After about a year and a half of working in health care, and at least some casual reading of the relevant literature, I’m increasingly skeptical that a libertarian free market can provide an adequate basis for the provision of health care. The longer I work in the field, the more convinced I become of the essential truth of Kenneth Arrow’s famous insight about the economics of health care:
[T]he special economic problems of medical care can be explained by adaptations to uncertainty in the incidence of disease and in the efficacy of treatment (emphasis added).*
That’s an understatement. I’d be more inclined to say that the economics of health care is like economics done under conditions beset by the Evil Demon of Descartes’ Meditations. I’ve also come to think that Arrow’s insight applies even more broadly than he suggested, not just to medical care per se, but to medical research, to the provision of ancillary services, to preventive care, to administration, and so on. In general, I would say that Arrow’s insight lends credence to the thought that health care differs fundamentally from most of the other goods that we buy and sell in the market, which leads in turn to the (tentative) inference that the market is ill-suited to its provision. Anyway, consider this post another expression of my skepticism on this score (this one being the first).
As with my last blog post on this topic, I have a particular case in mind, one that (once again) involves the funding mechanism for medical research. Consider a thought-experiment based on an actual case.**
Imagine that a medical researcher has promising preliminary research for the cure of a serious, chronic, widespread disease that currently lacks a cure. Suppose further that the research satisfies the following description:
It’s expensive enough to demand a substantial amount of long-term funding.
The researcher’s hypothesis about the etiology of the disease is true.
Given (2), the researcher has a corresponding hypothesis/proposal about a possible therapy, which also turns out to be true.
The therapy cures the disease in a safe, decisive way at very low cost.***
The envisioned therapy is so cheap that there is little profit in administering it–so little that providers of the therapy would be unlikely to recoup investment costs from it in any reasonable amount of time.
The envisioned therapy has the further effect of wiping out the entire industry devoted to treating the disease as a chronic condition. (I say “the industry,” but realistically, that probably means “several different but interrelated industries.”)
Though not an absolute, it seems to me that a free market is biased against any research program with the preceding six features. Very few entities would, at step (1), have a profit-making incentive to fund the research. And some of the succeeding steps only make things worse. Left unfunded, such a research program might well wither on the vine despite the truth of its claims and/or the promise of the therapies it proposes.
Even if there were non-profit-driven entities in the marketplace willing to fund the research, precisely because they weren’t profit-driven, they might lack the funds to invest in an optimal version of the research program. And so, the research program might consistently be tested in a methodologically sub-optimal way. A predictable consequence would be chronic, self-fulfilling uncertainty about the merits of the research. An underfunded series of studies might (precisely through underfunding) fail to demonstrate the merits of the research despite the truth of the hypotheses involved, merely reproducing and intensifying unfounded doubts through defects in the testing protocol–defects explained by lack of funding, not by the supposed demerits of the hypothesis.
Given this, a series of inconclusive studies might easily (however unfairly or prematurely) be taken to indicate the wholesale failure of the research program. Hence the research program might fail–might even be entirely lost–despite its merits, and despite the fact that, if properly funded, it might have demonstrated the truth of its claims.
This is, to be sure, a single thought-experiment involving a single disease. And it might legitimately be objected that a single thought-experiment, even if unanswerable, could hardly be thought to sink the idea of free market medicine as such. A thought-experiment is an exercise of imagination, not an assertion of truth. And the results of such an exercise point to a possibility, not an actuality. Beyond that, as stated, this particular thought-experiment points at best (or at worst) only to a single possibility.
Fair enough. So consider another thought-experiment, or less grandly put, an addendum to the first one: imagine that the preceding case can be generalized across a range of similar cases. And imagine that it can be generalized past medical research to other parts of medicine–preventive medicine/ primary care, surgical services, the marketing of pharmaceuticals and medical devices, medical administration, etc. If so, it’s a structural defect of any free market system, whether explicitly “capitalist” or not, that it lacks a profit-making motivation to fund this research. That would, if true, indicate a serious defect in any free market approach to health care as such.
Some obvious objections come to mind at this point. Am I not assuming, falsely, that everyone in the market is driven exclusively by a desire for profit, and isn’t that obviously false? The free market may incentivize profit-maximization, but it permits other motives, as well. So we can’t assume that profit is the only possible motive behind action in a free market. Indeed, most of the most famous medical research organizations in the United States arose for charitable reasons, and were (or are?) driven by charitable, not monetary considerations. So we have historical evidence to suggest that a great deal of medical research is undertaken in defiance of the imperative to maximize profit. Why then assume that if a research program isn’t profitable, it wouldn’t be funded within a free market? Many have been, and many could be.
There’s a great deal of truth in this objection, but it still, I think, misses the mark. I’m not assuming that literally everyone in the free market is driven by a desire for profit. I’m simply assuming–with most, if not all, of its defenders–that the free market has an incentivizing bias in the direction of profit: i.e., that the market differentially favors profit-making enterprises as against enterprises that don’t.
The standard free market claim is that free market profit-seeking and competition track desired (hence desirable) outcomes via the invisible hand, and that tracking desirable outcomes via the free market is both morally and economically superior to any other option at our disposal. It’s morally superior because it relies entirely on voluntary action without recourse to first uses of force, and it’s economically superior because market-revealed preferences are a more effective route to socially desirable outcomes than any route that bypasses them.
The fact remains that while a free market permits non-profit-oriented action, it favors profit-oriented action, and does so at the expense of enterprises that don’t make a profit. So research that doesn’t promise a profit is bound to be disfavored relative to research that does. That’s still a problem, and it’s all that my thought-experiment requires.
In any case, since profit is the fundamental and charity only a secondary or relatively marginal force in the market, profit-maximization is the fundamental driver and fundamental ideological selling point of the free market. If something can’t be done at a profit, it can perhaps be done through philanthropy (true), but if there is a basic mismatch between the desired outcome and the imperatives of profit-maximization, there is still bound to be a systematic mismatch between that outcome and the fundamental mechanism behind a free market.
Philanthropy is a more or less effective way of patching up the shortfall between profit-maximization and unprofitable-but-desirable social objectives (how effective is a hotly contested issue), but there’s no way of denying the existence or systematic character of the shortfall. Given that, advocates of a free market are either obliged to deny the desirability of the unprofitable outcome, and/or (if they admit it) to insist that profit-maximization and/or philanthropy can rise to the challenge of meeting it.
Reflection on the particulars of my thought-experiment should suggest why the preceding gambit is implausible. If research is not profitable, indeed, would wipe out profits of an existing industry, there is bound to be a strong, indeed visceral aversion to it among players in the health care market. And these players need only have garden-variety motivations; they need not be stereotypical villains of any kind, just ordinary profit-maximizers of the kind we entertain at parties or hang out with at the bar. The research they overlook or reject may save lives, but does so at the cost of an industry more powerfully dedicated to other things.
Advocates of the free market tend to underplay the trade-off involved between the internal and external goods of medicine–between the pursuit of desirable clinical outcomes and the pursuit of the material rewards of participation in a lucrative profession. But the trade-off is very real, and only too obvious to anyone in the field.
As for the fact that the American market has given rise to philanthropy-based research, it’s undeniable that a free market makes that possible. But it’s also undeniable that nothing about a free market makes philanthropy a scientifically reliable source of funding–by which I mean, nothing about a free market directs funds to the most scientifically promising research programs, especially in cases where those programs have little profit-making potential (or market-discernible potential) about them. “Market discipline” can (and does) discipline and punish scientifically worthy enterprises to death. Facing stringent market discipline, such organizations can either fold, or else survive by turning themselves into profit-oriented businesses. Arguably, this has in fact happened to American medical research. If it happens often enough, at the expense of meritorious research programs of the kind described in my thought-experiment, we back into the problem that the thought-experiment serves to depict.
Put differently, the thought-experiment serves to highlight the problematic move from “desired” to “desirable” in the standard free-market account. Desired outcomes as filtered through a market process are not necessarily desirable by other normative standards, e.g., by the imperative to reward moral desert, or to satisfy medical needs, or to achieve positive clinical outcomes, or (frankly) even to show minimal kindness in cases where displays of kindness are not remunerated (as they often aren’t). Nor can the divergence between market outcomes and the satisfaction of these other standards be finessed by insisting that the market can inevitably be imagined into tracking them. That just seems like imaginative hand-waving–hand-waving vulnerable to counter-displays of imagination involving thought-experiments intended to disconfirm them.
What we seem to be left with is the adamant assertion that any aim pursued voluntarily is morally superior to any aim pursued by first-uses of force, regardless of the magnitude of the divergence between what the market delivers, and the satisfaction of any other normative aim. Better to preserve economic freedom at the price of the perpetuation of a chronic disease than to fund the cure by a mechanism that violates economic freedom. Maybe, but it’s a hard sell–certainly a hard sell if you have the disease in question, and also a hard sell if the decision is to be made behind a Rawls-type veil of ignorance.
All of this suggests that Robert Nozick was right to argue that free markets resist patterned distributions–including patterned distributions involving moral desert, need satisfaction, positive clinical outcomes, and counterfactually stable displays of non-remunerated kindness.**** Indeed, if progress (including medical progress) exhibits a patterned distribution, then the workings of a free market seem at odds even with the stable display of this pattern. That’s why opponents of the market call themselves “progressives.” Libertarians find this maddening, but it shouldn’t be. If “liberty upsets patterns,” it upsets progress. It seems natural enough for those who favor progress over markets to choose a name that reflects their commitments and priorities.
Where Nozick saw the market’s tendency to “upset patterns” as a morally neutral (or perhaps even morally groovy) feature, others might be inclined to see it as a bug. Taking Nozick at face value, it’s an understatement to say–with Yeats–that under a free market, “the center does not hold.” Nothing holds, except the desire for profit, or put differently, the desire to satisfy desire. As far as the market is concerned, the satisfaction of desire is a proxy for a summum bonum: it takes on a life of its own that bypasses any other normatively salient end or pattern. At a certain point, the divergence is bound to seem or become intolerable. And for obvious reasons, health care is the place where the intolerability will seem most obvious. Once you see its workings up close, you begin to see the truth in Marx’s dictum that the capitalist desire for profit is a fetish. If you’re in health care, you also begin to wonder what this fetish has to do with medicine.
Many of my thoughts on this subject are variations on a theme I’ve blogged here before: to the extent that a free market in anything is driven by the profit motive, it serves widely desired ends, but there are domains of life where the satisfaction of desire on a market model can be systematically at odds with otherwise desirable outcomes. In and of itself, that’s not a conclusive objection. But once the examples pile up, the normative strikes against the free market start to add up as well. This isn’t to say that there are no good ideas to be borrowed from market-based approaches to health care. Nor does it point unequivocally in the direction of any single policy prescription. But there’s a real problem here that needs a better solution than adherents of free market solutions have (as far as I can see) so far generated. If there is a market for better solutions, I hope it kicks in soon.
*From Victor Fuchs, “Kenneth Arrow’s Legacy and the Article that Launched a Thousand Studies,” in Health Affairs, citing Kenneth Arrow, “Uncertainty and the Welfare Economics of Medical Care,” American Economic Review, 53:5 (1963).
**The actual case is Denise Faustman’s research on Type 1 diabetes, as described in Elisabeth Rosenthal’s An American Sickness: How Healthcare Became Big Business and How You Can Take It Back, pp. 182-84. Faustman’s research is highly controversial, but evaluating it is well beyond my competence, so I don’t mean to be taking a position on its merits. For a summary, see “Why Denise Faustman Isn’t Deterred by Skeptics…” Healthline, January 2021.
***Recouping the investment becomes somewhat more likely if patents are involved, but if we take patents out of the equation, there’s no reason to think that an otherwise cheap therapy would be a money-making venture, or could without force or fraud be turned into one. And there are two ways of taking patents out of the equation: we could either suppose that the therapy in question relies entirely on generic drugs and/or medical devices; or we could reject the legitimacy of patents as such. Take your pick.
****Robert Nozick, Anarchy, State, and Utopia, pp. 160-64. Nozick’s objection to patterned conceptions is that maintaining them requires “continuous interference in people’s lives” (Anarchy, 163). I agree. What he doesn’t show is that the interferences in question are necessarily rights violations on a normative conception of freedom of the kind he himself adopts (in, e.g., his famous paper, “Coercion,” in Socratic Puzzles). That said, I reject the gambit taken by Nozick’s critics to the effect that we can have patterning without continuous interference (e.g., Stephen Nathanson, Economic Justice, pp. 76-78). Within health care, at least, there’s no two ways about it: a commitment to a patterned conception of justice does require continuous interference of some kind. The question is not whether interference is required, but whether the required interference violates the rights of those interfered with.