Reform of the American medical care system is necessary not only from the perspective of Catholic social teaching but also from the economic standpoint as well. Billionaire investor Warren Buffett once called medical care costs “a tapeworm eating the economy.” And it makes sense: The more dollars we spend on medical bills, the less we can invest in our futures or spend in other markets. Before we can even consider reforming the system, we must understand that medical care is not just another industry or business that can set fair-market values by free-market rules.
Free Market and Regulation
First, what defines a free market? A market is free to the extent that the transactions within it are non-coercive. That is, the buyer is free to not buy from the seller and the seller is free to not sell to the buyer. (In a socialist command economy, by contrast, the government owns all sources of goods and services. As such, it negates the freedom of the market by dictating who buys what from whom at what price.)
Market freedom necessarily requires “a certain equality between the parties, such that one party would not be so powerful as practically to reduce the other to subservience” (Compendium of the Social Doctrine of the Church 352, cit. St. John Paul II, Centesimus Annus 15). It also requires the existence of reasonable alternatives, especially the existence of competitors: other buyers who are willing to pay more and/or other sellers who are willing to accept less. The absence of coercion by either party is the basic premise of fair-market valuation.
There’s no inherent conflict between a free market and government regulation. Indeed, it takes more than bureaucracy and welfare programs to make a system socialist. Rather, experience has shown that the self-interest of the market’s actors isn’t sufficient to protect the ignorant, the weak, or the dependent from coercive and exploitative business practices. A truly free and fair market can exist only within a proper, effective regulatory framework. Furthermore:
Faced with the concrete “risk of an ‘idolatry’ of the market”, the Church’s social doctrine underlines its limits, which are easily seen in its proven inability to satisfy important human needs, which require goods that “by their nature are not and cannot be mere commodities”, goods that cannot be bought and sold according to the rule of the “exchange of equivalents” and the logic of contracts, which are typical of the market. (CSDC 349, cit. CA 40)
Human Rights and Virtual Monopolies
Catholic social teaching includes medical care as a human right derived from the right to life and the fundamental dignity of the human person (cf. St. John XXIII, Pacem in Terris 11; Compendium of the Social Doctrine of the Church 166, cit. Gaudium et Spes 26). As a human right, it can’t be justly denied, deprived, or made contingent on personal merit, even by the rubric of “due process of law.” Put differently: No one “doesn’t deserve” essential medical care. Since human rights belong to everyone, the responsibility for providing and ensuring those rights also belongs to everyone.
To assert that medical care is a human right is not to assert that those persons, institutions, and businesses necessary for providing medical care must go without fair and adequate compensation, including reasonable profits for the private enterprises involved. “The social doctrine of the Church recognizes the proper role of profit as the first indicator that a business is functioning well” (CSDC 340; italics omitted). Neither is it an assertion that all aspects of the economy involved in health care must be government-owned and government-run. Indeed, the Church fears both too little and too much government intervention (see CSDC 187.2).
However, American medical care doesn’t — or can’t — conform to the “free market” model of business. Some medical circumstances by their nature eliminate reasonable alternatives. For instance, if you suffer serious injuries in an accident, you’ll ride the ambulance on-scene to the closest hospital whether either the ambulance or the hospital is in-network or not. There’s no time to comparison-shop or consult provider networks. Even a planned in-network hospital stay has a good chance of at least one service being provided by an out-of-network company. And patent laws allow pharmaceutical companies to create virtual monopolies on essential drugs for years.
Problems with American Medical Care
Insurance companies don’t consistently analyze hospital bills for unfair billing practices: double- and triple-charging for items packaged in kits, charging as much for a single pill as the local pharmacy does for a whole bottle, and so forth. (That’s why patient advocacy is a booming business.) Different medical care provider networks have different negotiated rate structures. So what a doctor’s office charges the uninsured or bronze-level Obamacare patient won’t necessarily be what they’d charge United Health Care, which won’t be what they’d charge Aetna, etc. Above all, the carriers don’t have Medicare’s government-backed leverage for negotiating affordable prescription prices.
By no means have I addressed all of the many reasons why American health care costs are rising at an unsustainable rate. Some of it has to do with Americans’ unhealthy lifestyles, some of it to do with civil law as it relates to medical malpractice. But more of it has to do with inadequate regulation, regulatory capture, and the lack of freedom in many aspects of the market. And precisely because the insurance industry gives the least coverage to those least able to pay their medical bills, unsatisfied medical debts contribute to the spiraling costs.
Catholic social teaching places great emphasis on protecting and assisting the poor, the vulnerable, and the marginalized. One condemnable feature of the present medical care system is that, while it often threatens the financial futures of even the healthy and well-to-do, it places greater burdens and social mobility restraints on the poor and chronically ill. To presume that these people “deserve” such burdens as temporal punishment for imputed moral or prudential failures is unjust and uncharitable. Furthermore, putting people in debt beyond their means to repay places further stress on the economic system.
The Problem with Obamacare
When Catholic Stand posted my article on price-gouging, one frequent guest commented, “Glad to see you finally embrace Obamacare.” The best I can say about the Affordable Care Act is, it was better than nothing. Because of it, the debt I incurred last September from a three-day-two-night hospital stay is only slightly less than half of my remaining student-loan debt. It would have been more than twice as much without my policy. And I recognize that we got Obamacare because it was the closest approach to universal health care that Congress would permit. Damning with faint praise.
However, putting the burden of implementing universal health care on the insurance industry was as much a mistake as was the Romans’ use of publicani to collect taxes. Medical insurance is only a stop-loss, with the cheapest coverage offering the least stoppage. While it socializes most but not all expenses through cost-sharing, it profits by using statistics to wager on what costs might be incurred. ACA-compliant plans have to cover preexisting conditions and family predispositions for critical illnesses, as well as some “free” services. So carriers had to raise premiums to cover the bets they’re guaranteed to lose.
(Nota bene: Also, medical insurance as such doesn’t provide coverage for loss of income. This is a major factor in the rising number of bankruptcies in which medical bills play a significant role. Some employers offer a supplementary hospitalization or gap coverage policy. But depending on the carrier and the policy, it may not cover pre-existing conditions.)
“Affordable Healthcare Act” is a misnomer. It didn’t address the causes of spiraling medical care costs. It made insurance more accessible for some people, but the high deductibles of government-sponsored Healthcare Marketplace policies make routine medical care less affordable for others. The act also compelled many businesses to cut health care benefits and even turn positions into part-time or contract work to save costs. Many carriers have fled the Marketplace, leaving a few corporate “welfare queens” to squeeze as much profit out of taxpayer subsidies as possible. Obamacare, in short, was a Band-Aid on a cancer lesion.
Conclusion: The Market is Not a Genie
The U.S. is about to be hit by a massive wave of pandemic-related medical bills even as millions of people are filing for unemployment. It’s a crisis of our own making. In a recent CNN story, a nurse anesthetist revealed the last words he heard spoken by a covid-19 victim who was placed on a respirator: “Who’s going to pay for it?” Derrick Smith told reporter Alaa Elassar, “… [We] have a profound failure when one has to worry about their finances when they’re dealing with much bigger issues that have to do with life or death.”
To believe the free market, like a genie, will eventually conjure up the perfect solution given enough time is wishful thinking. Worse, it’s to choose to do nothing — which, as Edmund Burke supposedly said, is all that’s required for evil to triumph. Medical care is not now and will never be like any other private enterprise. It’s time to write the laws and make the rules we should have had in place a decade ago. It’s time to create the health care system we should have implemented years before that.
It’s time to recognize that the free market, like all things human, has its limits.
14 thoughts on “Medical Care and the Free Market’s Limitations”
The only change we need is to get rid of health insurance, government run healthcare including most of the regulations and employer funded health care.
Insurance is a big part of the problem. Study the history of it. I process insurance claims for a health provider, including those for “state” programs. They are probably the worst.
Rationed health care? Thank you, no.
Doctors who serve the state ahead of the patient standing before him? Thank you, no.
The state determining who enters medical school and into which areas of medicine that student goes? Thank you, no.
The state requiring doctors to perform any and all state approved medical ‘treatments’? Thank you, no.
All religious founded hospitals compelled to offer ‘treatments’ which contradict the teachings of that faith. Thank you, no.
Expect all of these nasty byproducts of the system promoted in this article. Indeed, this is only scratching the surface of the collateral damage.
Why should we “expect” them when they’re neither necessary nor inevitable? Especially since I haven’t promoted a particular system in this article; I’ve simply indicted the present system and presented the need for change. Unless and until I do promote a system — and I don’t know if or when I can do so — you have no basis for assuming such dystopian elements must arise. Are they potential? Sure; as potential results, a proposed plan must also include safeguards against them. We don’t have to adopt any other country’s scheme wholesale. And it would be better if conservatives took the lead in creating the plan to avoid those potential outcomes. But at this point, you’re saying any seeds we put in the ground will necessarily become kudzu plants. That’s simply faulty logic.
Both Chris C. and Tim H. confuse a free market with an unregulated market. Not the same thing. The essential characteristic of a free market is that the transactions are uncoerced — neither party is forcing the other to trade at a disadvantage. As I pointed out at the beginning of the article, this almost requires government legislation and regulation to ensure that the transactions carried out within the market are fair. The self-interests of the parties themselves aren’t sufficient to guarantee those conditions. Heck, government regulation of markets has existed to some degree for most of human history; it’s far more extensive now than ever precisely because of increasing technological and economic complexity.
As for insurance: Insurance companies have always been chartered by the individual states, not by the federal government. As such, when a company chartered in one state wishes to do business in another, it has to apply as a “foreign” entity (as opposed to an “alien” entity; that is, one chartered in another country). Again, though, so long as neither the insurer nor the insured is forcing the other into the insurance contract, it’s still part of a free market.
We’ve tried laissez-faire economics. It doesn’t lead to the capitalist version of “the most happy state” — unless your version of a happy state means consumers and workers being shafted and needlessly endangered on a regular basis while the economy regularly teeters between boom and bust cycles. It has to do with this thing we Catholics call the propensity to sin. Deregulation will not lead to Utopia.
Your attempt to make a distinction between a free market and an unregulated market is just hand waiving.
Folks seem to assume that there is cutthroat capitalism where the producer does all he can to squeeze the consumer and the worker vs an all wise government official motivated by good intentions, expertise, love for all, equipped with all the right tools to create the right policy and where regulation has the intended affect and nothing more. This is not the real world.
Producers are at the complete mercy of the consumers and even the workers in the sense that the overall market as an aggregate of consumers and workers are always much larger than any given producer. Moreover, producers want to produce things people want. And over time, they must do that or they die. That is the kind of market regulation I favor.
The only way to regulate market actors is to let market actors regulate each other and to allow for tort law to do its thing. The consumer always, always benefits in the longer term than if government gets involved.
Once government gets involved, markets are distorted. Then people see the distortion and now that a precedent has been establish, they call for more involvement to fix the problem created in the first place. Which leads to further distortions. I may be that many policy makers think they can help but they never seem to question the hubris involved in interfering in the extremely complicated and delicately balanced market mechanism in the first place. To be clear, I do think there is a common good, I just think it’s a lot more complicated than government recognizes or can possibly deal with. There are so many things working against government being a positive force, that it simply cannot overcome them.
All industries where the government is heavily involved are where the industries are having the worst time. Healthcare, schooling, the financial sector – all heavily, heavily regulated and all completely distorted from what they would be if people were free. Name one other aspect of life where we do something, it goes wrong and we therefore do more of what went wrong. Government involvement and addiction seem to be the only two areas where this happens and yet we keep asking for more and more government.
I’ll make this my last reply; if you wish to have the last word, go ahead.
The distinction between “free” and “unregulated” isn’t mine; it’s from economic theory, from the presumed non-coercive nature of the transactions within it. Non-coercion is essential to fair-market valuation. To call it “hand-waving” is simply appealing to the stone. You, on the other hand, are committing a fallacy of equivocation by conflating different meanings of “free.”
It doesn’t require a presumption that all or even the majority of actors within a system are greedy, rapacious predators to justify regulation. All we need to know is that abusive and exploitative transactions happen. (By the way, “regulation” in this context embraces tort law, the difference being whether infractions are handled administratively or judicially.) Abusive parents won’t become kinder if we do away with child-abuse laws and CPS. People won’t become more considerate drivers if we do away with traffic regulation. In the same way, in the absence of regulation, abusive and exploitative business practices will not disappear save in the sense that they’re no longer defined and proscribed as such. All it will mean is that the victims will no longer have recourse to law. I say again, abuse doesn’t have to happen all the time to justify regulation — it just has to happen often enough that we say, “Hey, here’s a problem that needs to be addressed!”
Yes, regulation can be overdone or misdirected, although not all the cases you allude to stem only from bad regulation. But the answer isn’t to go ditch-to-ditch; as an old Latin legal maxim had it, “The abuse doesn’t take away the (proper) use.” The answer to bad regulation is good regulation, not no regulation. And yes, regulation can be burdensome, but we the people through our elected representatives have decided that, in principle, consumer protection is worth the burden. The fact is, most industries aren’t good at policing themselves, despite the fact that it would serve their interests better.
Furthermore the deponent saith not. Pax tecum.
The article seems to presuppose that there had been a free market in health care insurance prior to Obamacare when in fact there wasn’t. If there had been, health insurers would have been free to sell policies across state lines. However, being that insurance is tightly regulated at the state level, that hasn’t been the case. Surprising that an article discussing the free market in health care wouldn’t explore that in some detail.
The fact of it is that at no time in the recent past have we had a truly free market in health care. Free market options might include allowing deductions for individual taxpayers rather than employers, for the cost of policies, greater use of medical savings accounts, and the aforementioned free competition across state lines for the selling of health policies. There is a role for regulation to ensure that carriers are properly qualified, have adequate reserves so as to meet expected obligations, and have a fair claims policy subject to review and possible sanction for the bad faith denial of claims, as well as ensuring fair competition so as to help ensure affordability and quality claims service.
There is no reason to think government involvement greater than that would serve a useful purpose in providing the best health care to the most people.
See my response to Tim below. Do you follow Jesus or not?
I’m sorry but you don’t even scratch the surface of what a free market in medical care would look like. Sorry to be blunt but we have got to be that way in the face of untruth that I am just soul crushingly tire of hearing.
THERE IS NO SUCH THING AS FREE MARKET HEALTH CARE IN AMERICA AND HASN’T BEEN FOR MANY, MANY YEARS.
Let me ask a few questions.
How is the (relatively) free(er) market for food doing at producing food in America? – surely a much more important good in terms of life than “healthcare” – whatever healthcare is.
Why do you need an MD to treat every single malady? (hangnail – go to the doctor . . .)
Why do you need deluxe insurance even if you don’t want it?
Why can you NOT get a price quote for any given medical service at any hospital or doctor’s office? (Would would the price of something depend on the kind of “insurance” you have and yet there it is. Imagine this in the world of buying groceries – madness!)
These are all consequences of of that many call Cadillac Healthcare. It means, if every car made had to be a Cadillac how many of us would own cars?
There are free market doctors out there and you can contract with them to handle all your medical needs including prescriptions. You can get contracts at much more reasonable prices than paying for insurance.
Try the Free Market Medical Association.
Also try the Surgery Center of Oklahoma.
Please for the love of Mike Catholic folks, Get out of your bubble!
If you rely on government to “fix” this problem, they are just going to make it worse. “Controlling” healthcare is the LAST thing we want government involved in. We need to demand true freedom including getting rid of almost all governmental regulation in the medical field. True insurance companies and doctor organizations and the threat of lawsuits are enough to create a quality medical system.
Freedom is the only way for the healthcare system to survive!
Market based necessarily means that the rich get good health care and the poor get none. Not a Catholic (or Christian) viewpoint.
Well said.
Everything you say is true! And you deserve a lot of credit for posting this here at CS.
The problem is, only one political party is willing to do the hard work to remedy the situation. This was true in 1972 with Senators Kennedy and McGovern, it was true in 1993 with Hillary Clinton’s proposal, and it was true in 2009 with the intense legislative logrolling (detailed here previously) that established the (very imperfect) “Obamacare”. Republicans have not shown any interest, aside from their juvenile repeated resolutions to undo Obamacare without putting anything in its place.
Democrats have always paid a political price for their efforts. Hillary’s efforts led to loss of Congress in 1994. Enacting Obamacare resulted in surrendering control of the Senate in 2010. One can’t expect Democrats to hit their heads against the wall once again, not when it is so politically advantageous to sit back, take health industry money, and attack what others have laboriously tried to build.
Thanks. I don’t know how much credit I can actually claim for publishing the article here since I’m on the editorial staff and Catholic Stand really only has two big limitations — no heresy and no Pope-bashing. That gives me more than enough flexibility to be a moderate voice. Unfortunately, being a managing editor of a still relatively obscure online magazine doesn’t give me fiat power to get things done. You want to get me elected Dictator in Perpetuity, all I can say is, “Lotsa luck.” Until then, all I can do is contribute my voice to the babble in the public square and hope enough people find it sensible to make a difference. A slim hope is better than no hope at all, they say.