'Free market' in healthcare has been misdiagnosed

Since consultants are working on behalf of the companies and their "advice" is designed to help the company, not the client, the argument that the "free market" in healthcare should be left alone is to say that people with power should be able to make money off people who are starved of choice and information, the writer says.
Since consultants are working on behalf of the companies and their "advice" is designed to help the company, not the client, the argument that the "free market" in healthcare should be left alone is to say that people with power should be able to make money off people who are starved of choice and information, the writer says.

Before campaigning to defend a market, it is a good idea to check whether it exists. The release of the report by the Competition Commission's health market inquiry, chaired by former chief justice Sandile Ngcobo, and the (distant) prospect of national health insurance (NHI), triggered a familiar local ritual.

Whenever an official body suggests the government change the law to limit private economic power holders, a chorus complains that the free market is under attack.

This is so common now that just about everything the government might do to regulate behaviour in the economy is denounced. But, like the behaviour of the boy who cried wolf, it makes it far more difficult to tell real dangers from prejudices.

And sometimes the market the chorus wants to save does not exist. Health is a good example.

The inquiry found that competition in private healthcare is often a fiction and it proposed ways of forcing more competition. Some health industry players insisted that its information was out of date.

What both sides - and the free market lobbies - didn't say is that a free market in healthcare is impossible. For markets to exist, two closely related elements are needed.

The first is choice: if people cannot choose what to buy or sell, there is no market. The second is information: choice makes no sense if buyers and sellers do not know enough about the goods and services they trade to make an informed decision.

Neither exists in healthcare. Very few of us know whether we really need the tests or operations our doctors recommend.

Those who do know are probably medical professionals. So, if we use private healthcare, we may be asked to spend large amounts of money for remedies we might not need.

If what we are told we need is covered by medical aid, we probably don't mind whether money is wasted. But if medical aid doesn't pay, we may pay a huge price - literally - for something we don't need.

Choice and information are scarce in the medical aid industry too. Some of us can choose any medical aid we like as long as our employer likes it too.

If we are lucky enough to be able to choose, few have the information to know what we need.

Medical aids hotly deny that they make their rules difficult to understand to make sure we have as little choice as possible.

But, even if it isn't deliberate, few of us can understand them well enough to make an informed choice. In theory, consumers are helped to choose by medical aid consultants, but this is a fantasy.

The consultants are working on behalf of the companies and their "advice" is designed to help the company, not the client.

Given this, the argument that the "free market" in healthcare (or any other sector where markets don't exist) should be left alone is to say that people with power should be able to make money off people who are starved of choice and information.

If anything like a free market in health is to exist, rules are needed to protect citizens and ensure they have choices.

The debate should not be about whether rules are needed but which rules they should be.

The government's proposed measures may not be the answer (though it is hard to argue with a law banning consultants who work for medical aids). But those who argue they are not the answer should propose better ways of fixing the problem - not no action at all.

*Friedman is research professor with the humanities faculty of the University of Johannesburg

Would you like to comment on this article or view other readers' comments? Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.

X