Dr. Charles Peterson's Counterpoint ("'Free market' and 'health care' are not an easy fit," March 21) notes that the Republican plan to roll back and replace Obamacare ought to be a fix, not a replacement — or we should go straight to Medicare for all.
Dr. Peterson says a free-market health care system is inherently noncompetitive and can't work. We need a government system to control medical market dysfunction. He describes the alleged nirvanas of low-cost high-quality government (National Health Service) cartels abroad.
What's wrong with these arguments? What's wrong with cartels?
In Canada and the United Kingdom, government managed care systems are monopoly cartel arrangements. They have power to ration access to "free" care. The cost of free care is hidden through high taxes and queues. Queues balance budgets by transferring costs to the sick in the form of lost wages, morbidity and possible death, while open access to "well-care" for the healthy keeps most folks happy — but not all the time. Politicians regularly promise health care reforms at election time, because queues eventually anger too many citizens. The hospital infrastructure in the U.K. is currently threatened with collapse and the availability of medical personnel erodes in Canada.
In the U.S., the Obamacare government-corporate oligopoly system is also a cartel arrangement. Corporate mergers to collude in profit-driven rationing of care are protected by 2011 federal waivers of antitrust laws and waivers of anti-fee-splitting and anti-self-referral (Stark) laws. Ironically, the U.S. cartel system, meant to control costs, has exploded with double-digit inflation of insurance premium prices despite tax props, clinic price controls and patient queues in ever-narrower corporate networks.
What's the fatal flaw, when market failure hits a cartel arrangement between two huge and powerful partners? Why do they develop politically unpopular queues plus hidden or overt cost inflation?
To paraphrase economist John Cassidy, no central authority, however brilliant its managers, can match the effectiveness of freely determined prices for the allocation of labor, capital and human ingenuity.
Could the free market be the fix, shifting power from the collusive cartel bureaucrats to families?
Before 1965, there was a free market in health care and with little history of cost inflation for nearly 100 years. There was little insurance; not an ideal system. Many employed workers did have health insurance after 1942. They thought "the boss paid for it," but the expense in reality came out of their take-home paychecks.
In 1965, Congress enacted Medicare and Medicaid; suddenly, 85 percent of the population had tax-subsidized insurance (employed workers plus the old, poor and disabled). Demand inflation began abruptly, as cheap, tax-free insurance reduced the apparent price of a quality good.
Kenneth Arrow in 1963 wrote about this "moral hazard" of insurance. It has nothing to do with personal morals — it describes the economic impact of cheap insurance. Behavior is predictable when cheap insurance reduces the "price" of a quality good. It has led to "affordable" insurance becoming today's bad joke.
Political price fixing and politically created, profit-driven, managed care rationing began in the 1970s, but failed to control cost inflation for over four decades. Obamacare was passed in 2010 to create a more powerful government-protected corporate cartel system in hopes that transferring cost control to bedside gatekeepers would work, if they were incented by "bonus opportunities" to ration care or by "negative payment adjustments" to avoid ordering too much care (all known in fed-speak as industry "value pay").
But medical cartel systems cannot escape the fatal flaw of all command-and-control economic sectors. Such industries were largely deregulated in Western nations after 1980 to prevent economic collapse. The persistence of medical cartels is the aberration — free care is politically untouchable.
The exception now is the untenable cost of America's massive cartel bureaucracy, and the inefficiency of funneling funding for care through a third-party profit-driven rationing system. The cartel industry now demands bailouts.
Will Congress be able to deregulate our unaffordable Obamacare version of a managed-care cartel and return medical market place power to American families? A collapse into draconian government rationing is the alternative — and the systems are already in place.
Robert W. Geist, a physician, lives in North Oaks.
