Using the market to solve problems of health care coverage in this country is like using a lawn mower to vacuum the living room rug. It ain't gonna do it. This doesn't mean there isn't room for market forces within the healthcare industry, but that they're the wrong tool for health care coverage.
I don't remember what justification Hillary Clinton offered in 1993 for having her secret meetings for coming up with some kind of national plan for health coverage, or even if she offered one. I can guess what Dick Cheney's reasons for secret meetings with the energy industry for coming up with an energy plan in 2000 were. I know I have my biases, but I'm pretty sure Hillary wanted to come up with a way to help citizens afford health care and I'm just as sure Dick wanted to help out his buddies. I suspect the secrecy of the meetings had to do with the fact that both Hillary and Dick wanted to give the private sector world room to talk outside of public view: a private enterprise version of the smoke-filled back room. And sometimes people need that.
Both Hillary and Dick were operating not only on the assumption that politics demand they not mention or even consider any kind of non-free-market solution, but even more important, they were operating on the assumption that they could in fact come up with private solutions to the very public problems of health care and energy.
A bit of review:
The operating forces in the free market are supply and demand. In the most general sense, the consumer tries to get the cheapest something and the producer tries to sell it for the most she can get. (Remember this is all pretty much theoretical)
This is supposed to be a free market: consumers are supposed to be making voluntary purchases. They choose to buy.
This means the producer will want to make his product as cheaply as he can to maximize profits. He might
- try techniques like producing in bulk -- economy of scale, presuming that it gets cheaper and cheaper to make more and more of something in a uniform process.
- try techniques like having a gimmick or an improvement in his product that will add to rather than eat up profits.
- try to ensure that a customer or group of customers won't cut into his profits. For instance, she won't want people asking for extras or changes to the basic design at no additional cost.. She won't want to be bothered delivering her product to a place where transportation costs outweigh profit, or where there aren't enough potential customers to make a profit. Think of cutting out train stations in small towns.
The consumer, on the other hand,
- will look for the cheapest price for the same article. For instance, until the price of consumption outweights the price at the pump, people will drive around looking for the cheapest gas.
- Will buy the item with the gimmick only if the price is comparable and the gimmick worth it. Won't want to buy something with gimmicks or add-ons he has no perceived use for.
- Will buy what is convenient rather than driving a huge distance to another town, for instance, to find it but will look for the cheapest available item in his area.
When healthcare coverage is a product on the free market just like, for instance, a home entertainment system, the producer
- will want to minimize expenditures and maximize profit and so...
- will look for the equivalent of the cheapest methods of production.
- will want gimmicks and add-ons if and only if they increase profit.
- will not want to service consumers who will eat into his profits, especially eat most of them away.
The health insurance consumer
- will want to buy it at the lowest price he can.
- won't want gimmicks and add-ons that jack up the cost and don't provide anything he needs.
- As a consumer in the market, won't want to pay more for the product so someone else can buy a better product at the same price he is paying for his cheap one. That would be paying $30,000 for a Ford Escort so someone else can get a Lexus SUV for $30,000. Since buying the insurance at all is voluntary people who are young and healthy and possibly struggling to make a living aren't going to be willing to pay large premiums so old crocks can have expensive heart surgery or spend their last year on an expensive ventilator.
Although health care coverage is a product, that doesn't mean that it is the kind of product that can be successfully sold in the free market.
Health care coverage is a product in the sense that it has been created "by someone [or more than one] or by some process." It is also a product in the sense that it is the consequence of the problems individuals face when trying to pay health care costs out-of-pocket.
Home entertainment systems are products in the sense that they are "commodities offered for sale."
Yes, yes, I know. Health insurance is currently a commodity offered for sale. My point is that we've made the assumption that because it is a product, it must be saleable. But there's no logical reason to assume that all products should be saleable.
Above I looked at products in terms of supply and demand: as the exchange in the process of supply and demand when it is understood as a market process. So you can understand that all products are not necessarily suitable entries into the market process, here's a look at some products that are definitely not saleable, or at least aren't grabbed up as commodities:
- depression, a product of chemical imbalance, perhaps, or circumstances, or both.
- cigarette ashes, a product of the combustion of cigarettes used in smoking.
- dust bunnies
- parents' love for their kids, which some marketers try to exploit, but, which, by definition, itself is not for sale to the kids.
- the cookies a parent makes for his kids.
Let's look specifically at health care coverage as a product. (I say coverage instead of insurance, because what we need is coverage. Coverage does not necessarily have to take the form of private insurance.)
- health care coverage is the product (result) of the need to pay for healthcare expenses.
- various kinds of health care coverage are products that have been created to meet the need to pay for healthcare expenses.
HOme entertainment systems are good products in the free market because:
- People don't need home entertainment systems.
- People don't mind buying a more basic product for less money, though many will search for the most bang they can get for the buck.
- People don't need to go bankrupt to buy a home entertainment system. They don't need to buy the product to begin with if they can't afford it.
- The price of a home entertainment system goes up when it has more bells and whistles or if you choose to buy it on credit or to buy it somewhere close by but more expensive. But you don't have to buy it at all.
- Prices rise as demand rises, but the demand is a voluntary demand.
- The inability to buy a fancy home entertainment center doesn't lead to pain and suffering or death or loss of a job or bankruptcy and loss of your home and your abilities.
On the other hand, people need healthcare coverage:
- While at any given moment in time, maybe half the population can get away with the more basic product for less money, at another given time, most people will need healthcare coverage.
- The sicker they are, the more they need it, the more expensive the coverage becomes. They can't say, we can't afford the high-end product.
- The inability to buy a high end product can lead to increased health problems, job losses, disabilities of all sorts, bankruptcy, loss of your home and even death.
In the free market game between seller and buyer, both should be playing from positions of some strength. In the home entertainment system game, both can, even if one is playing at the low end of the cost side of the field. In the healthcare coverage game, when health care coverage is part of the free market game, as the buyer's need becames greater, both buyer and seller lose out. The buyer can't afford to buy what he needs because the seller can't afford to sell it at a price the buyer can afford.
