The Social Consequences of Free Trade in Health Care: A Public Health Response to Orthodox Economics

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Abstract
In recent years, difficulties in U. S. health services have been ascribed to excessive government intervention and regulation; high costs and other problems would be solved, it is argued, by “return to the free market and competition.” Examination of the past operations of free trade and competition in health care, however, shows that in this market not one of at least five conditions necessary for effective competition exists. Numerous adjustments made by society reflect strikingly the problems caused by these market deficiencies (such as seriously inadequate information or the presence of major social “externalities”). Furthermore, even these adjustments-such as medical ethics or health insurance-have generated serious secondary problems. Many types of waste and social inequity also persist, in spite of all the attempts to compensate for market failure. In effect, the so-called free market in health care has survived only because of the extensive regulations and other actions taken to patch it up. Abandoning these adjustments would further aggravate current problems. Only replacement of free trade by systematic social planning could hope to achieve a health care system that allocates resources and distributes services both efficiently and equitably.

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