What Is Free Market Health Care?

A small but growing number of health care reform advocates and policy analysts, mostly affiliated with conservative and free-market research organizations, are in favor of a free-market health care system as a comprehensive reform. They see a free-market approach as a sensible alternative to the government-administered single-payer systems of many other industrialized nations, such as Canada and Australia.

Identification

• Free-market health care is a system that's free of most government licensing and regulation, as well as taxpayer funding. Leading proponents of such a system include conservative and libertarian think tanks, such as the Heritage Foundation, the Cato Institute and the Reason Foundation. These and other advocates claim that free-market health care will produce better quality medical care and drive down the high costs of care and insurance coverage through competition.

Function

• Most Americans with medical insurance obtain it through their employers. Proponents of free-market health care consider the practice of linking health insurance to employment antiquated in an increasingly mobile work force in which people change jobs frequently or are self-employed.
  Alternatives to employer-paid insurance vary among advocates of free-market health care. Some advocate giving individuals tax breaks to purchase insurance or allowing them to purchase policies with pre-tax dollars from their paychecks.

Prevention/Solution

• Free-market health care proponents say another problem with the employer-driven health insurance system is that third-party payment, by government or by private insurance carriers, shields consumers from the costs of their medical care, giving them no incentive to be cost conscious or to curb their use of medical services. Meanwhile, continued consumption of costly medical services requires that the government raise taxes and insurance companies increase premiums.
  Proponents believe a market-based health care system will give consumers an incentive to be more cost conscious and to "shop" for the best deal. They contend that paying directly for health care, rather than billing a third-party insurance carrier, will cut administrative costs, which they cite as the main reason for the high costs of medical care. Lower administrative costs will allow physicians to reduce fees, according to these advocates.
  A free-market health care system would make coverage and care more affordable for low-income families and the uninsured as well, according to advocates, who contend that lower taxes or tax credits would give such people more money with which to buy insurance or pay for medical care.

Types

• Leading advocates agree on the problems with the U.S. health care system and on the need for a free-market approach, but they differ in their specific proposals for achieving such a system. In 2007, President George W. Bush called for tax cuts or deductions for families to purchase their own health insurance.
  Another proposal, offered by some employers, is a health savings account. This puts untaxed dollars into savings accounts that individuals can use to purchase insurance plans that meet their individual needs. They also could use funds in the account for preventive care, such as physical examinations.
  Free-market proponents contend that giving consumers control over the accounts will give them the incentive to shop for the best prices and services, forcing more competition among insurers and medical providers. At the end of a year, any unused money in patients' health savings account would be theirs to keep.

Considerations

• Critics of a free-market health care system contend that it is unrealistic and makes too many assumptions about how consumers, insurers and medical providers will behave. They also believe that such a system will not address the high costs of health insurance and medical care or address the problem of the millions of Americans who don't have health insurance coverage.