Put bluntly, free markets do not work in the healthcare area. Nobel Laureate Kenneth Arrow showed us that and how, many years ago. Absent free markets that function properly, it is clear that government has to be involved, hopefully to assist in achieving similar results, that is, cost effective and efficiently provided medical care. However, government involvement has also been a conspicuous failure in the US.

The reason markets do not work properly is two-fold (1) the varieties of uncertainty involved are too great for free markets to handle, and (2) doctors feel morally obligated to treat whoever comes to them, regardless of whether they can pay. Understand that markets can and do deal with risk all the time, but they cannot deal with uncertainty. Risk entails probabilities associated with a few well defined alternatives. Uncertainty entails unknown, ill defined outcomes without stable probabilities.

Consider a standard product or service available for purchase. With a bit of search effort it can be well known and it is certainly well defined. You can also shop vendors to learn from whom you want to buy it. You have time for that. You can as well decide when to buy the product. The price of most products is low relative to your monthly income. You know the product will be what you want and need because you have checked it out in advance. Finally, you know the cost of the product from various sellers from your time spent shopping. These facts allow you to shop around effectively for the product so sellers must compete for your business. Competition is well enabled and effective.

But uncertainly abounds in health care. Consider first, the varieties of uncertainty involved in purchasing medical care as a product. One, you don’t know when you are going to need it. Two, you don’t know what type of medical care you will need. Three, you don’t know who (what specialist) will provide it. Four, you don't know what it will cost. Five, you don’t know whether the proposed treatment will be effective or whether further treatment will be required. Six, you don’t know who will pay what proportions of it. Seven, you do not even know where you will be when you need it. Shopping around to induce competition is wholly precluded in this situation entailing so much uncertainty. A market cannot work properly. Think about it objectively.

Such price and product uncertainty are enough to cause any market to malfunction, but add in the treatment attitudes of doctors and understand that free markets have little chance. Just making within 600 feet of an emergency room usually assures at least initial treatment regardless of the ability to pay. Costs can rival buying a house. All of these factors together destroy the free market mechanism for efficiently allocating resources in this area at minimal cost. That doctors practice or try to practice medicine to a uniform, single standard of care further compounds this problem.

Then, into this mix, throw health insurance companies and health care providers gunning to earn a handsome profit off each patient and the problems become further compounded and insurmountable. Insurers want to insure only the young and healthy, screening aggressively for pre-existing illnesses, and deny coverage to the elderly, even if they are healthy. Many of the young and healthy do not want to buy health insurance, leaving a higher percentage of those sick or ill among the insured. Insurance companies feel compelled to raise their rates and are doing so rapidly, but then even more young and healthy drop their coverage and the situation spirals out of control. Obamacare helps but not enough.

Markets are simply unable to effectively address health care needs under the free enterprise model or indeed even with our system of ineffective regulation. Price gouging simply replaces shop around competition. The need for a single payor national health care system without the profit motive involved becomes abundantly clear.