The 2012 presidential election will impact healthcare delivery in the United States. The question boils down to whether the electorate believes that the free market will control the cost of healthcare while delivering quality care.
According to The New Yorker’s James Surowiecki, “In most areas of the economy, free-market principles insure that products and services keep improving, and that consumers get better and better deals.” Although the free market may be the optimal way to sell cars and refrigerators, it may not provide the same impetus for medical care. Nearly half a century ago, Stanford economist Kenneth Arrow, in an article entitled “Uncertainty and the Welfare Economics of Medical Care”, suggested that healthcare is an outlier that limits the power of the marketplace. Paraphrasing Arrow, Surowiecki writes that “Because people don’t have the expertise to evaluate doctors, hospitals or treatments, it’s hard for them to comparison shop. Because they can’t pay for major care out of pocket, they must rely on insurance, often losing the final say in what to buy or how much to spend. More fundamentally, markets work only when consumers have the power to say no if the price isn’t right. Yet it’s very hard for people to say no in the case of things like end-of-life care or brain surgery.”
Surowiecki points out that, over the past four decades, Medicare has done a better job at holding down healthcare costs than the overall market. He also notes that most developed nations – which have government-controlled healthcare –succeed at reining in costs while delivering first-rate outcomes.