eliminating price controls, moving to high deductible health plans, and offering more choices of insurance companies will by themselves reduce health care spending? For price competition in health care to work, several elements would have to be present. Patients (let’s call them “consumers” for this exercise) would need information to compare the quality and cost of the “providers” and health plans offered to them, just like they do when buying a car or washing machine. Yet we patients know almost nothing about the qualifications of the physicians and hospitals we supposedly can choose from, other than some basic information like whether a physician is board-certified or where he or she went to school. Many of the physicians who argue for free market reforms resist mandates that they “report” to the public on the quality and efficiency of their care.
We patients would also have to know in advance what physicians or hospitals charge for services so we could shop around, but there is no equivalent to Expedia for comparing physicians’ and hospitals’ charges. And even if I as a patient know what a doctor charges for a “typical” office visit or procedure, this tells me almost nothing about the actual cost of my care, because I may not be typical, and my cost of care has as much to do with how many procedures and visits I will need, what specialists I will be referred to (and what they charge), diagnostic tests I will need (and what they will cost me) and hospital trips I’ll have to make. Except maybe for a few elective procedures, much of this will remain unknowable and unpredictable, making true price completion unworkable.
Even the idea that we have a choice is a bit of an illusion. We don’t get any choice when it is an emergency room doctor, or when an anesthesiologist is assigned to us for surgery. And in many markets, there may be only one or two insurance companies to choose from. And even if we had more insurance companies to choose from, how do we patients know which ones offer better service and benefits at a price we can afford?
Finally, the argument that price competition and high deductible plans will substantially lower health care spending overlooks that fact that most health care spending is concentrated in a small percentage of the population, with half of the population spending little or nothing on health care, while 5 percent of the population spends almost half of the total amount. The high spenders tend to be older, sicker, and with multiple chronic diseases—the kind of people who would quickly use up a high deductible HSA account. The same study shows that they already have high out-of-pocket expenses relative to Income (so much for the argument that requiring them to pay even more out-of-pocket will lower spending). Much of health care spending occurs in the last six months of life, a time when seriously ill (dying) people aren’t likely to be shopping around for the least expensive doctor or hospital.
This isn’t to say that markets aren’t important, but markets work best when people have a real choice and the information to go with it to make informed decisions, and when government regulates things that markets don’t do well on their own, like providing public subsidies to people who can’t afford to buy health insurance on their own, requiring insurance companies to compete based on quality instead of cherry-picking the healthiest enrollees, mandating public reporting of quality and outcomes data, and providing patients and their physicians with information on the comparative effectiveness of different treatments. Oh but that is precisely what the Affordable Care Act tries to do, and conservatives say that is too much government and not enough markets. Fine, but I have to then ask: show me how free market health care would work in ensuring access and driving down costs (supported by evidence, not vague statements of philosophy) in the absence of government regulation and subsidies.
Today’s question: Is there any example or evidence, within the U.S. or abroad, that shows that free market health care can work in driving down expenses and ensuring access without government regulation and subsidies?
About the Author
Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog
Email Bob Doherty: TheACPAdvocateblog@acponline.org.Follow @BobDohertyACP
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