The Market for Free Riders?
To argue that the market discards those it regards as undesirable is to both ignore the prevalence of private charity and deny the existence of the entire public-relations industry. Indeed, setting socialist doctrines aside, we can see that affectionate treatment of the poor and downtrodden is actually a very profitable endeavor.
In every market, firms of all sizes expend resources to maintain a positive public image. There are few actions better received by a community than healing and treating their vulnerable and disabled at a discounted or zero price. As such, it is absolutely foolish to believe that hospitals would not take in such customers for treatment.
In fact, if we examine the nature of prices and income differentials closely, we arrive at another instance of destructive government intervention. Price discrimination of almost every form is illegal in almost every market, and health care is certainly no exception.
Price discrimination may feel unfair, but if allowed by law it can lead to much more efficient market outcomes and higher market quantities of all goods and services. Using price discrimination, hospitals would be free to provide additional and cheaper services to low-income consumers without decreasing the price for high-income consumers.
Price discrimination would benefit the hospitals as well, because they would not only increase the quantity of services they perform and add potentially loyal new customers, but would also be able to increase the price of services to their high-income patients without losing their business.
Viewing the converse of this market outcome, then, we can observe that laws against price-fixing necessarily decrease quantities of goods and services, and squeeze marginal consumers out of the market. In the health care market, this means that those who are most in need of low-cost care are forced out of the market in the name of social justice.
In contemplating competition between medical service providers, we can deduce that the market will indeed treat people who are now free riders with dignity, but that those consumers will no longer actually be free riding on others. Instead, they will provide a valuable good to society — namely, the satisfaction that comes with supporting others in their time of need. While it may seem strange to think of this as an economic good, it certainly is, as evidenced by consumers' willingness to forgo other forms of consumption in favor of charity.
While caring for these patients would still redistribute costs to other consumers, it would do so only to the extent that these paying consumers would tolerate it by continuing to purchase care and services. That is to say that consumers' choices between competing hospitals' services would, just as in any market, force those hospitals to provide equilibrium quantities of charitable care.
This efficient market quantity would therefore be determined by the charitable inclinations of insured and higher-income patients. And in a truly libertarian market, which would lack taxes, we can say that these individuals would inarguably be more giving of their own income.
Perhaps the best feature of the free-market process in a libertarian health market is that it would allocate charitable funds to their best use. In our emergency services case, this axiom of market behavior implies that hospitals will spend their charity budgets on the most destitute and impoverished patients.
Whereas government funds are allocated according to political cronyism and electoral opportunism, free-market hospitals will always attempt to maximize the benefit to their public image — nothing more than profit maximization — by providing for those patients who are most in need.
As others have pointed out, for costs that the government does not create, Government interaction with the populace can only be summarized as redistribution of aforementioned costs. Costs cannot be eliminated unless they never occur. (ie. Federal government effectively prohibiting health care)
