There’s been a lot of talk about health care and whether it should work by a public or private system. Advocates of private systems say that a public system can’t hope to achieve the efficiencies, innovations, etc. that a private system can. Fair enough. But there’s a “catch-22” in all of this.
A market’s job is to optimize a set of well-understood parameters in a dynamic negotiation between providers and would-be consumers. But if you don’t set the parameters and incentives correctly, the market mechanism cannot perform magic. Instead it will ruthlessly achieve what it’s programmed to achieve, selecting whichever customers make it the most money and ignoring the rest, whether or not that’s good for society.
In order to serve the public as a whole, it is critical to set the incentive structures correctly. Without that important step, markets will just make a mess of things. We saw this effect in graphic detail last year when the mortgage industry melted down and Alan Greenspan, visibly shocked, admitted too late that additional oversight had been needed.GIGO, to use an acronym that’s about as old as the computer industry: “Garbage In, Garbage Out.” Computers—and that’s what the free market is, a giant organic computer—only do what they’re programmed to do, nothing more. So if the instructions or data you put into them is garbage, that’s the result or effect you’ll get back out.
But here’s the “catch-22”: In rough terms, the people who support the free market solution also support reduced government control. Yet the problem is that in order to use the market, the entire incentive structure for what the market seeks to achieve needs to be revised.
The present system incentivizes a number of specific practices that allow insurance companies to make money by clever games of finding people who are cheap to insure and getting the most money out of them, and trying hard to exclude people who are expensive to insure. In order for health care to mean “health care for all,” not just “health care for the employed” or “health care for the healthy,” we need to revise the rules.
But if the people who are promoting a market-driven approach are opposing regulation, that can’t be done. Those people need to decide whether they want to really help, and if they do, they need to make some serious concessions toward appropriate regulation. The market will not do to this on its own. It has no incentive to. And markets are everything about incentive.
If the people who favor a market-driven approach continue to avoid material government regulation, as if there is something wrong with it, they should understand they are, by so doing, asking that a market-driven approach not be used. They can’t say they have a powerful tool that everyone should want to use while in the same breath saying that no one is allowed to touch the very powerful controls. That’s Catch-22 logic and won’t get our society where it is asking to go.
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