Free Market Fail

Free Marker FailEduardo Porter is an economics writer for the New York Times. He wrote an amazing article on Tuesday, Health Care and Profits, a Poor Mix. Despite the title, it is not only about healthcare. It is more about how the United States has embraced the idea that markets work “magic” and if you want to reduce the cost of a government service: privatize it!

This is a religious believe on the right. And it isn’t confined to the supposed free market. Paul Ryan’s big idea for Medicaid is to “block grant” it. What this means is just to shove some money at the states and let them deal with it. Now I want to be clear: the intention is to destroy such programs. But the argument that is made (because “fuck the poor” is not a very compelling argument) is that the states will “experiment” and find innovative ways to make healthcare (or whatever) cheaper. It doesn’t work. Not only is there no evidence that states are more effective than the the federal government, business is also not more effective.

What Porter shows is our experience over the last 25 years has shown just the opposite:

We now know this didn’t work as advertised. Competition wasn’t as robust as hoped. Health maintenance organizations didn’t keep costs in check, and they spent heavily on administration and screening to enroll only the healthiest, most profitable beneficiaries.

Indeed, the use of HMOs and other private care for Medicare has only increased costs. But it is even worse than the costs would indicate. Porter describes a study of tranquilizer use at for-profit and nonprofit hospitals. Doses given at the for-profit hospitals were four times as high. This was because the for-profit hospitals cut staff to the bone and it is easiest to manage patients who are asleep most of the time.

Let’s think about this. We get worse healthcare for more money via the private healthcare systems. We get corruption and abuse of the poor with our private bail bond system. We get an unstable economic system and higher income inequality because of our under-regulated banks. Yet conservatives are taken seriously everywhere spouting policies that have clearly failed. In fact, much of the “liberal” Democratic Party is devoted to these same failed policies.

To do a riff on Brad DeLong’s line: why oh why can’t we have a better government?

H/T Dean Baker

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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