The Health Care Pricing Fallacy

The often supplied answer, in some circles, to any question that seems to do with economics is “let the market decide!” However, the limits of what the market can do effectively are rarely discussed. What the market allows is for rational actors to compete for limited resources. Where that falls apart is where one of those assumptions fails: the actors cease to be rational, the actors can’t compete, or the resource (or demand) is not longer limited. And often times, when someone faces an out-of-pocket hospital bill, all three assumptions fail. When someone is severely hurt, it is hard to argue that they are in a frame of mind to make rational decisions; people in the hospital are rarely in a state of mind to ‘comparison shop’ hospitals; and many people value their health to such a point that effectively their ‘demand’ is unlimited (think what life insurance policies pay out…). In short, it seems to me that leaving the market alone to set the price of our health care services is not a bright idea. I value my health and agree that healthcare professionals should be paid well for their services, but I am much more appreciative of healthcare I can actually afford!