Free Market Medicine


If you read this blog regularly, you know that I am an advocate of free market medicine. Force medical providers to advertise their prices like all the other businesses, let insurance cover catastrophic costs instead of everyday costs, and let market forces go to work.

In order for the free market concept to work, though, we have to get rid of the third party obfuscation, though. Right now, not many people care about the cost of a product because they aren’t paying for it. Third party “middlemen” are paying for the product.

I read a post on Kevin MD’s blog that puts free market principles into play.

Take all of those who are suffering from low back pain. You want to know if something might be wrong. Do you need an MRI? That depends. Is the pain acute or chronic? Are you having any “red flag” symptoms? Will you be willing to undergo surgery if something is wrong? You may need to see a primary care physician to see whether an MRI is warranted.

That’s another thing I would change with the system, by the way. Do away with the concept of requiring a physician’s order to obtain testing. You want an x-ray? Go to the radiology department, plop down your credit card, and get your x-ray. We can buy pregnancy tests, HIV tests, and glucose testing supplies over the counter, why can’t be buy urinalysis test strips or tests for strep throat? Why do we need a doctor’s order to have blood testing done? Don’t give me the song and dance about the dangers of x-rays, either. We allow tobacco companies sell lung rockets to any patient with a nicotine addiction as long as the packets have a label stating that the surgeon general has determined that cigarette smoking is bad for your health. Everybody is hereby warned that the surgeon general has determined that excess radiation is bad for your health. Done.

It would make the practice of medicine a lot easier and a lot less expensive if we didn’t erect so many barriers for patients to get testing done. Sorry about the tangent. Off the soapbox and back on topic.

Let’s say you get the prescription for an MRI of your low back. You lost your job and lost your COBRA coverage. You have to pay for everything out of pocket and you know how expensive MRIs can be. Where do you go to have your back MRI done? According to, you can have your MRI done at Northwestern Memorial Hospital in Chicago for$3800 plus the cost for the radiologist to interpret the films.

Or, if you want to have the exact same test done at the Lincoln Imaging Center in Chicago, according to the test and reading fee together would cost you $325. That’s more than a twelvefold difference in price … in the same city … for the same exam.

Now maybe you want the university radiologists to read your scan and you’re willing to pay extra. Or maybe the Lincoln Imaging Center sees that the prices it is charging are too low and increases them to reflect the market pricing. The whole point is that prices will take care of themselves once customers begin voting with their feet and their wallets.

Hopefully will be one of many resources that patients can use to decrease the costs of medical care.

Thumbs Up. We need more sites like this.


  1. When I turned 50, I got the gift of a routine colonoscopy. The gift was not free, however. When I asked, I could not find out what the doctor’s charge would be. When I asked what the hospital charge would be, noone could tell me.

    This was all routine, and should have been straight forward. Total charges were almost $10,000, of which I paid 20%. If I could have gotten it cheaper down the street, that would have been good to know. On the other hand, do I want someone to learn on my butt?

  2. Naw, never work. Doctors are evil, too busy doing unnecessary tonsillectomies. Better to force them to charge the same price for everyone, everywhere, regardless of local conditions.

    Undoubtedly, someone will pop up here and say, “But medicine is different than soap/cars/breakfast cereal! You can’t expect people to make a decision while under duress!” Which would be true and a valid comment, had the future commenter actually read WC’s post.

    This would absolutely work for any and all routine procedures or voluntary care. It already works for cosmetic and LASIK surgery, why wouldn’t it work for your annual checkup or routine blood tests? Pay for these out of an HSA and cover the car crashes with some form of major medical coverage.

  3. I agree with you 100% The unfortuante thing is that people and politicians think insurnace is the same as healthcare. Insurance is about money. An insurance company makes the most money when it has the most people paying the most into them in the form of premiums. By law, they have to pay a proportion out in services but they get to keep the interest. So, their goal is to control as much money as possible. There is no incentive to decrease costs, as it is to their benefit to have things cost as much as possible so they can raise their rates and control more money. Since people have their employer pay for their insurance, it is like the Federal Income Tax. Since you dont see the money, you dont see how it is spent.

    Your answer, the free market, connects people to their healthcare dollars, just as a fair tax would connect people to their federal income tax. Just as the Income Tax and government spending has led to increase costs and deficit spending, so has our “healthcare with-holding system”.

  4. Melissa (oddharmonic) on

    @Matt M: my husband worked in medical software for several years and one of the last projects he worked on was a pricing tool that would allow hospitals to give an estimate on care /before/ a patient agrees to whatever was suggested for them.

    I always hope to see something like that when we get care. We’ve been uninsured for long enough I know the self-pay costs of office visits with various providers and procedures one of us might have.

  5. Siemens is moving toward more OTC testing supplies. Their Albustix Urinalysis product helped me move from away from weekly labs for Nephrotic Syndrome.

    It’s a small step, but it has sure brought costs down for me AND my insurance company

  6. I like the site idea, but the we are moving as fast away from this as possible. The only way for a free market to work would be to rescind EMTALA since you can’t have a free market when paying customers have to subsidize those getting services for free. That is not on any group/parties political agenda – certainly not the Republicans.

    However beyond that free market medicine is a tricky thing in a malpractice environment. Recommending testing to paying customer not only serves the interest of ordering physicians but also helps to protect against potential torts. As the practice spreads it becomes the standard of care making it difficult not to order or at least recommend such testing. It would then be up to the consumer to navigate the world of sensitivity/specificity, false +/- rates to make a choice – a dfficult task even for physicians.

  7. How would “free market” medicine work in the ED?

    WC, you’ve repeatedly said you were an advocate of free market medicine, glad to see some proposals. I would hope you would extend your advocacy to getting government out of medicine to reducing government in all areas of life.

    Which physician advocacy groups have specific “free market” proposals you physicians believe the public should get behind?

    Do you think physicians are truly prepared to compete against one another for the customer’s dollar based on price and quality of service? To market? And at a risk of possibly making less money? I’d be interested to hear what you physicians think about all the things that come with embracing the “free market”.

  8. I agree with you that the website is a good start, but I don’t think it’s quite transparent enough. For one thing, it only covers a small number of procedures. Even if it were expanded to cover all CPT codes, it is impractical to expect patients to go home and check a website for every little procedure they undergo.

    I have two proposed solutions to this problem. One of them involves requiring doctors to charge private-pay patients no more than they are paid by their lowest-paying insurance company (including the co-pay). If Blue Cross pays $80 for a procedure, then a private-pay patient could be billed at most $80 for a procedure. This would eliminate the gouging of private-pay patients that I have experienced (and which seems to be widespread), and allow those who want to pay for non-catastrophic care out-of-pocket to do so at reasonable market rates. As a side effect, it would encourage doctors to require insurance companies to clarify their payout rates, as otherwise docs wouldn’t know how much they could charge private-pay patients. (Perhaps such a clarification could be required by the same law.)

    Another solution would be to have some group (either a governmental entity or a consumer-protection agency) create a standard list of prices for all CPT codes. Any provider who agrees to charge no more than the standard price for all procedures would be able to advertise that fact — those who charge more (or less) would be able to advertise that they charge “No more than the standard rates plus (or minus) x%”. The key here is that the patient doesn’t need to keep a list of prices for all the thousands of CPT codes in his head — all he needs to know is that hospital A charges +10%, while hospital B charges +50%, so he’ll go to hospital A.

    On a completely different note, do you think that private pay / free market is the best way to pay for routine preventive care? The biggest benefit of the free market is that it encourages patients to skip unnecessary medical care; but while we want patients to skip unnecessary tests, there is no benefit to encouraging them to skip routine preventive care (even if they think it’s unnecessary). I don’t see how private pay / free market has any advantage over a low-overhead “insurance”-type plan for routine preventive care.

    What about healthcare that is a public good? If vaccinations and treatment for contagious diseases are only provided on a free-market / private-pay basis, then some people would go without such care, and their doing so would be vastly more harmful to society than the cost of just giving them free (government-paid) care in the first place.

    (One could even argue that most routine preventive care is a public good, in that it helps keep people out of the ED. If you buy that, then the above two questions are the same.)

    • Blue Cross pays $80 because it has enough market power to force the provider to accept a rate that likely does not cover costs. If everyone paid at those rates, the provider would go out of business. Which is free market, yes, but not the outcome we’re looking for.

      • If everyone paid the same rates, then Blue Cross wouldn’t have the market power to force the provider to accept a rate that doesn’t cover costs. Blue Cross would have to raise its reimbursement rates, and self-pay patients would no longer have to subsidize the insured. Win.

  9. No offense WC, but you should consider taking an economics course before advocating free market for the buyer and the seller. Free markets over time have a huge tendency to polarize/inflate towards high costs regardless of demand or competition. It’s always better to establish some sort of hybrid free market system where there are some rules of engagement in place.

    Take a look at the stock market and commodities prices if you want to get some idea of how chaotic “free market” can be. I know there’s other examples of free-market implementation gone awry, but it’s been too long since I took economics for me to recall.

    • No offense taken.
      The free market principles you espouse don’t seem to hold true to the aspects of medical care that are largely free market, though.
      Prices for LASIK surgery have decreased over time and prices for cosmetic surgery such as breast augmentation have stayed relatively stable – at least since 2004.
      Can you cite an example of a service industry in which the free market has polarized regardless of demand or competition as you described?
      Agree that there need to be some rules of engagement – especially for emergent care, although I still believe that in a significant majority of cases, consumers have a choice over where they end up for emergency care.
      Free market should be dominant force.

      • Do you feel like you’re prepared to compete in the free market? Advertise, for example? Pursue collection actions against your customers? Compete on the basis of quality of services and price?

      • That would clearly require a repeal of EMTALA.

        That said its amazing how quickly someone can be convinced to see a particular point of view or develop a particular skill set when ones livelihood depends on it.

      • Matt –
        In my other profession, I already do compete in the free market. I don’t advertise at all. I get calls from all over the country asking for my services, and not infrequently I turn away business. I have never had to pursue collection actions against any of my customers because I get payment in advance. In simple terms, I compete in the free market every day. You seem to think that physicians are a bunch of dolts. We’re not. Maybe a lot of us are spineless, but we’re not stupid and it isn’t that difficult to figure out how to compete in a free market.
        Guiac has it right – cut reimbursement to the point that cons outweigh the pros of practicing medicine and you’ll reach a critical mass of physicians coming up with a new practice model very quickly. First office-based physicians, then hospital based physicians, then maybe even hospitals.

        Guiac –
        You’ve mentioned a repeal of EMTALA a couple of times.
        It ain’t gonna happen. I don’t necessarily think it should happen.
        Are we going to turn away a patient with an MI because they can’t pay – whether or not EMTALA is enforced? Of course not. EMTALA doesn’t require that we treat non-emergent problems and I foresee that in the future, patients with non-emergent problems who can’t pay their emergency department bill will be triaged out of the emergency department to local clinics for their care.
        I think that it is a good thing that EMTALA provides a safety net for patients. The bad part about EMTALA is that it is unfunded and there is no liability protection. Being forced to practice perfect medicine at a monetary loss under the threat of multimillion dollar lawsuits isn’t a sustainable business model. Something has to give.

      • I don’t think you’re dolts. I just am wondering if you’re prepared to compete in an industry that hasn’t really had to compete in 40 years. I hope you are, but that’s putting the cart before the horse, perhaps.

        Is there a more “free market” proposal we should be supporting that puts the horse in front?

        “Being forced to practice perfect medicine at a monetary loss under the threat of multimillion dollar lawsuits isn’t a sustainable business model.”

        Ah, the drama and the hysterics. It’s like a bad telenovela. How do trucking companies do it with having to drive “perfectly” under the threat of multimillion dollar lawsuits! Can physicians possibly make it under the threat of having to pay a deductible when so few ever go to trial? Tune in next week for the exciting conclusion!

      • “The bad part about EMTALA is that it is unfunded and there is no liability protection.”

        Yes, poor people don’t deserve to expect we’ll meet the standard of care in treating them. The greedy sons of bitches!!

      • I think the notion of truly free market medicine is never going to happen. It gets discussed here as if its a real possibility but neither the Republicans nor democrats seem to be talking about it.

        That said repealing EMTALA is the only way to have a free market throughout medicine – and yes it would exactly mean that some people with emergency problems would get turned away. Maybe not completely – so you might, for example, get an EKG on the uninsured or unpaying pt with an MI give him an ASA and a whiff of oxygen and then send him over to the public/chartiy hospital even though you have a perfectly good cath lab downstairs.

        Also in many cases it takes significant resources to determine a patient doesn’t have an emergency and who will pay for those?

      • “That said repealing EMTALA is the only way to have a free market throughout medicine”

        Good luck finding a politician who is going to support that. Outside of Ron Paul that is.

        Were healthcare providers, in some previously unseen burst of energy and dedication, decide to move away from the third party payment model, there would still almost certainly be some base level of care provided by the govt. And that most likely would include the ED, don’t you think?

      • I should clarify that I oppose repealing EMTALA – but seek to point out that socialized care began here and that no one is seriously talking about free market medicine amongst politicians.

        Matt – I have seen the face of free market medicine in India thanks to some visits with my uncles who are physicians. For those that can afford it care is quite good – in fact it is a hub for medical tourism from Europe with top notch cardiac care including off-pump bypass, etc.

        For the masses there are government hospitals – rat infested hellholes little better than warehouses for the dying in many cases.

        I’m not saying that would be the system here. But it does beg the point should those poor folks in India be able to sue to the government run facilities for not providing standard of care medicine available to the rich? There is a clear cut double standard in care available so that the poor receive the standard of care correlating to their class. I don’t agree with such a system but it is a free market.

        I have no experience working prior to EMTALA – only anectodes and stories from guys that did including some horror stories such as the MI case I posted, or a patient who arrived by private car with a chest tube in place because no surgeon at the nice hospital would admit him, etc.

      • I’m a US Supreme Court justice.
        What difference does it make?
        I run a business in a service industry and do just fine in the free market. Does the nature of my business have any bearing on the ability of us dumb doctors to work in the marketplace?

      • My apologies. Didn’t realize it was such a sensitive issue.

        You shouldn’t feel dumb because you’re a doctor. You should feel quite proud of your accomplishment in becoming a physician. It takes a lot of work.

        Did you find some “free market” legislation that we free market believers can back to move healthcare in the right direction?

    • Anonymous,

      What is happening in the markets today is NOT the result of a “free market”. We are seeing the result of continual government intervention and manipulation which supposedly is to “level the playing field” but in reality causes unintended consequences which cause even more regulation. Which…umm…causes more unintended consequences. Which…ummm…causes congressional investigations and the creation of new bureaucracies.

      Social engineering through market control.

  10. I could definitely see something like this working, though I think it would be a good idea for some kind of insurance (whether public or private) to cover the two extremes. That is, routine and emergency care. One is a public good, as Joe mentioned, and the other can send people bankrupt.

    There is however one problem that I can see. For a free market, one should not only know the prices, but also the quality of service.

    How does a patient know if a doctor is any good or not? You can have doctors with excellent bed-side manner and horrible diagnostic skills and visa-versa. How does the patient know whether their bad outcome is because of sub-optimal care or just misfortune?

    I think there is the very real possibility that Press-Ganey scores or something similar might determine which doctors/hospitals are considered good. And that would probably be disastrous for healthcare…

    • How does a patient know if a doctor is any good?

      Well, how does an automobile owner know if a mechanic shop is any good? How does a parent know if a tutor or private school is any good? How does a board of directors know if a potential CEO is any good?

      There are many life-critical decisions which we make on the basis of limited evidence; what’s so special about doctors and health care?

      • True, but biology being rather more complicated than engineering or economics, its a bit a harder for the average patient to determine whether they’re getting their money’s worth. Its not that a free-market system would fail, but that is might not be as efficient as portrayed (think Homeopathy). Patients may value the service provided by indicators which are irrelevant. Kind of like judging a school by the attractiveness of the teachers…

        But after a bit of thinking, I think the point is to reduce utilisation, and make prices more standard and equitable than they are now, rather than effect choice per se. So that makes my point moot.

    • I think you need to trust a brand. Each hospital is responsible for ensuring good providers work there in order to preserve/enhance their reputation.

  11. I’m generally kind of a big socialist but I do agree with you on these things, WhiteCoat. In fact I feel that part of being a good member of a social collective is being aware of the resources you use and not using them inappropriately. There are plenty of times when I would’ve chosen the more financially prudent course of action had I known the actual costs and/or had my doctor involved me in the decision making. A knee MRI was a good example of this: had the ortho been straight up about the value of this study for my complaint (near non-existent), there is no way I would’ve signed up. Even though the savings would’ve been realized by the insurance company rather than my colleagues directly, I still feel bad about being party to an inappropriate expense.

    Being able to choose tests for ourselves, on the other hand, I like from more of an amateur mad-scientist perspective. And, hey, all those fitness bloggers who are now forced to settle for posting shirtless photos of themselves would now be able to post monthly lipid panels, HbA1c, and such as well. But I don’t think the average patient really has a good sense of what testing might be necessary for anything out of the ordinary. Hell, in my experience my doctors haven’t necessarily ordered appropriate testing, and they presumably have a clue.

  12. Whitecoat,

    I’m in total agreement with the idea that a free market system can work. The less the governmnet is involved, the better.

    You said; Why do we need a doctor’s order to have blood testing done?

    Just wanted to let you know that there are several states that do no require a Dr’s order for lab tests. In Missouri you can walk into a hospital and have any lab test done without a physicians order. You won’t, however be able to have insurance pay for it. Also, not all hospitals will do it for you.

    The pricing is ridiculous, but it’s an option. The facility I work for is large enough to have it’s own insurance company, and so our prices are broken down by medicaid/medicare, in house insurance, outside insurance, and Self pay. The difference in pricing is absurd. The medicare reimbursement is about 50 cents for a CBC. A self payer would be about $54.

    We also have a large Amish community that pays out of pocket each time they need to come to the hospital, and we constantly have pricing questions from them. We’ll get questions about how much a Hep B AB test will cost, as opposed to just getting the vaccine in cases where they’re not sure if a patient recieved a vaccine. They’re masters of price comparison in hospitals. I think we could all learn a thing or two from them.

    Last point. There are several companies out there. like that allow you to do walk in testing independent of insurance companies and physicians. I think the success or failure of companies like this will be an interesting market research study. It could give a good idea of how ready or willing the general public is to embrace the idea of a free market system.

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