Dr. Nick will see you now.

The free market at work:

In an unusually candid admission, the federal chief of AIDS research says he believes drug companies don’t have an incentive to create a vaccine for the HIV and are likely to wait to profit from it after the government develops one.

And that means the government has had to spend more time focusing on the processes that drug companies ordinarily follow in developing new medicines and bringing them to market.

“We had to spend some time and energy paying attention to those aspects of development because the private side isn’t picking it up,” [said] Dr. Edmund Tramont, head of the AIDS research division of the National Institutes of Health.
[...]
“They will eventually — if it works, they [private companies] won’t have to make that big investment. And they can make it and sell it and make a profit,” he said.

40 million people are living with AIDS, another 13,500 contract it daily. If that’s not enough of a “market” to draw in drug company investment, then surely there are legitimate doubts about whether health care should be subjected to the harsh realities of laissez-faire capitalism.

Those doubts are hardly confined to those suffering from AIDS. George W. Bush and his Republican allies constantly pitch “market-based solutions” to every problem from pollution to education to health care. With the President’s push for Health Savings Accounts (HSA) this year, it’s important to note that market forces already influence healthcare, and from drug research and sales to the cost of hospitalization to insurance plans, the market’s influence is unwelcome. Yet as polls and anecdotal evidence register the magnitude of Americans’ dissatisfaction with the health care system, Bush is proposing to exacerbate the situation as the system (and those stuck in it) reaches its breaking point.

Bush rolled out his campaign for HSAs last month at Wendy’s International, Inc. in Dublin, Ohio. In laying the groundwork for his plan, he exposed his own duplicity on the issue by setting what has to be a record in the false dichotomy category:

First of all, we’ve got to choose between two competing philosophies when it comes to health care. Behind all the rhetoric in Washington, and all the proposals, there’s really a philosophical debate. On the one hand, there’s some folks who — good-hearted folks, good, decent folks, who believe that government ought to be making the decisions for the health care industry. And there are some of us who believe that the health care industry ought to be centered on the consumer.

Those who view healthcare as a right rather than a privilege don’t seek to make decisions for any industry, they want to set up a system where the 45 millions Americans who don’t have insurance can participate in what the President calls “the best health care system in the world.” Bush and his ilk have already had their crack at “reforming the system,” and it produced the Medicare prescription drug benefit, one of the largest government boondoggles in history, almost totally written by industry lobbyists. Included in the bill is explicit language prohibiting the government from negotiating bulk prices from the drug companies, as well as allowing insurance companies to create hundreds of confusing coverage plans that have so far discouraged the vast majority of seniors from signing themselves up for Medicare Part B. If that’s consumer-centered, we’re going to have to redefine our terms.

For this alone, Bush shouldn’t be allowed within 100 miles of the healthcare system, but just as he was intent on “fixing” Social Security by forcing Americans into the stock market, he wants to “fix” the healthcare system by prodding citizens into another market they are ill-prepared to navigate: negotiating for healthcare. Were the President actually “centered on the consumer” instead of once again indulging his free-market” rhetorical fetish, improving healthcare in this country might be possible. But as long as business interests take precedence over the common good, the number of uninsured will rise and the quality of care will continue to fall.

In his Wendy’s speech, the President explained why he thinks that HSAs are better than distributed risk or insurance:

For many routine medical needs, HSAs mean you can shop around until you get the best treatment for the best price. In other words, it’s your money; you’re responsible for routine medical expenses; the insurance pays for the catastrophic care. You’re responsible for paying for the portion of your health care costs up to your deductible. And so you — you talk to your doctor, you say, can’t we find this drug at a little cheaper cost? Or you go to a specialist, maybe we can do this a little better — old Joe does it for X, I’m going — why don’t you try it for Y?

Bartering might be fine for flea markets and car showrooms, but do we really want to be responsible for putting out bids for medical service? Last year my father became ill, and at first the seriousness of his condition was not apparent. He had top-of-the-line insurance, yet getting a diagnosis much less treatment proved elusive. The nature of his illness reduced a normally razor sharp man to confusion and helplessness. Should he have been negotiating with multiple doctors, choosing a course of action and directing his own care? Well, that’s exactly what the President would prescribe, and he’s not any better of a doctor than he is a student of economics or history.

The 2001 Nobel Price for Economics was awarded to George Akerlof, Michael Spence and Joseph Stiglitz for their work analyzing markets with asymmetric information:

Much of economic analysis assumes that markets are characterized by full information: both buyers and sellers know everything about the product they are buying or selling.

However, many markets are characterized by the fact that either the buyer or the seller has considerably more information about the product than does the person or firm on the other side of the transaction.
[...]
The consequences of asymmetric can be profound. In the extreme, markets with asymmetric information may simply cease to exist. In other cases, asymmetric information will cause the market to “behave badly” and thus create an opportunity for a government or some external organization to come in and intervene to improve the private market outcome.

It’s hard to imagine a more asymmetrical marketplace than healthcare, where one side is armed with advanced degrees and sophisticated statistics and the other side is operating under duress caused by illness and ignorance. Since we know that a Republican-controlled government would rather spin a dysfunctional market as perfect than step in to correct the dysfunction, any attempt to fix the healthcare system must take this into account. But beyond the ideological and structural objections to HSAs, there is the practical matter of the real impact they would have on the American people. 600,000 more Americans would become uninsured under the President’s plan, and as with everything else this administration does, the well-off will benefit at the expense of the poor. And in a nation currently boasting a negative savings rate, is it really a good idea to join medical care with cash-on-hand?

The President can tout his “market-based solutions” all he wants, but he should at least acknowledge that every time he calls for one of these solutions, consequences are felt by those least able to bear them. It may be fine with him that under an HSA regime, people would seek out unqualified doctors because it would cost less. He’s obviously not very worried about the way industry is not investing in AIDS research. And if the existence of 45 million uninsured Americans concerned him why would he propose a plan that would add to their ranks? This scheme must be fought as hard or harder than was Social Security in 2005. Our health demands it.