Sunday, October 25, 2009

The fiction of health-care market efficiency

This blog entry is written as the U.S. debates whether or not to increase its socialization of medicine to come up towards something more completely approaching making health care universally available to its citizens.

I propose an unusal addition to the argument for socialized medicine. And that is the market argument. If you look at how non-government corporations treat health care among their employees, they virtually all reject market solutions in favor of socializing the costs within their jurisdiction. The vast majority of successful corporations offer subsidized health insurance to their employees. Indeed, the most successful of these corporations offer the highest degree of socialization of these costs: high quality health care available to their employees and employee families at little or no out-of-pocket cost.

Let me make this clear. Essentially all successful U.S. corporations, acting as rationally as is concievable in the modern world, reject market solutions for the health care of their employees. This rejection is notable for what these corporations do NOT choose
  1. They do not offer less insurance to large famililes than to smaller families or single employees
  2. They do not choose insurance plans with very large co-pays or partial coverages
  3. They make no attempt to alternatively compensate employees who use the benefit less, and therefore cost the company less

How remarkable is it that U.S. corporations, these bastions and beneficiaries of free market capitalism, treat health care in this market-rejecting way? Not that remarkable. Think of the other ways U.S. corporations reject markets every day.

  1. There is no market in offices. Wouldn't there be a great efficiency and fairness in calling upon employees to rent their offices in a market system? Shouldn't the employee willing to work in a windowless cubicle be paid some of what he saves the company compared to his colleague in the corner office with windows?
  2. Information Technology (IT) help is available for free. I'm sure there are some employees who beat their computer problems to death before they make that call to IT. I'm sure there are other employees, like myself, who love the high quality help so much that we look forward to finally addressing the problems of our laptops with hour-long calls to IT. Shouldn't the company charge employees for their IT calls? Isn't the efficiency of the enterprise dependent on employees making intelligent choices about which resources to use, something they can only do when signalled by pricing information? Shouldn't the low-impact employees make a little bit more money, since they are saving the company money?
  3. Indeed, there is no market in computer equipment, office equipment, or access to printers and fax machines. For years I have bureaucratically fought for the best computers and laptops I could get. I have always had a better laptop from work than anything I would ever buy at home. How crazy is it to think that a profit-seeking company can ignore the information a priced market would provide to improving resource allocation.

In summary, the refrain that the market is always more efficient than the government seems fraught with the peril that even those making it choose non-market solutions time and time again. If the market is no good for the health care of the employees of the best, richest, smartest, most profit-managed corporations in the world, then why would anyone think it is a good idea instead of a government program for health care?