Free market does not work for health insurance

A reader criticized my Sunday column which pointed out that “death panels” already exist in private health insurance. He correctly suspected that I see significant advantages to abdicating the free market when it comes to health insurance. (I also, for what it’s worth, fear major problems with HB 3200.) He’s a sharp guy, and he made three points. One, he said the problem with health insurance is excessive regulation. States have placed so many restrictions on covereage, he said, that the free market is not working as it should. Two, he correctly pointed out that at least now, consumers can sue their insurance company if it wrongfully withholds coverage. Three, he said voters no longer trust Obama because he constantly proposes solutions that erode at a free market.
Here is my response:
If competition is meaningful, I’m all for it. I agree that government bureacracy tends to mess things up. The free market does not work well for health insurance, though. Read a 20-page Blue Cross policy and an Aetna health policy, look at their premiums, and tell me which is the better deal. OK, you might be able to do it if you spent enough time on the project, but most couldn’t. The free market is fantastic at allocating resources when it comes to commodities, and better than government on almost everything. It is not a good tool, though, when it comes to complex products with hundreds of variables. The reason states have stepped into the insurance issue is that consumers lack the ability to compare policies.
Making the free-market approach even more problematic is that the insured rarely is the decision-maker. Usually it is the employer trying to compare apples and oranges.
Add 47 million with no health insurance to the already murky free-market approach, and you have a real problem.
I agree with you concern about the federal government not being accountable, although I would point out that most deaths are a result not of private insurers ignoring their policies but adhering to them. Legislation could solve the problem.
I don’t agree with all that Obama is attempting, but it should come as no surprise that his efforts tend to be contrary to the free market. Governmental intervention is contrary to a free market, so when the government acts, the market is less free. The president has embraced a free market where possible — cap and trade is an example — but implicit in government action is an erosion of the free market. If he supported the free market in all respects, he would do nothing.

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Filed under Government regulation, Health care

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