William Paul Bell Queensland University Researcher

Why is mainstream economics not a social science but ideological mathematics?

Free market Fundamentalism and the US Health System

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President Obama’s health reforms run against a strong current of free market fundamentalism.  A fundamental belief that the free market always delivers the best results.  My article ‘The G8 protests and the logically inconsistent foundations of neoclassical economics’ discusses how there lacks a theoretical justification for the free market delivering the best results.  The empirical evidence shows that alternative systems of health provision provide better health outcomes for less cost than the US free market approach, see the CIA world factbook on ‘infant mortality rate’ and ‘life expectance at birth’.  These basic health indicators are picked deliberately as they encompass equity and disparities in health care provision.  Noting that the US health system might well provide good health care outcomes to the segments of the population who can manage to stay insured or are rich.

The CIA factbook shows that out of 224 countries 43 outperform the US on ‘infant mortality’ and 49 outperform the US on ‘life expectancy’ but only 19 out of 229 countries outperform the US on ‘GDP per capita’. The majority of countries that outperform the US on the two health indicators for less ‘GDP per capita’ have some form of nationalised health insurance scheme.  There is theoretical justification for this observation.  See the literature on ‘Adverse selection’, a well documented problem for insurance.  President Obama’s health insurance reforms do go some way to ameliorating adverse selection.  However, the fear of free market fundamentalists needs addressing for the bill to be successful, as fixing the ‘adverse selection’ problem in a health system does not require nationalising the whole system.  An example that would invoke the fear of free market fundamentalists is a comparison with Cuba, a country with much less ‘GDP per capita’ than the US but outperforms the US on ‘infant mortality’ and uses a nationalised health and insurance system.  A less fearful example for free market fundamentalists is Australia that outperforms the US on both health indicators with less ‘GDP per capita’.  Australia uses a national health care insurance called Medicare to pay for visits to general practitioners, public hospitals and partially funds visits to specialists.  Medicare is used in conjunction with the Pharmaceutical Benefit Scheme, which uses monopoly buying power to secure medicines at low prices.  The vast majority of doctors and specialists are in private practice.  The pharmaceutical companies are all private companies.  The hospital system is a mixture of public and private.  This hybrid solution to a complex problem moves beyond the dogma of free market fundamentalism.  Free market fundamentalism also acts as an obstacle to finding solutions to other health issues .  For example see my post Comparing the role of government in self-control problems from behavioural and neoclassical economic perspectives’ for a discussion of self-control problems.

The ‘UK health system is top on “efficiency”, says report‘, which is consistent with the US lacking a universal health insurance system being linked to the poor performance of the US health system relative to other countries.

1. The Netherlands
2. United Kingdom
3. Australia
4. Germany
5. New Zealand
6. Canada
7. United States

“In contrast, the US consistently underperformed in most areas of health care relative to other countries, says the study report.

These include access to care and quality of care whatever the background or income of the patient. This is despite the fact, the study says, that the US health system is the most costly in the world.

But, notably, the US differs from the other countries studied because it does not have a universal health insurance system.”

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