Counterpoint: 'Free market' and 'health care' are not an easy fit

U.S. Rep. Jason Lewis' defense of the GOP health plan ("Defense of Obamacare is plainly indefensible," March 18) outlines the first of three steps that promise to give "universal access to affordable health care." I found no convincing numbers in his "replace" argument, only ideological theory to "restore health care markets" and "increase health insurance choices." "Restore" suggests bringing something old back rather than attempting something new. The historical context is that total annual U.S. health care costs rose in almost a straight line from 5 percent of GDP in 1960 to almost 18 percent in 2010.

Lewis is obviously adopting and defending House Speaker Paul Ryan's Ayn Rand-based unfettered capitalism theory applied to health care delivery. Such free-market choice competition theories of cost control for medical care were credibly challenged by Stanford Nobel laureate economist Kenneth Arrow back in 1963. Arrow's analysis was in turn cited by Dr. Arnold Relman, the highly respected former editor of the New England Journal of Medicine, in his health reform book, "A Second Opinion," published in 2007.

Arrow's thesis is: "The medical care system is set apart from other markets by some unique characteristics." These characteristics include:

(1) Patient demand for services is for conditions that at unpredictable times rise to an existential threat from life-threatening illness or injury. This tilts buyer priority concerns away from costs toward quality.

(2) Buyer demand for services does not simply respond to the desires of buyers, but is primarily determined by the professional judgment of physicians about the medical needs of their patients.

(3) There are significant limitations on the entry of providers into the market resulting from the high costs and exacting standards of professional education.

(4) There is a relative insensitivity to costs and a near absence of price competition (here referring to competition among providers, not insurers).

(5) There is significant buyer market uncertainty because of the great asymmetry of knowledge between provider and buyer for a particular service, and the consequences of a course of action.

Arrow concluded that because of the way all these factors conspire, patients cannot independently decide what services they want in the same way consumers decide in the usual market when shopping for what they want at the price they want to pay. Because a higher level of trust is required in medical care than in most venues, society must rely on nonmarket mechanisms such as educational standards and state licensure, rather than on the discipline of the market and the choices of informed buyers.

The fundamental economic reality in the U.S. is that health care spending has risen faster than GDP at the same time wealth disparity among buyers has increased. If everyone is to receive care and these divergent trajectories continue, the affluent will have to pay more for those who can't afford it. By comparison, in the same recent time frame, most of the other 20 most advanced world democracies have done much better at keeping health care costs in line with their GDPs. All of their citizens are guaranteed affordable care at 50 percent to 70 percent per capita cost of that in the U.S., with generally better outcomes. Most of these countries do this with some variation of single-payer with private providers similar to Medicare. These facts and many others support Arrow's theory more than they undermine it.

Furthermore, most Republicans refer more to competition among insurance companies rather than among providers without giving evidence supporting the theory that competition among insurers inhibits costs and prices of providers.

The Ryan-GOP free market premise of free-market capitalism to control costs is weak in both theory and supporting evidence. Republicans are in danger of betting on a false market premise that could make their formulations into more of a disaster than that which they judge Obamacare to be. A safer bet against serious failure that could also expand the Republican base would be to fix Obamacare, or go straight to Medicare for all.

Dr. Charles R. Peterson, of Bloomington, is a retired cardiologist.