Why the free market won’t solve healthcare

Healthcare has been a hot topic in the past year, in the Democatic primary and across the nation. According to a Gallup poll conducted in November, 73% of Americans are dissatisfied with our healthcare system, but we can’t agree on how to fix it. 

​One common argument made by those on the right is that if we just left healthcare up to the free market and deregulated it, it would work itself out.  Republican Senator from Kentucky Rand Paul has promised that “I will ensure that real free-market principles are applied to the American healthcare system so that it is responsive to patients, families, and doctors, rather than government bureaucracy,” and notable conservative pundit Ben Shapiro has claimed on multiple occasions that “one of the reasons [healthcare is] so much more expensive and so much less competitive is because you do not actually have a free market in healthcare. You have a heavily, heavily regulated market in healthcare.”

For many goods and services, this is a reasonable assertion; in the case of healthcare, it is horribly flawed because healthcare has what economists refer to as an ‘inelastic demand’. The free market depends on the fact that increasing the price of something makes it so fewer people buy it, and in the case of healthcare, this is often untrue. If you or a loved one is seriously ill, most would do everything in their power to obtain treatment. Turns out ‘not dying’ is the kind of commodity that’s rather hard to put a price on.

Proponents of a free-market system, such as Ben Shapiro in the very same speech referenced earlier, love to talk about lasik eye surgery and plastic surgery, both of which are exceptions to the epidemic of rising healthcare costs in America. This, they claim, is because these treatments are covered by the free market rather than by bureaucracy. What they are instead demonstrating is that when people’s lives aren’t on the line, such as with plastic surgery or lasik, the inelastic demand effect disappears and healthcare prices become reasonable.

​When people’s lives are on the line, however, the free market’s ability to manage itself disappears. Hospitals can charge exorbitant prices and still have people come to them for treatment. The existence of the health insurance industry is in and of itself a demonstration of how extreme the situation has become — hospitals now charge prices so high that consumers can’t even begin to afford them.

​The free market of supply and demand cannot function properly when the demand remains the same despite the suppliers charging prices so high they bankrupt households containing a total of 1.7 million people each year.While concerning, such a high price would be justified if healthcare actually had to cost that much. But it doesn’t — not only does the U.S. spend almost twice as much on healthcare as other wealthy countries for results that are not significantly better, but government spending on healthcare in the U.S. takes up roughly the same portion of our GDP as other wealthy nations (8%), and yet unlike other wealthy nations, America doesn’t get free healthcare.

​The free market does not and will not serve our best interests in healthcare, but we shouldn’t expect it to. If we want a healthcare system that works, we need a healthcare system that cares for us when we get sick, not one that exploits us.