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The "Free Market" For Health

    I came across this picture of a guy's hospital bill for over 150,000 bucks after a snake bite, being circulated as a way to criticize the American "free market" health system. If competition and the lack of government intervention drives quality up and prices down, how come the prices are so expensive? Simple: the US is far from a free market when it comes to health insurance.

    A free market is one in which health insurance companies have to deal with clients and healthcare providers on a voluntary basis. In that context, both the services provided and their prices are defined rationally, by how much professionals are willing to sell their products for, and how much clients can, and are willing to afford.

    The American health insurance system is highly subsidized. That means that government pays for a certain part of the population's health insurance costs, with money it either took by force or created by fraud. This messes up the way prices convey information... badly.

    On the one hand, it creates artificial demand for more expensive procedures. Instead of focusing on doing the best with the money people have, subsidies convey the information that "it's all gonna be payed for", so providers can spend as much as they like on expensive material - until they can't, because the government ran out of money. On the supply side of things, it destroys the competition between companies - since there's virtually infinite money for everybody that manages to gets in the health insurance business-scheme, the profit margins that would be squeezed by competition go up.

    What happens when you're not covered by the subsidy, yet you still have to go to the hospital? You're cut off from low-cost alternatives, since the market for that has been artificially erased. You also have to deal with prices that have been drastically ramped up, because those involved respond to the government's claim that "we have money", and not to the real scarcity of resources.

  -  January 28th, 2020