Many classic conservatives advocate a broad application of free market principle. This includes an opposition to regulation, or rather regulation that does not favor businesses. As health care is seen as a business in the United States, this view leads to concerns about health care cost regulation in the United States.

Because of the high cost of health care, there have been proposals to limit the cost of health care services. Those who oppose these regulations claim pricing should be set by free competition between health care providers and that consumers of health care should become savvy shoppers. The idea is that savvy shoppers will take their business to providers that offer better services or lower costs, which will force the competition to lower costs or improve quality. This is a stock free market argument.

There are serious problems with the idea of relying on savvy health care shoppers and competition to reign in prices and improve quality. The first is the challenge of finding the prices that health care providers charge. While it can be difficult to predict what services a consumer might need, health care providers often have a range of prices depending on who is paying for the services. For example, insurance companies negotiate prices, and these differ from what consumers without insurance would pay. Health care providers, although they always have a database of billing codes and costs, are often reluctant to provide this information in a readily accessible and comprehensible manner.

A second problem is that health care consumers usually lack the medical knowledge to make informed decisions about health care. While a person might face some challenge in picking the best phone or laptop, sorting out medical care is typically beyond the skill of most. That is why people go to medical professionals. As such, being a savvy shopper is difficult.

A third problem is that it is somewhat misleading to call a patient a consumer. While this might seem to be a mere difference in labels, the difference between consumer and patient is significant.

One difference is that a patient is typically in duress. They are injured or ill and not in a position to engage in savvy shopping practices. While an informed rational consumer will be looking for the best deal, a suffering patient is concerned with getting better. As people say to not go grocery shopping on an empty stomach, it would be best to not shop for health care when one is not healthy. But that is exactly when one needs health care. There are also the more extreme cases. For example, a person who is badly injured in a car crash is not going to be shopping in a savvy manner for emergency rooms during the ambulance ride.

It can be countered that there are cases that allow savvy shopping, such as elective surgeries and non-emergencies. This is a reasonable point and a person who is not in need can take the time to shop around and be a savvy consumer. However, this does not apply to cases in which a person is sick or injured enough to impede such savvy shopping.

Another important difference between consumer and patient is that the consumer often has a reasonable choice between buying a good or service and doing without. For example, while someone might want the latest and greatest iPhone, they can live just fine without it.      

 In contrast, patients usually have need treatment and doing without would be a real hardship or even fatal. When one must buy the good or service and the provider knows this, it makes it much harder to be a savvy shopper. This also provides a segue into the matter of regulating prices.

While free market pricing might work when consumers can easily do without the good or service, it runs into obvious problems for the consumer when the goods or services are necessities. To the degree that the patient cannot do without health, the patient is at the mercy of the provider. So, while a person can easily elect to do without the latest iPhone if they cannot afford it, it is much more difficult for a person to do without chemotherapy. As a personal example, when I was bitten by a dog in September 2023, I had to get rabies shots because if the dog had rabies, then I would die without the shots. And when I had a quadriceps tear, I had to get surgery if I wanted to be able to walk and run.  True, a consumer could do without liposuction or breast implants, but such elective surgery differs from non-elective treatments.

The stock counter to such concerns is that if a consumer finds the price of a good or service too high, they can go to a lower priced competitor. In the case of health care, the opportunity to find a lower priced competitor can be problematic. A patient might not have the time to shop around. In many places, there is not any local competition with lower prices that would allow a patient to engage in savvy shopping. Going back to my rabies shots, the only place I could get them was at an emergency room and I had to pay the emergency room prices each time. I checked with all the local pharmacies and my own doctor, so I did try to shop around. When I had my quadriceps tendon repair surgery, I also did not have an opportunity to shop around for a discount. As such, this free-market advice is not very helpful.

In the case of pharmaceuticals, patients often find that there is no competition. When a company has a patent on a medication, the United States’ government uses its coercive power to enforce that patent, ensuring the company retains its monopoly for the specified time. Because of this, a patient who needs the medication has two choices: do without or pay the price. There is no free market competition, so without regulation on the part of the state, the company can decide to charge whatever it wants. While this can result in bad press and public criticism, patients cannot rely on this to result in lower prices.  

This monopoly system does create a quandary for a principled proponent of the free market. On the one hand, without such state regulation a truly free market of drugs would make it irrational for for-profit companies to invest in costly research. As soon as the drug was developed, the competition would duplicate it and would be able to sell it cheaper because they would not need to recoup the cost of development. A solution, which would not be very free market, would be to have the state fund the expensive research and then provide the results to companies who would then compete without monopolies for consumer dollars. One could, of course, stick with a strict no regulation ideology and let the market be completely free of the state and hope medications would somehow be developed.

If the state steps in to regulate prices as part of the agreement for using its coercive power to protect patent monopolies, then there would also be no free market competition. But the state could see to it that the companies charged prices that allowed profits while not gouging patients.

My own view, as might be suspected, is that since patients are essentially a coerced market when it comes to health care and medication, the state should act to regulate prices. In the case of pharmaceutical companies, this should be part of the bargain with the state that allows them to maintain their monopolies. After all, if taxpayer dollars are to be used to protect monopolies, then they should get something in return and this should include reasonably priced medication. In the case of health care providers, while they do not usually have a monopoly, they do have a coerced market. Just as the state justly steps in to prevent price gouging during large scale natural disasters, it can justly do so regarding personal disasters in the cases of injury or illness.

I know health care providers and pharmaceutical companies want to make a profit and, as such, I would advocate that the regulations on pricing leave them a reasonable margin of profit. While it might be objected that a reasonable margin of profit is hard to define, my reply is that if price gouging can be recognized in other areas, it can (and is) be recognized in the realm of medicine.