USF Professor of Economics Bruce Wydick warns that the free market can't be counted on to protect the health of families.
As the U.S. Congress grapples with how to reform America’s health
care system, Bruce Wydick, professor of economics at USF, argues that relying
on the free market isn’t a fix.
Health care in America has never been a free market, never
should, and never will, according to Wydick.
Sure, markets work well for selling goods like computers or
food but studies by several Nobel Prize winning economists show that a lack of transparency
and information sharing between consumers, doctors, and insurers, distort the health
care system. So much that virtually no economist recommends anything close to a
free market for health care, Wydick said.
“Economists have demonstrated that this problem not only
affects health care, but also financial markets – another sore spot for our
economy,” Wydick said.
At the root of the health care problem is “adverse selection,”
Wydick contends. People with greater health care needs willingly pay higher
premiums, thereby driving the cost of health care higher and healthier consumers
out of the market.
To counteract this, insurers do all they can to screen for
riskier patients and prevent them from receiving coverage.
“Notice that in a normal market, firms try to attract
customers with high demand for their service,” Wydick said. “But, the perverse
incentives of the health care insurance market cause firms to try to screen out
those who need their product the most.”
Another factor affecting health care, according to Wydick,
is that well-functioning and efficient markets begin to break down when there
are spillover effects as a result of consumer decisions, such as someone
spreading a contagious disease or other people picking up the tab because they
can’t afford medical care.
“Like it or not, everyone has an interest in everyone else
having health insurance,” Wydick said.
Instead of endorsing the current system – in which a few large
insurers dominate and lobby government to pass favorable regulatory laws that
perpetuate their profitability – Americans should steadfastly rebuff the notion
that a free-market system will work of a free market for health care.
“It’s not doing the job, and it won’t,” Wydick said.
Instead, he points to evidence of greater consumer satisfaction
with government supported health care. A published study in Health Affairs journal, for example, found that elderly beneficiaries
of Medicare (a U.S. government program) were nearly three times more likely to
view their health insurance as “excellent,” compared to those with private
insurance, Wydick said.
“Believe it or not, the empirical evidence on this issue comes
down on the side of greater consumer satisfaction with government provision of
health care,” Wydick said.
Editor's note: This article was adapted from a recent Op-Ed published by Professor Bruce Wydick in the San Jose Mercury News.