Free Market Arguments against Medicare for All

University of Massachusetts economist Gerald Friedman talks about his recent debate at the Soho Forum with Sally Pipes, a leading figure in the conservative anti-single payer movement. He breaks down the major lines of attack used by the right against Medicare for All, including wait times, horror stories, and free market ideology.

Show Notes

This week we welcome Professor Gerald (Jerry) Friedman, economist at the University of Massachusetts Amherst, and author of many Medicare for All economic analyses. Last week, Jerry debated Sally Pipes, well-known conservative opponent of single-payer healthcare, on whether the COVID-19 pandemic makes the need for Medicare for All more urgent. Jerry joins the podcast today to talk about free market arguments against Medicare for All. And how they’re wrong!

Market-based attacks on Medicare for All are based on, Jerry says, a fantasy theory in which free market competition in healthcare would promote efficient delivery of services, but only the services that people want. In addition to being wrong, these theories make no allowance for:

  1. people who can’t afford healthcare;
  2. the lack of information or inability for people to make “consumer choices” in healthcare; or even
  3. the benefits we all receive when other people are kept healthy with good access to care (for example… during a pandemic!).

Jerry says that playing with free market theories of healthcare can be fun, but they have as much bearing on the real world as playing chess has to modern warfare.

Although Pipes is making economic arguments against Medicare for All, do real economists believe that a free market can work in healthcare? No, Jerry says, she is really on the fringes. There are debates among economists around Medicare for All, such as around eliminating all cost sharing, but not about substituting a free market principle.

Stephanie notes that most conservatives who attack Medicare for All, do so by characterizing countries with single-payer healthcare systems, as Pipes did in their debate, as “being in a constant state of crisis.” This is an umbrella for wait-times, rationing, etc. Jerry says this comes out of the assumption that if we make healthcare free at the point of service, there would be a huge surge in demand for healthcare. Even if that did happen, we could accommodate large increases in demand by moving to Medicare for All because of all the administrative hours and burden it would remove for providers, who could then treat more patients.

If you look at the data, the United States has more wait times than other countries even for those have access to healthcare (i.e. for those who have insurance): only 43% of Americans can see a doctor that day or the next day – in the OECD (the coalition of wealthy countries), the average is 57%. You can find areas where the American healthcare system works well, but that’s only for the people who get into the system.

When you look at basic things like life expectancy, the United States is way below most countries – as much as 6 years below how long we should live for what we spend. We are comparable in life expectancy to Chile, which although a wonderful country, does not spend near the resources on healthcare that the U.S. does.

While we can have a debate on the facts, data, and merits of Medicare for All, that is not how the political debate will play out when M4A is attacked by free market conservatives, or the healthcare industry. Jerry took one for the team and read Sally Pipes’s book opposing Medicare for All. The attacks will certainly use cherry-picked data, but more importantly powerful “horror” stories claiming to show Medicare for All doesn’t work in other countries. The stories, like Ronald Reagan’s “welfare queen,” may have a grain of truth, but are often 95% fabrications, or reflect mistakes made by individual providers – not by the health insurance system failing anyone.

Reflecting a common theme on the podcast, Jerry reminds us that many people are “risk averse” – easily scared about even positive change, and fearful of losing what little coverage they have left. These stories will directly play on that psychology.

What about the argument that Medicare for All, by negotiating lower drug prices, would undermine research & development by Big Pharma to bring new drugs on the market? Jerry reminds us that half of all drug research & development is already paid directly by the federal government. Most of the rest, carried out by the private sector, is not cutting edge drugs, but finding ways to re-patent existing drugs with expiring patents, or extend old drugs to new disease categories. Drug companies do not invest in long-term projects, since developing truly novel drugs takes a long time, and may or may not result in a marketable product. Virtually all breakthrough drugs, effective anti-biotics, and most cancer treatments are developed by government agencies or at Universities. Also, many amazing breakthrough treatments are developed in other countries!

Drugs have become so unaffordable that oncology doctors have developed the term “financial toxicity” to describe the inability to offer certain cancer treatments to patients who can’t afford them.

We close by asking Jerry for an Economics 101 overview of why markets work or do not work when it comes to healthcare, and health insurance in particular. Jerry reminds us that Kenneth Arrow essentially launched the sub-discipline of health economics in 1963 with an article that described why markets in healthcare do not work. The reasons have to do with uncertainty and “information asymmetries” – people don’t know what healthcare problem they have, and they don’t know where they should go. The information that providers have, which patients don’t, gives providers monopoly power.

We also know that people want health insurance because we have uncertainty around what our health needs and costs will be in the future, so paying steady monthly premiums protects us against that risk. Private health insurance companies, though, make money and increase their profits primarily by avoiding coverage of the most expensive patients. Unlike companies operating in a free market, they make money by (selectively) selling less, not by selling more. Virtually all economists would agree with this characterization of why healthcare is not a free market. But that wont’ stop conservatives from making bogus “economic” arguments.

Ben’s takeaway from Jerry’s overview: a free market in healthcare incentivizes healthcare corporations to do all of the things you would never want a healthcare system to do: avoid the patients who need care the most, and develop drugs we don’t need or want.

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