You’ve heard of the third-party problem in health care? Actually, it’s worse, say Charles Kroncke and Ronald F. White, who write in the journal of the Independent Institute. We’ve got a four-party system:

  • Patients (who want health care services)
  • Physicians, doctors, drug companies and others (who give treatment)
  • Insurance companies and government programs (which pay the bills)
  • Employers (who select the insurance that most of us have)

The authors argue that America’s “awkward flirtation with the marketplace” “more closely resembles corporate welfare than an experiment in free-market medicine.” The Independent Institute offers the following tease:

Despite numerous federal interventions that have favored health care providers and insurers, the industry has yet to figure out how to overcome the problems of adverse selection, moral hazard, information asymmetry, and free-ridership. Did it ever make sense to create a health care system in which fourth-party employers purchase insurance for their first-party employees from third-party corporations, which in turn pay second-party providers for health care products and services?

Cross-posted from State House Call.

Share More …