LOL. classic appeal to authority. Just because a field exists doesn't mean it serves any useful purpose. Just look at the hundreds of economists employed by the Fed. It's all just government rent-seeking.

Interesting strawman. I'd wager there are more health economists in academia and industry than there are in the government sector, and outside of the U.S.

It's just a theoretical construct that has little to do with the real world. To model the real world you need a much more complex model, so complex even that no economist or computer would be able to solve it.

I am not certain you understand the purpose of modelling in the first place.

In any case, let us evaluate the properties of medical care as an economic commodity:

• Demand for medical care is a derived demand for health: It is uncontroversial to state that medical care on its own is a disutility; surgical procedures are painful and prescription medications run the risk of unwanted side effects, for example. However, conditional on facing health issues, medical care is beneficial if it is able to alleviate the issue and restore individuals to a healthier state. To borrow from Evans (1984), the marginal utility of medical care can be represented in the following way:

(effect of medical care on utility) + (effect of medical care on health)*(effect of health on utility)

As implied, the effect of medical care on utility itself is negative (surgeries are not a fun and painless experience). However, the second composite term brings us to the first issue with a "free market" provision. In general, the effect of medical care on health is positive, as well as the effect of health utility. However, in a practical sense medical care providers will only have knowledge of the first part, while individual patients the second part (and the effect of medical care on utility itself). This introduces two violations of the standard normative assumptions behind the application behind the standard application of economic analysis: Individual sovereignty, which assumes that individuals themselves know best; and information asymmetry, which in this case means providers themselves have a greater knowledge of both the available options of medical treatments as well as (expected) outcomes of each. The informational advantage of providers in this case also provides them with significant market power that makes phenomenons such as supplier-induced demand (i.e., the ability of supply side to directly influence demand, an agency issue that stems from another violation of conditions for a perfectly competitive market) plausible.

• Externalities: Aside from the obvious physical externalities (e.g., herd immunity), empirical evidence (e.g., Jacobsson et al. (2007)) also suggests that individuals may exhibit a form of caring/paternalistic externality when it comes to medical care. Of course, it is an open question as to whether or not Americans collectively shares that sentiment but even in the negative case the existence of physical externalities on its own already precludes a perfectly competitive market of medical care.

  • Information asymmetry: Aside from the case in the health production relationship I mentioned above, there are a few other important distinctions here. For many standard economic commodities, the issue of information asymmetry may be alleviated through experience/learning/trial and error (e.g., auto repair) and costs are not permanently irreversible. That is not the case with medical care. If a particular treatment does not work, one is at best left at the same level of illness as prior to the treatment, and at worst faces the consequences (e.g., side effects) that stem from the treatment itself.

This is all without questioning the most central (and normative) assumption of them all: willingness-to-pay as the measure of benefit versus an actual notion of need itself.

As for the video:

• Chargemasters: An issue related to medical care funding mechanisms, something that privatizing medical care (which, again, does not lead to a perfectly competitive market) does not necessarily solve.

• Medical care insurance: Regarding medical care financing and medical care insurance, they dismiss access as a valid motivation for medical insurance design when in fact that is a deliberate choice by its architects in modern times. They understand the concept of risk reduction, but immediately sweeps it aside when discussing their own services. Of course, if individuals knew for certain they only had to set aside enough funds for that one surgery in that year and knew for certain that there will be no other unforeseeable major medical expenses, then that would really defeat the purpose of insurance.

Aside from the ad hominems (who knew there can be so many ways of referring to the PPACA), fear-mongering, lying (e.g., the bit about the NEJM and Lancet editors), and things bordering on conspiracy theories (e.g., discussion about the FDA) in the video, it does not really offer a justification for the notion that a free market will be optimal and be free of all the issues I discuss above. I do not believe I have to point out which way the bias goes for the discussants.

There are other issues with the video, but given my time constraint my priors tell me that the effort I can put in to discuss them will not be rewarded with an equally thoughtful response.