What Obamacare Tells Me About Government’s Understanding of How Markets Work

September 5, 2009

In this post, where I questioned whether government controlled prices on medical procedures would help Obama’s worry of a doctor recommending an unnecessary tonsillectomy to make more money, I also mentioned that I don’t think that behavior is a problem in today’s medical care industry. 

Here’s why I think that.

First, I won’t pretend that the current medical care industry is a free market.  That’s an often repeated myth of supporters of government health care.  The medical care industry has been moving away from free market since the late ’60s and many of the problems with the industry are caused by exactly that.  Moving it further away will only make the problems worse.

That being said, there still is a lot of choice in the current market.  Under most medical plans, I can still choose among a variety of competing medical care providers and I can still obtain the much recommended second opinion in the case of a major diagnosis. 

Doctors who order higher cost procedures for the sole purpose of making more money would not be able to attract and retain business.  Good business owners learn that the best way to wealth is by treating customers well and building a good reputation.  Ordering unnecessary procedures doesn’t do that.

Now, will there be some unscrupulous doctors?  Yes.  Will some patients receive unneccesary procedures?  Yes.  But that will happen no matter how the market is organized (free, governed by third party insurers, government). 

The question is under which system will it happen the least?  The free market is the clear winner.

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