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Monday, October 12, 2015

Health Care Is Like Other Services

Star of Life

Note: Please see the opening note there. It applies here too.

One frequently hears the argument that there can be no markets in health care. Those who so argue strenuously deny that they are Communists (or some other form of collectivist) and disclaim any intent to generally abolish the capitalist mode of production. It is just that health care is so very different from all other goods and services that—for just this little special case covering 18% of the U.S. economy—we need to adopt a collectivist approach.

To draw this distinction two differences are invoked: one with a grain of truth but far from justifying collectivism; the other, entirely spurious.

The first difference is that emergency medical services are often rendered in situations where the patient cannot shop around because he is either unconscious or time is so critical that the only reasonable provider is the one closest at hand. One can think of pedestrian hit by a truck while crossing the road and critically injured. The only reasonable response to get the unconscious pedestrian to the nearest emergency room post-haste and without inquiring about prices.

Such situations do indeed occasion a small, but significant, part of all health care and one cannot directly address them through competitive markets. But the law recognized this centuries ago and evolved adequate responses not involving collectivization of all of health care. One of these responses is the doctrine of quantum meruit. Under this doctrine a quasi-contract is created between the helpless victim of accident and doctors and hospitals treating the victim. The victim becomes legally obligated, as if he had signed a contract to this effect, to pay the doctors and hospital for the emergency care.

But note that this quasi-contract is doubly limited:

  1. It covers only such services as are necessary to keep the victim alive and conscious long enough that the victim has an opportunity to participate in the health care market.
  2. The price charged for these services must be no higher than the market rate for similar services paid by others not so impaired. In effect, quantum meruit approximates the market rate for services for which there is no market by looking at the market prices of similar services for which there is a market.

On the whole, quantum meruit is a perfectly workable solution for these uncommon, but real, cases. Hence, this is not a reason to collectivize even emergency services, much less all other medical services.

The second difference advanced is that most people, not being medical doctors, cannot adequately appreciate the costs, benefits, or necessity of medical procedures and that, therefore, no market for medical services can exist. This is a fine argument for those who also embrace its obvious corollaries, e.g., Because most people are not automotive engineers, there can be no market for cars. or Because most people are not chip designers, there can be no market for computers.

Those who are willing to embrace these corollaries are, contrary to their disclaimers, general (and not just health-care) collectivists. Those who are not willing to embrace these corollaries, have offered no reason that health care must be collectivized.