The Q and O Blog has a great article showing why American health care is far from being “free market’:
…in the US, health coverage is mainly provided by employers, who, even in smaller companies, must pay the majority of the premium for health care coverage, and for the elderly and poor, Medicare and Medicaid. Overlaid on that, is a smaller number of people, like the self-employed, who provide their own health care coverage. One should also note that, since employee health care premiums are tax-deductible for employers, the government in effect subsidizes those costs.
For the most part, though, we do not have a system where consumers purchase and consume their own health care coverage. In short, health care consumers spend other people’s money on themselves.
For the consumer, there is no incentive, therefore, to cut costs, or to ration one’s own care. The dominant incentive in the US health care system is to consume health care without regard to the cost. Naturally, this leads both to over-utilization of health care, and the consequent price rises that follow such over-utilization.
They go on and define what a free-market system would look like.
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Health care is an essential service… it's no different than the military or a police force. You have to defend your interests, you have to investigate crime and prosecute offenders to maintain a civil society… why is health care different. This is not the same as trying to sell a better widget.
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