Many right wing advocates like to claim that they support “market based” solutions to social, political or economic problems. A recent example of this comes from commentators who are supporting George Bush’s State of the Union call for tax incentives as a way to get more people covered by private health insurance.

     Many of those commentators are claiming that what Bush seeks is a market-based solution to the rising cost of health care. They support his solution with the claim that alternative approaches advocated by some Democrats are not market-based, and are therefore inferior.

     It is certainly true that markets can operate as powerful incentives for efficient economic activities. But markets can only work properly under a relatively narrow and constrained set of conditions. If those conditions are not in place, markets can go horribly wrong and create far more problems than they solve. It is stupid to rely on a market when the proper conditions are not in place.

    For a market to work properly, there must be a large number of suppliers who are competing to provide goods or services to a large number of consumers. That means there must not be any monopolies, or cartels that limit supply or demand. Both the suppliers and the consumers must also have ready access to the information they need to make rational decisions about their economic activities within the market.

     The conditions for the proper operation of a market do not presently exist in the health care services industry in the United States, and they have not existed for many decades. Health care is provided by physicians, who have a legal monopoly. The medical schools have limited the number of physicians who are allowed to practice medicine in the United States. This artificially limits supply over time, and helps keep prices high.

     The availability of information regarding health care services is also highly constrained, at least as far as most patients are concerned. If a doctor tells a patient that he or she needs a particular type of treatment, most patients do not know enough to make a rational decision about that claim. The “second opinion” is one option, but it can be very expensive to obtain.

     With a legal monopoly in place, and with most patients not having access to the information they need to make rational decisions about their health care, the market does not do a good job of promoting efficiency in the heath care services industry. The result is soaring health care costs, high prices for health insurance, and lots of people who are uninsured.

     Giving income tax incentives to the uninsured will do little or nothing to solve that problem. Very high percentages of the people who are uninsured are also low income, and pay little or nothing for income taxes. Promising to cut their tax bill if they will obtain private health insurance simply will not work when the cost of the health insurance is many times greater than their entire tax liability.

     Bush’s health care tax incentive proposal has nothing to do with a real market based solution. If he really wanted a market-based solution, he would eliminate the monopoly by dramatically increasing the supply of physicians in this country. At the same time, he would make it much easier and cheaper for patients to obtain second and third opinions regarding their health care options. But of course Bush will not do these things, because he does not really want a “market-based” solution.

     What Bush really wants is to prevent the new Democratic majorities in Congress from being able to pass a system for universal health care in this country. Polls consistently show that a substantial majority of the public supports the concept of universal health care. The Democrats could score some major political points, and implement some good public policy by giving the people what they want.

     Don’t hold your breath, however, because George still has the veto power, and some Democrats are just as deep into the pockets of the medical lobbyists as the phony free market Republicans. Making your voice heard is far more effective than holding your breath.

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