Is the free market system compatible with our health system?
Is the free market system compatible with our health system?
M. Iqbal Mochtar, Ministry of Health, Makassar, South Sulawesi
In an international survey conducted to measure the health
system in 191 countries, Indonesia's health system was
categorized as bad and was among the worst in Southeast Asian
countries. Health experts here have blamed many factors
attributed to the centralized health system.
Some of them raise the need for a free-market system to ensure
the best delivery of health care services, given its efficiency,
equity and equality. A free market would mean that both health
care providers and patients would seek and compete with each
other to get the best value for their money.
Hospitals should be free to determine the cost of their
services, doctors fix their standard consultation fees and
patients deserve the right to go to any hospital or doctor
according to their preference. Given the nature of competition,
health care providers try to provide efficient services and
prices.
However, there are some likely fallacies underlying this pro-
free market notion.
In a competitive market, income distribution is determined by
two factors: The workers' salary and their skills. Yet, these
factors may vary widely from person to person. Every worker
certainly has their own knowledge and ability, and thus each
receives a different salary. As a result, the unequal
distribution of income can be observed in everywhere,
particularly in a developing country like Indonesia.
In the health sector, unequal distribution of income usually
benefits those who are better off, as they are much more likely
to be able to afford health care than the poor. The more
expensive the health care, the larger the discrepancy between the
rich and poor in their access to health services.
The free market mechanism cannot easily be applied to the
health sector because the categories of health care are broad and
varied, particularly in developing countries. Some curative
medical services and medicines are categorized as private goods,
while most public health programs are public or "merit" goods --
the latter refering preventive programs such as vaccination.
The free market system is likely to be applicable to private
goods only. In Indonesia, however, the need for public and merit
goods have remained substantially higher than the need for
private goods. The number of people needing free clean water and
immunization is considerably higher than the need for plastic
surgery and weight-reduction programs. As a result of this
discrepancy in health needs, the government is required to keep
control over the availability of public and merit goods.
The government's interference under such conditions would
disrupt the significant role of price as a result of the
relationship between supply and demand, which means that the free
market system cannot function in this particular situation.
Another argument against the free market system in the
provision of health care is that the nature of health needs may
simply not be viewed in the same way as with other goods and
products. Health is one of the most valuable things an individual
has, and therefore, the quality of health demanded cannot be
justified simply by pricing and market equilibrium. Patients do
not have alternatives to health or life. This is not the case
with other goods, such as chocolate or butter.
To be efficient, the free market system requires both
producers and consumers to have adequate knowledge regarding the
goods on offer in order to make a rational decision in selling
and buying goods. In the health sector, particularly in
developing countries like Indonesia, however, this requirement
does not seem to be fulfilled.
Health care providers surely have a much more superior
knowledge than patients in terms of health care services. Thus,
health care providers have an advantage and may perform any
health treatments they choose -- for whatever benefits -- while
patients are mostly dependent on their providers' discretion.
This amounts to inefficiency in a free market system.
The advantages of a free market system -- minimizing complex
costs of administration and bureaucracy -- occurs in an
environment of real competition.
Like the governments of many countries, the Indonesian
government is currently examining which health care system is
most compatible with the conditions here. But nowadays, given the
particular circumstances of a developing country, the health
sector cannot rely on a single system, whether a free market or a
centralized system.
A combination of the two systems may provide the flexibility
necessary to achieve efficiency. In a combined system, the
government may control the market to maintain efficiency, while
it must control the price of health care provision relative to
consumption through the direct and free provision of certain
health services. It also needs to control the behavior of health
care providers through appropriate legislation.