Conservatives Make No Sense On Healthcare

by Brien Jackson

A.L. makes a point I’m seeing more and more of, and one that needs to be made a lot more:

This is a sentiment commonly expressed by conservatives and libertarians. It’s also totally ridiculous, an example of an almost childish kind of magical thinking. I am as big a believer in the power of the marketplace as anyone, but the market is not the Force. Its powers cannot be harnessed to achieve all policy goals. There are very obvious limits to what the free market is capable of producing. For instance, the market will NEVER lead to the provision of goods and services that are unprofitable. That’s why you can’t buy an Ipod for a dollar or be chauffeured across town in a limousine for 50 cents an hour. That’s why you can’t buy private flood insurance if you live in flood plain or buy auto insurance if you’re legally blind. The market won’t provide these goods and services to you because doing so makes no economic sense.

For some reason, though, conservatives and libertarians like to pretend that these basic rules don’t exist when it comes to health care, that if we just did away with Medicare, Medicaid, and various regulations, the market would somehow magically produce affordable medical care and health insurance for everyone, including the elderly and those with pre-existing conditions. It is difficult to overstate how divorced from reality this fantasy is.

The free market had plenty of time to work its magic prior to the passage of Medicare, but for obvious reasons, it failed to provide the elderly with any affordable options. Because elderly people require much more in the way of medical services, on average, than younger people, it makes no economic sense to offer them health insurance, at least not at premium levels that most people can afford. The result was an epidemic of uninsured elderly Americans who were being bankrupted by medical bills. That’s why Medicare was necessary. It was a response to a massive market failure.

The words “Market Failure” really can’t be used enough in this context. In my experience, however, there’s something of a different dynamic at work between conservatives and libertarians here though. Conservatives sing hosanas to “free markets” the same way they do to “drill baby drill.” It’s a buzzword they don’t really understand, and little more. Libertarians, on the other hand, largely seem to deny that a market failure is possible, in part because, in my experience, they tend to have a self reinforcing notion of what is and is not government intervention into the market. I don’t know very many libertarians who are against government issued patents, for example, even though, at their base, they’re market distorting rights to a temporary monopoly. But without them technological advancement wouldn’t be profitable due to the free-rider issue, so the government distorts the market to make increasing knowledge capital profitable. The general response to these sorts of things has just been to deny that they represent government intervention into a market that wouldn’t otherwise function, and voila!, no market failure.

But in regards to healthcare, I think most people can see that there’s really just no way to sustain a working private insurance regime. There’s no money to be made, for example, by covering a pre-existing condition. Or covering a 53 year old man with a long family history of chronic heart disease. Or the elderly in general. And on a certain level, that’s ok. Really, there isn’t much other choice for a profit seeking company. But it does leave you with a bad macro outcome, because those people are still sick, or are still going to get sick, and they’re going to need healthcare, and that healthcare is going to have to be paid for. And the fact that they’re either not going to get care, or they’re going to get uncompensated care, creates other problems for the rest of the system as well, so there has to be some sort of net for them to fall into. This is why a public option makes sense, the same way Medicare made sense in 1965; you just can’t have this many people going without coverage, and there’s no way the private market is going to cover them efficiently. It’s the picture of a market failure.