An Evolutionary Analysis of Health Care Under Capitalism




Ostensibly, conversations about “health care” in the United States of America are conducted within the prevailing framework of market capitalism. Distilling the debates to their essence typically reveals a legitimate disagreement between the concern for moral hazard (e.g.: those with fire insurance tend to have more fires, or those with unemployment insurance are less motivated to get jobs) and the concern for moral neglect (e.g.: it’s immoral to let people suffer and die in a society that has ample aggregate means to get everyone the medical attention they “need”). Some may object to my assertion that our society can “afford” it in terms of national debt, et cetera, but that is ultimately a governmental budgeting issue under the federal tax regime, and as such, is beside the immediate point.

It has been amply demonstrated that there is no shortage of arguments about how to reconcile the problem of health care within the bounds of market capitalism. Likewise, great lengths have been taken to demonize certain options as socialist in nature. I assert that all such arguments arranging possible solutions into a capitalist versus socialist dichotomy obscure the fundamental issue on the side of the problem. In other words, arguing about “who pays” is irrelevant because the “what we’re paying for” side of the equation doesn’t qualify as capitalism (or socialism for that matter). This is true for [at least] two reasons.

Capitalism is an economic system in which the means of production are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the free market; profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses and companies. -Wikipedia

To call something market capitalism, it must conform to [at least] two criteria:

  1. The private actors involved must be making a[n uncoerced] decision.
  2. The supply, demand, price, distribution, and investments must be subject to market forces.

The health care system exploits evolved human nature

Rational choice ends where questions of health and survival begin. This is true of food and exercise choices. Evolution has a nasty habit of biasing organisms to weight their immediate impulses much higher than future probabilities. The classic example of this from behavioral economics is giving people a choice between receiving $100 today or $110 tomorrow. Then, ask the same people to choose between receiving $100 dollars in 30 days or $110 in 31 days. For our purposes, the number of people who choose $100 today or $110 tomorrow isn’t important. What is important is that almost everybody chooses $110 in 31 days in the second case, including the people who chose $100 today in the first case. From a rational standpoint, the absolute difference in waiting is identical in both scenarios, but people value the future 1-day wait as much less painful than the time from now to tomorrow. That’s some insight into why we’ll make unhealthy nutrition and fitness decisions today even though we’ll pay for it in the future, but it isn’t all we need to know in our discussion of health care.

The Darwinian imperative of all things is to survive to reproduce. In humans, we have not only similar survival instincts as other animals, but also an extra layer of conscious awareness that allows us to imagine the future. We don’t just act to avoid death, we engage in conscious mental gymnastics to avoid death. Despite zero empirical evidence, many humans go so far as to believe in a ghost that survives their body at death. Our dual levels of instinct and thought about instinct puts us in a remarkable category of death avoiders. How does this influence our ability to make health care decisions?

In short, our survival bias negates anything that might resemble a decision or choice when matters of life and limb are ate stake. When asked the question, “how much is it worth to save my legs,” what is the answer? I suggest the answer is “however much I have to give”. Taken from the other direction… When presented with the information that, “to save your legs will cost $70,000, are you willing to pay it?”, what is your answer? I suggest that the question you answer is not, “are you willing to pay”, but “do I have (or can I come up with) the money?” If that is possible, the answer is yes.

There are limits to the value of limbs of course. When Aron Ralston was faced with the scenario, “how much are you willing to pay to survive?”, the answer was: “my arm”. However, to give a value to that choice, we would have to know the dollar value placed on his life, AND whether he would have been willing to also give his other arm, or two legs, et cetera. Ultimately, survival is the most important, but we “know” that losing a limb is bad for survival/reproduction probability. We know because we can picture the difficulties of missing limbs, and we know because of the physical pain that provides a direct signal.

No, there is no effective decision involved in the evaluation of serious medical care. The price is almost infinitely variable depending on a subjective ability to arrange funds, and not an objective utility valuation; the answer is always yes if the funds can be arranged. To capitalize on individuals with no effective decision is the very definition of extortion.

There is no free market for health care services

We must be careful to resist seduction by the illusion of market forces. It is true that there is a sort of quasi-market in health care services. In some instances, insurance companies influence prices, and the prices insurance companies are willing to pay impacts the market to some extent. However, this is merely inverted extortion in that medical service providers are coerced by the threat of payment refusal. The nuances here are irrelevant because this dynamic merely represents the price fluctuations of a quasi-market.

Two conditions must be met for a free market to exist. One, there must be price competition between providers. Two, the private actors ostensibly making the decisions must exert choice influence on the service providers.

Neither of  the above conditions are met in the health care “market”. In most situations, service providers are chosen by geographic necessity. Further, competition between providers is largely based on reputation and referral, not price. Thus, the first condition fails on either of two counts. Typically, prices for procedures are not known until after they have been performed. Upon admission for a procedure, an effective blank check must be agreed upon by the consumer of services. Options may be given, but they are typically framed in cost-benefit terms revolving around probability of success or failure, and various side-effects or discomforts to be expected. Again, not in terms of price.

To compound the lack of the market meeting conditions to be called a free market, all of this is amplified by the characteristic non-decision of the previous section. When there is no effective decision, there is no mechanism through which the consumer of health care services could exert choice influence even if there was a functioning market.

The business of health care is fundamentally anti-capitalist

I haven’t introduced anything novel. I have merely laid out the definition of capitalism and pointed out that health care meets none of the requirements of a system that can be defined as capitalism. The only thing resembling market capitalism is the flow of money. If the health care business does not qualify as capitalism, what is it?

It’s safe to say that it isn’t socialism. No, the lack of customer influence upon the pricing mechanism in combination with the extortionate property of de facto non-decision most closely resembles a point somewhere between authoritarianism and totalitarianism.

With no real influence on price, and no real choice, why should we be content to discuss the capitalist or socialist ramifications of who will pay for the services. Whether payment is from individuals, or the collective, true capitalists should be outraged at the unquestioned authoritarian monolith that’s willing to take money from anyone and everyone who agrees to be subject to its predatory tendencies.

Note: I don’t find it necessary to delve into conspiracy theories or the specter of “evil” insurance companies to explain this. While those things are interesting discussions, all of this can be a true outgrowth of emergent properties in the system without invoking them. I hope it goes without saying that doctors and other workers in the health care system don’t create the systemic problems either.