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News Article : Public or private practice?
Category: Healthcare Insurance : Medical Schemes
Author:Nigel Benetton
Email:[email protected]
Posted:28 Mar 2007

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Healthcare is a monopolistic business

While the benefits of capitalism are undoubted they are not all a bed of roses. And if it is beds we are talking about, consider the healthcare industry.

Government seeks to transfer as much of the burden of healthcare across to the private sector. Is this a good thing?

The clamour for privatisation of anything from electricity supply, telecommunications to jails and education has often been part of anti-government propaganda, joyously supported by consumers thinking they’ll get a better deal.

After all, why squander valuable taxpayers’ money on inefficient, bloated bureaucracies when a sleek, profit-motivated dynamic private sector can provide twice the quality of service at half the price?

Well, is that really true?

The problem is that open to free markets the supporters of privatisation would certainly enjoy their rewards, but what of those sectors open to capitalism only?

A curious question, maybe, but something I have raised several times before concerning the fact that free market philosophy is not the same as capitalism.

This is because capitalism, which has many benefits, if not controlled properly, allows a few individuals to control access (which is anti free market).

The most affected are those businesses requiring massive amounts of capital investment like schooling, telecommunications, television and the music industry, mining and oil exploration, and, of course, healthcare. The odd coincidence about these sectors is that they are invariably an essential service as well.

Capitalism prevents access and competition in these sectors, while the vital importance of the service leaves most in our communities with no choice.

Healthcare is a monopolistic service. It does not have the characteristics required for a free market business: it never will have. Free markets require, amongst other things: open access, free competition and ‘perfect knowledge’.

Instead of open access there are many barriers to business trying to enter the healthcare sector. There’s the capital required – hospitals are fantastically expensive to construct.

They’re not just buildings but more like space stations with ducted oxygen, anaesthetics and so on; biological secure zones (ideally) and strict controls of dangerous substances including drugs, various gases and surgical instruments.

Even if you could get the money together there is, quite rightly, all the licensing and strict medical controls. Then there are all the doctors whose expensive education take years to complete. In other words, a hospital is not like setting up a corner store and selling anything you can get your hands on.

So instead of free competition in a private business, such barriers create monopolistic conditions.

Similarly, instead of ‘perfect knowledge’ – that is, access to information about every aspect of a service eg hospitalisation, surgical procedure and all necessary medication and so on (obviously impossible) – there is very little to go on to make an informed purchase decision.

Few consumers outside the profession will have the slightest idea about medical practices, diagnoses, diseases, operations, or medications and side effects; as by its nature healthcare is a specialist if vital field.

Such monopolistic conditions are a fact of the business model itself, and can never be changed. Privatising a monopoly simply puts control in the hands of a few greedy-minded capitalists. It may be privately owned, but it is still a monopoly.

Instead, government should consider what’s bad about centralised control and fix that. Those aspects of the business that can operate in a free market environment should be privatised, while essential services should be centrally controlled, albeit within free market principles of profit centred, sound management.

They should then be performance measured against private sector indices.

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