Do market forces really operate in US health care?


For supply and demand to work, the supply side needs to be driven by rational decisions made by informed consumers. The “wisdom of the market” must be reflected “where the rubber meets the road”—at the point of purchase. Consumers need to be able to discern quality and then decide where the best compromise between price and quality falls.

The supply side responds by increasing efficiency and innovating to create products and services to match that compromise. It also tries to influence the demand side by advertising—defining for consumers the “true nature” of quality.

For thirty years, America has attempted to apply the power of supply and demand to the profession of medicine. Health care has become an industry operating in an unfettered free market. The theory was that this would drive up quality and decrease cost. Health care would follow the path of personal computers, DVD players, and LCD televisions.

The theory has proven to be painfully, tragically incorrect.

I would like to suggest that the theory was invalid from the outset. I would like to suggest that present attempts to tweak it so that it can work are silly and now, entirely self-serving.

My suggestion is based upon a very simple reality: patients will never be informed consumers making rational decisions. This is not a belief. This is a reality. For proof, I need only ask that people honestly consider the last time they or one of their loved ones were ill or injured.

At that painful time, were their decisions rational and informed? Were they based upon a desire to find the most utilitarian compromise between quality and price?

When an emergency room physician tells the mother of an eight-year old child, writhing in pain on a gurney, that a helical CT scan is needed to help determine whether that child has an appendix that is about to rupture, does the mother ask, “How much does that cost?” Does the mother call three other emergency rooms in an attempt to compare costs for CT scans? Would you?

The overwhelming answer to these questions is no. Where the rubber meets the road, at the point of purchase, when we make decisions about health care, cost comparisons almost never play a role in those decisions.

When people make health care decisions, they are either sick or injured or worried about a loved one who is sick or injured. They are at a time when they are most vulnerable and least rational. They are frightened. Their powers of reason have been diminished. To demand that these “consumers” anchor a system of supply and demand with rational, well informed decisions is just plain stupid.

I would ask those who are proponents of market driven health care reform to take my simple test. Honestly look at your last serious illness. Truthfully consider the last time one of your children was really sick or badly injured. Were you asking the doctors, “How much does that cost?”

I would finally like to suggest that if a doctor included cost in the consideration of care, you would have been tempted to respond with a question of your own. “You’re talking about money at a time like this?”

Every health care decision is a time like this for the consumer, aka patient, having to make a decision about a health care purchase.

About the Author

J.R. Waggoner, M.D. practiced family medicine for thirty years in Aurora, Colorado. He also worked as a consultant and herded cats as the managing general partner of a general partnership of physicians. Three years ago, he left his practice to study health care policy and write. During his time away from clinical work, he has written two books and worked as a Senior Clinical Content Specialist and freelance writer.

His current book Medical Metamorphosis: The three step cure for America's health care crisis is available at 


Topics #health #health care #health care market #health economics #hmo #PPO #supply demand