The Illusory Promise of Free-Market Healthcare Miracles


Supporters of a single payer health system rally outside the White House in September of 2009. Haraz N. Ghanbari/AP

By Wendell Potter for The Center for Public Integrity

While listening to the promises to repeal ObamaCare during the Republican National Convention, I was reminded of what those of us in the health insurance industry said when our friends in Congress were able to block passage of President Clinton’s health care reform legislation 18 years ago.

Like the politicians in Tampa, we insisted then that a big government program not only wasn’t needed, but would be harmful — that what the government really needed to do was get out of the way and let the free market work.

Insurance company spokesmen like me assured the public that our then-novel managed care plans, coupled with the invisible hand of the market, would do the trick. Leave it to us, we said, and we’ll get medical costs under control and enroll every American in a good HMO.

The proponents of a pure free-market health care system hope that Americans have amnesia and can be persuaded to blame President Obama for the problems that grew almost immeasurably worse between the demise of the Clinton plan and the passage of the Affordable Care Act. They want us to believe, despite overwhelming evidence to the contrary, that health insurers and the largely unfettered, loosely regulated marketplace can somehow turn things around. And that we should reward insurers for their failure by turning the Medicare program over to them.

In many respects, the free market approach to health care has indeed been just what the doctor ordered, although not for patients. We spend twice as much on health care per person as western European countries do on average. Yet, according to the Commonwealth Fund, 81 million Americans are now either uninsured or underinsured — far more than during the Clinton administration. And with just a few exceptions, we rank well below almost every other developed country in measures of health outcomes, such as longevity and infant mortality.

There is fresh evidence almost every week that our uniquely American free market health care system continues to fail us.

Last week, in a piece about hospitals buying physician practices, The Wall Street Journal reported that patients are getting bills for doctor visits that are much higher than they were before their doctor’s medical group became part of a hospital system. Hospitals are charging more for physician services they now own just because, well, they can, thanks to the free market.

The story quoted insurance executives saying that one of the reasons insurers are raising premiums is because they’re having to pay more for physician and outpatient services as a result of this trend. And because insurers have moved millions of us into high-deductible plans, we’re having to pay more out of our own pockets, too. So we’re getting hit where it really hurts — our pocketbooks — twice.

Another reason for skyrocketing premiums: Hospitals are also merging with each other to have more clout at the negotiating table with insurers. According to the health care consulting firm Irving Levin Associations, there were 86 hospital mergers or acquisitions last year. That’s compared to 75 in 2010 and 51 in 2009.

Those mergers and acquisitions not only have been enabled by our free market approach to health care, they’ve been necessitated by it. The consolidation among hospitals is accelerating because of the even more rapid consolidation in the insurance industry. The two biggest health insurers, UnitedHealthcare and WellPoint, are giants because of their numerous acquisitions over the past several years. As a result of this consolidation, almost every metropolitan area in the country is now dominated by just one or two big insurers.

It has become a kind of arms race between hospital systems and insurers, and there are no signs that it will end anytime soon.

There was other fresh evidence last week that patients do not benefit from these trends. In a study published in Health Affairs, researchers reported that Americans younger than 65 (and not yet eligible for our single-payer Medicare program) are more likely to die because of a lack of timely access to affordable, effective care than people in the same age group in the single payer systems in France, Germany and the United Kingdom. For men, the preventable death rate was 69 per 100,000 in the United States versus 53 in the U.K., 50 in Germany and 37 in France. American women fared a little better but not much. Especially disheartening was the fact that we are falling further behind those countries every year.

Bottom line for us: we’re paying more and more for health care but continuing to trail the rest of the developed world in access to quality, affordable care.

In a recent post on the Forbes website, free-market advocate Sally Pipes of the Pacific Research Institute bemoaned the fact that “the dream of a single-payer system in America just won’t die.” This despite a decades-long campaign by insurers and their allies to equate single-payer systems like those in Canada and Europe with socialism and big government. Considering the many failures of the U.S. health care system, it is more appropriate to wonder why the dream of a free-market health care system just won’t die.