In a free market, competition is open. Both providers and consumers are equally knowledgeable about the worthiness of the product or service. Each is free to walk away if not satisfied. The price is set by the unfailing law of supply and demand. There’s no coercion or influence from the government. let’s see if each of these free market features can be found in the medical market, starting with the requirement of free and open competition.
The medical market lacks open competition in every aspect. Patent laws protect Big Pharma from its less expensive competitors for many years. Consolidations protect hospitals and providers from competition and closed networks keep patients from moving freely from one provider to another. Nonprofit hospitals can merge and acquire all they want without fear of Federal Trade Commission’s scrutiny because the FTC must keep their hands off the nonprofits. The mere existence of the noncompete agreement is prima facie evidence that the medical market cannot be competitive. Most terms include barring practicing within a 50 mile radius for at least one year.
Two Midwestern states have legislation on the move that would eliminate noncompete agreements for physicians. Indiana has already passed a bill that would ban noncompete clauses for physicians that could allow physicians to more easily move between practices. South Dakota went further to eliminate noncompetes for physicians, physician assistants, registered nurses and other advanced practice providers, and it is now considering whether to expand the legislation to include physical therapists, respiratory care practitioners, licensed social workers and other positions. The Federal Trade Commission is trying to ban noncompete agreements altogether but the American Hospital Associations is pushing back arguing that banning noncompetes would “upend healthcare labor markets”
There’s also no negotiating in the ICU, operating room or emergency room. Heart attack victims are rushed to the emergency rooms, extensively tested and then transported to surgery, all without consideration, or even awareness, of cost. It all happens too fast for a bewildered patient fighting for his life.
There’s also an asymmetry of information and knowledge. For both sides to be equally knowledgeable of the value of the service every patient would need to have a medical education.
Additionally, the medical market disregards and shatters the law of supply and demand. Providers increase supply only if it increases their market share to be more profitable. Consumers, without price and quality information, can’t create demand for bargains or quality. They assume that all providers are equally competent and see quality only in convenience and a hassle-free experience.
As if all the above isn’t enough to dispel the myth of the medical free market, there’s plenty of government involvement in healthcare. The federal government develops national health policies, provides health insurance for the poor disabled and elderly and the Veterans Administration Authority. Individual States license health care providers, administer and fund Medicaid and through Departments of Corporations provide contracts with commercial insurers. State’s Attorney Generals protect consumers from anticompetitive mergers and acquisitions. Local governments own and operate public hospitals and develop and enforce public health codes. Clearly, all levels of governments have their skin in the game.
So much for the fictional “healthcare free market”.