The Free Market Healthcare FAQ

I seem to be writing the same thing in response to bunch of people, so I'm going to start collecting them here.

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A friend writes:

"Will "increased competition" bring down healthcare costs as Republicans say?

No.

This is the fallacy of libertarianism. Libertarians, bless their hearts, truly believe that competition brings down prices because they believe that businesses compete on price. Why do businesses compete on price? Because they want the most customers, right? And people always go for the cheapest product, so businesses that want more customers work to lower their prices, right?

Libertarians are so adorable.

Businesses do not want to maximize number of customers. They want to maximize profit."

https://www.quora.com/Will-increased-competition-bring-down-healthcare-costs-as-Republicans-say/answer/Franklin-Veaux

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My response:

Note that I, and most free market types, have no love for the abortion that the Republicans proposed to replace Obamacare with. I also have very little confidence that Republicans will do much to liberate healthcare in the U.S.

It's also not true that libertarians believe that prices will always fall in a free market system. If you have a socialist system, where the prices are fixed and care is rationed, and competitors are banned, the price may go up in dollar terms if the market is liberalized, especially initially, as people are newly able to bid for services.

However, the threat of competition tends to keep prices down, as entrepreneurs are always looking for ways they can profitably offer better services at a lower price than the existing market leaders.

"You don't do this with healthcare. If you're in a situation where you either buy a product or you will die, you buy the product. If I make an anti cancer drug for $3 and sell it for $15,000, you're still going to buy it."

No, not necessarily. Although it's true that demand for healthcare is more inelastic than demand for other goods, it's still subject to the law of supply and demand. Many doctors, for example, don't choose chemotherapy because they don't think the benefits aren't worth the costs.

http://www.zocalopublicsquare.org/2011/11/30/how-doctors-die/ideas/nexus/

Moreover, most medical care is not emergency care. Patients (and their insurers) have time to shop around. Many patients choose to get their care overseas, because they can get better quality of care at a tenth the cost:

https://www.forbes.com/sites/johngoodman/2016/03/02/better-care-at-one-tenth-the-cost/#3bb4c5cd45bc

And if it weren't for the thicket of regulations, healthcare cartel regulatory capture, and xenophobic immigration suppression laws, people like Devi Shetty could bring those same cost savings directly to the US. As it is, he must content himself to bringing them to the Cayman Islands, at least for now:

https://en.wikipedia.org/wiki/Health_City_Cayman_Islands

"If I'm diagnosed with cancer, guess what? My participation in the health care process is not voluntary. By definition, the utility value of dying is 0, because I can't spend my money when I'm dead."

Your participation in food consumption is not voluntary either. It doesn't therefore follow that we should give the government a de facto monopoly over the food supply.