Quote:
Originally posted by taxwonk
The health care industry is one huge case of market failure. The providers have limited incentive to hold costs down in some areas, because they know the insurers will pay the freight. Consumers are always willing to undergo tests or procedures that are margianl, because their out of pocket costs are essentially fixed. The insurance segment keeps raising rates to pay for increased delivery costs, because major employers and unions will pay the higher premiums in order to attract good labor.
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That's not really market failure, that's non-market/regulatory failure. That's been created by a belief that health care should not operate within a normal market. Instead, people should get health care through employers, free or at low cost, and should not bear much or any of the actual costs they impose on the system.
Yes, the health care system is fucked up for a variety of reasons, but you can't claim it's market failure when the current structure is far from any kind of "market" as we usually understand the term.
The moral question is the fundamental one--should health care be allocated in a way
other than the market. If so, how do you design a regulatory regime to implement best whatever allocation you want, while also minimizing waste and unfairness. But the justification for doing that is not because the "market" failed--it's because you don't "like" the result the market would reach.* To the contrary, the US has the best health care because it has, to the greatest degree of any developed country, actually let a true market remain to a fair degree.
*contrast, e.g., a market failure like pollution--there there is not a market in the cost of pollution, and there's a collective action problem in limiting it, so one can say it's market failure that we need to cure, not merely impose a moral view of how much pollution should be permitted.
