Devin Finbarr reiterates that the United States healthcare system is not a free market:
Those who call it a free market, lie (well, more likely they are just deluded). The American system is one part socialist and three parts guild and cartel. There is no laissez faire to be found this side of homeopathy. Medical companies and associations have government endowed privileges, rights, and monopolies. For example:
- The AMA has put strict limits on the number of doctors allowed to graduate each year. The American population has grown by ~40% in the last thirty years, yet the number of graduates has remained flat. Doctors have the monopoly privilege of dispensing certain kinds of life saving elixirs and procedures. The supply cap generates a huge transfer of wealth to the doctors and the medical schools. Worse, in America Medical school comes on top of four years of college, which drives the price of creating new doctors far above the cost in other countries.
- “Certificate of Need” laws prevent hospitals from adding new MRI machines. Big urban hospitals lobby Congress to ban startup specialist hospitals. Hospitals lobby cities to ban low cost, Walmart-style walk-in clinics.
- A web of regulations grants privileges to existing insurance companies and make it very hard to compete. Laws prevent health insurance companies from competing across state lines. Government tax breaks and approval processes favor incumbents. Hospitals give discounts to big insurers and charge people paying out of pocket multiples more.
- Many states have mandates that require insurance companies to cover certain treatments. Yet numerous studies have shown that a large amount of healthcare simply has no value-add. A RAND study that compared people who had everything paid for versus people who had to pay for care out of pocket, showed that the people paying out of pocket consumed half as much care, yet had the same health. Cross country comparisons show that Singapore spends one quarter per capita what America spends, yet they live longer. Mandated treatment simply forces higher premiums to cover care people do not need.
The supply restrictions and mandates react negatively when combined with irresponsible government spending. The U.S. Government spends ~7% of GDP on healthcare. This is comparable to many other developed countries with single payer or socialized care. Yet that level of spending only manages to cover 25% of the population. Even if the non-government sector operated with Singapore-like efficiency, that would still push total spending up to 10% of GDP. But when you add the supply caps the large amount of government spending simply drives up the cost of care. The other 75% of the population must then buy care at a price that has been bid up by Medicare, and they must buy more than they want, thanks to mandatory coverage laws.