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The Logic of Marketplace Arguments

Proponents of marketplace reform argue their case by claiming that because other "industies" have benefited from market reform health care would also do so. Not only does the argument fly in the face of 2000 years of experience but it is logically flawed.


Graeme Samuel, chairman of the Australian National Competition Council in his speech to the World Bank (Feb 2000) and Dr Wooldridge , Federal Minister for Health in Australia (May 1996) both justify the application of strict marketplace practices for health care by refering to very different commercial activities.

There is already a health care marketplace and a vast experience. This is what the arguments should be based on. Those who promote marketplace practices in health care do not do so. They choose to largely ignore this experience - an experience which seriously challenges the solutions promoted and indicates that marketplace practices pose a serious threat to the welfare of citizens.


Samuel and Wooldridge simply describe health care as an industry and claim that as such it is part of the market. They do not delineate the basis for this redefinition or what is implied by redefining it in this way. No argument is advanced. By simply making assertive statements and playing on words health care is logically associated with the idea of a market and with market paradigms of understanding. As a consequence it is no longer necessary for economists to confront alternate points of view. They lose their legitimacy. By defining the parameters within which credible discussion is permitted there is no longer a need to argue for business practices within health care paradigms. Tenet/NME founder John Bedrosian used exactly the same tactic in the 1980's when he simply dismissed the existing health care professional paradigms as obsolete.


Health care, traditionally regarded as a humanitarian service by members of society to other members of society who are in need can be included under sections of the definition of an industry only in the sense that it is "a department or branch of a craft, art - - - especially one that employs a large personnel and capital" -- a very broad definition embracing most of society. It is not a "productive enterprise" in the commercial sense used and it is not a "manufacturing activity as a whole". It may meet some of the broad denotative meanings of the word industry but not the associative meanings which link it to the market and market practices. The same Merrian Webster dictionary defines the market as "a meeting together of people for trade by purchase and sale". The dictionary in elaborating its definition of a market also uses Samuel's concept of "demand". In addressing health and aged care as a social responsibility the difference between demand and need is critical.


Most citizens accept that it is our responsibility as a humane society to meet the basic human needs of others. Demand is something which we accommodate to and negotiate about. As a socially responsible society there is no ethical or moral responsibility to meet the demands of others. The public is of course entitled to decide what its needs are and which needs it will meet. The title of Samuel's speech to the World Bank indicates that it is about "the public delivery of health care". Market proponents think in terms of demand which is not what the care of the sick is about, particularly care provided by the public purse. Using "demand" rather than need is confusing and skews the debate. Demand is a peripheral concept. The distinction should always be clearly made.

Members of society may well desire more than the community can reasonably be responsible for. It can be deduced that the commercial advantage for corporations entering into government contracts such as those proposed by Samuel will be their ability to capitalise on the "demands" of citizens for services outside those which the government pays for under contract. Those who support contracts between government and corporate interests ignore this issue. It is likely to be contentious. Pages on this www site examine the behaviour of corporations and the dynamics of the health care market place. The likely behaviour of for profit corporations in this situation can be deduced..


While many industries operate through the marketplace, the meanings of the words industry and market are quite distinct. It is simply not logical to argue that market principles and practices should be applied to health care simply because it can be fitted into one facet of a broad definition of the word industry. Health care differs from these industries in that it is a human response to the needs of others. While it must be funded one way or another it is not a "Macmedicine" and cannot be traded in market terms. Economic theory has appropriated a word with broad meanings and interpreted it within a narrower economic context. Samuel displays the sort of logic which public relations firms use when marketing to a gullible public. It has no place in intelligent debate. It is as stupid as saying that because a dog is an animal and had 4 legs, all animals have 4 legs.


Advocates of market systems become very confused when talking about customers and consumers. They like to think that they are the same when if fact the customer is more often the government or the insurance company. They also blindly assume that the "health care consumer" is an effective person capable of acting as a customer. That consumers are often anxious, disturbed, frail, ignorant and in other ways incapacitated is simply disregarded. In practice it is the most vulnerable sectors of the population which have been most ruthlessly exploited. There would never have been any need for professionalism, professional associations and professional ethics systems if this risk were not a real problem.


By defining health as a Macmedicine to be traded for profit, practices which have been frowned on and prohibited because they have in practice introduced inappropriate pressures on care immediately become legitimate. They are seen as obvious and logical answers to problems in the health system. The use of economic incentives and disincentives to influence the care patients recieve is the most obvious example. Without debate one of the most fundamental ethical principles protecting patients is discredited. The uncritical use of contracts which have a very poor record in health care is another example. This www site shows that these changes have been severely dysfunctional in the health care marketplace.


Market advocates like Samuel suggest a crisis and justify their pressure for the rapid adoption of marketplace proposals on the basis of urgency. Certainly it is crucial to open a wide ranging public debate on health care issues making all the information and the arguments available. We are facing a number of challenges. There could be no greater mistake than to introduce a system which has failed elsewhere, particularly one which is almost impossible to reverse.


The sort of marketplace thinking with which we are confronted is not new and the arguments have not changed in 20 years. A good example is Tenet/NME. Despite Tenet/NME's misfortunes Columbia/HCA continued to model itself on MacDonald's selling the same sort of Macmedicine. Other corporations including Australia's Mayne Nickless followed suit.

A director of Tenet/NME, giving evidence in 1992/3 explained the response of the company to the exposure, by members of the public of massive problems in care in Texas. Thousands of children had been needlessly admitted to hospital where they had been mistreated in the pursuit of profits. The possibility that what they were doing was severely dysfunctional and that it had adverse outcomes was not even considered. The outcry was perceived as a media problem to be corrected.

Company directors immediately flew to Texas to meet and employ public relations firms to deal with what they defined as an image problem. No one went to the hospitals to look at what was happening there until very much later. Even then they did not see the problems and despite their claims to have addressed them similar practices continued for many months. In other corporations these practices continued for years (eg Health Corporation of America - HCA).

To this director the problem was the media who were publishing the facts. The company's response was quite appropriate. This was the logical thing to do. This was John Bedrosian, one of the three directors who founded the company in 1965. In the 1980's he had debated publicly with Professor Arnold Relman. He claimed that medical services could be traded in the market like any other commodity. Medical paradigms were obsolete .

It was Bedrosian's repeated embarrassing revelations of his marketplace thinking as he responded to the public's anger which eventually forced the company to disown him. His was the face which appeared on Australia's Four Corner's program in October 1992 to read the company's response to Andrew Ollie's exposure of its practices. Once the blanket of corporate credibility was stripped from these belief systems and they were exposed to the spotlight of recent events and common sense they fell to pieces. Bedrosian, the public face of the company's policies for nearly 25 years became the scapegoat. His statement to the Australian public in October 1992 was trailed across courtrooms in the USA, confronting it with evidence.

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This page created April 2000 by Michael Wynne