Sen.
Ron Johnson (R-Wisc.) recently penned an op-ed for The Times, “Where the Senate Health Care
Bill Fails.” Mr.
Johnson’s moral outrage seems fundamentally misdirected, and his understanding
of the free market and how it functions, particularly in regards to health
care, is wholly flawed.
Rather
than focusing on the 20 million people who will lose insurance over the next 10
years or the upward redistribution of
wealth through unnecessary tax cuts, he laments the government’s failure in
obstructing the forces of the free market and the projected deficit increases
that will result from the Senate bill.
“A truly moral and compassionate society,” Mr.
Johnson says, “does not impoverish future generations to bestow benefits in the
here and now.”
First, the
Reagan-esque tax cuts for the wealthy, which lie at the core of the Senate health care bill,
impoverishes future generations to bestow benefits in the here and now to those who don’t need them. Second,
the tendency of Mr. Johnson and many of his Republican colleagues to frame the
moral component of health care in economic and political costs rather than the
costs of human suffering and death is truly stunning.
What’s
more stunning is that we Americans have largely accepted the premise that
health care markets function like other commodity markets. As a result, we no
longer appear to question that in the case of problems like rising premiums and
deductibles, to use Mr. Johnson’s words, “a simple solution is obvious. Loosen up regulations and mandates, so that
Americans can choose to purchase insurance that suits their needs and that they
can afford.”
Health
care is not simple, but we’ve been fooled into believing it is because of our
national, zealous belief in the power of the free market and a false notion
that health operates under normal market rules. I’d like to demonstrate this
point by looking at the crux of Mr. Johnson’s argument:
“Layer upon layer of laws, rules and regulations
have made our health care-financing system a complex mess, separating patients
from direct payment for health care. As a result, patients neither know nor
care what things cost. We have virtually eliminated the power of
consumer-driven, free-market discipline from one-sixth of our economy.”
It’s
worth noting here that no market is truly free. In his book “Saving
Capitalism,” Robert Reich clearly explains how all markets are governed by
rules, and those rules are not inherent, but rather set by those in positions
of power, often governmental forces. So, while Mr. Johnson asserts that laws,
rules and regulations alter the rules of the market, the very same could be
said for any repeal of laws, rules or
regulations. Each are simply means to alter how the “free” market is governed.
Still,
any functioning “free” market operates under certain assumptions, namely the
transparency of costs, the ability to make choices based on those costs and the
ability to freely enter and exit the market.
Mr.
Johnson is absolutely correct that patients are largely ignorant of health care
costs. In 2013, Steven Brill wrote an exceptional piece for Time on the inconsistent prices for
services set by hospital chargemasters and the lack of transparency regarding
the process for setting those prices and the eventual costs billed to patients
and insurers.
I’d
wager to guess that almost nobody reading this piece could name the cost of a
physical, even though many of us get one every year. Even worse, the cost of a
physical from Dr. A might be half that of Dr. B even though their offices are
only three miles apart. The arbitrary and often secretive nature of service
pricing makes it cumbersome if not impossible to comparison shop. Right away,
we’ve violated our first market assumption, transparency of costs.
Moreover,
this lack of transparency essentially violates the second assumption that we
can choose services and providers based upon those costs. But let’s assume by
some miracle we all knew the cost of every service and insurance plan
available. Even under these fanciful circumstances, choice remains largely an
illusion.
Let’s
look at insurance plans first. According to the Kaiser Family Foundation, 49 percent of Americans
receive insurance through their employers. Typically those plans are far better
than those on the individual market. However, your choices are rather limited.
An employer might offer three different plans, all of which are packaged with
predetermined premiums, deductibles, copays and levels of coverage. Not a lot
of choice.
And
your ability to choose services might be more limited based on the type of plan
you select. Let’s say you have an HMO, which typically mandates you select a
primary care physician to address your basic needs and refer you to specialists.
So you
select Dr. A, who charges less for physicals than Dr. B. But what happens when
you need another service from Dr. A, like an x-ray for a sprained ankle. Sure,
Dr. B doesn’t charge as much for that service, but you’re locked in to Dr. A,
so you have to pay the higher costs, even if by some miracle you could research
those costs an endured the pain of a possibly broken ankle long enough to
investigate them.
And
this brings us to the final assumption of most markets, namely that we have the
ability to freely enter and exit based on cost and choice. Mr. Johnson feeds us
an atypical example – all but parroting his colleague Sen. Rand Paul (R-Ky.),
an ophthalmologist: “Look no
further than how laser eye surgery went from exotic to affordable during the
years it was not covered by most insurance.”
While Mr. Johnson’s statement regarding
the decreased cost of laser eye surgery is technically true, it’s incredibly
misleading. Market rules actually do apply to this sector of health care,
unlike most others.
I happen to wear to glasses, and I am a
prime candidate for corrective laser surgery. Eye surgeons are relatively
transparent about the price for this procedure, and I can easily evaluate my
options and thus make an informed decision based on price and expertise.
Moreover, I can choose to enter and exit this market at will because,
regardless of how much I may want the
surgery, I don’t need it. My glasses
work fine. It’s this very fact that I don’t need the surgery now that affords
me the time to comparison shop.
However, let’s look at other sectors of
the health care market, namely emergency care. Let’s say I’m at home and I have
a heart attack. I’m in the health care market now, and you can bet I didn’t
choose to be.
I call an ambulance to take me to the hospital.
Many rural and small town Americans are serviced by a single hospital, so if
these folks have heart attacks, that’s where they go and they pay the prices
set by the hospital at a rate negotiated by their insurance. Again, little
choice.
But I’m fortunate. My town has three
hospitals. Let’s say against all odds I actually know the cost of heart surgery
at each of them, and in the throws of cardiac arrest, I manage to instruct the
EMT to drive me to the cheapest one. Even in this most unlikely of scenarios,
that’s still not going to happen, as most EMTs are required to take patients to
the nearest hospital, for obvious
reasons: I’m more likely to live if I’m treated sooner.
This is a perfect example of why free
market policies don’t align with the reality of health care in this country.
Costs are secretive; even if we learn those costs, we’re limited in our ability
make choices based upon those costs; and we can’t choose to enter and exit the
health care market.
Admittedly, some of those issues could
and should be addressed. Health care providers should be regulated to keep the
cost of services down and relatively equal within certain medical sectors and
geographic areas.
However, any insurance system that
remotely resembles our current one will necessarily limit choice, as the only
way to control costs is to collectively bargain, meaning most of us have to
sign on to limited numbers of group plans. Regardless, the unpredictable nature
of illness will always prohibit free entry and exit of the health care market
place.
Mr. Johnson’s longing for free market
solutions to health care may appeal to our ideological sensibilities, but in a
practical sense they will never work because health care does not operate like most
markets. Addressing America’s health care problems will require inventive
solutions based in reality, not rhetoric, the latter of which appears to be all
Mr. Johnson can provide.