March 4, 2013

Health Care And Free Markets

Nobel laureate George J. Stigler discussed how regulation was “...designed and operated primarily for...” the benefit of the industries being regulated. and as a result could use the regulation for their advantage. Stigler's conclusion was  “Every industry should be either effectively competitive or socialized.” Health care is one of the industries where free markets do not work.

Health care is an industry where the receiver of services, the patient, does not directly pay the provider, the doctor, for services rendered. A third party, an insurance company,  pays for the service and therefore the consumer is not as vigilant as he normally is when making a buying decision . The patient does not aggressively shop for the best care at the most affordable price in the market place because no money is coming directly from his pocket..

A trickle down affect of the disconnect between who is receiving the service and who is paying for it also negatively affects  the cost of drugs and other goods and services used by the doctor to cure the patient. The drug companies are able to buy business from the health care profession by giving lavish vacations and other benefits to members of the medical profession, raise the price of the good or service provided and neither the patient or doctor cares because it is passed on to the insurance company and added to the cost of the insurance premiums....More

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