Capitalist Health Care Has Failed

James Kwak
3 min readJun 26, 2023
Photo by Marcelo Leal on Unsplash

We could theoretically outsource our national defense to the private sector. Companies could offer to defend the border in exchange for payments from the people they are protecting. Or they could offer to invade another country if they can find enough customers who don’t like that country to pay for the attack. Russia does this, to a limited extent — consider Yevgeny Prigozhin’s Wagner Group and Ramzan Kadyrov’s Chechen paramilitaries — and look where that got them. (There are some people in the United States who do think we should privatize the military. Most people call think they are nuts.)

In the meantime, while the civilian-led armed forces are keeping us more or less safe from armed attack, there are other things that are killing Americans, every day. Now, everyone dies of something. But diseases and other health conditions often kill people long before they would have died of their next most likely cause of death. Yet in this case, we hardly think twice about outsourcing our safety to the private sector.

The New York Times has a story today about shortages of two widely used, low-cost cancer drugs, cisplatin and carboplatin. As a result, health care providers are reducing dosages, increasing intervals between treatments, or restricting the drugs to patients with the best chance of survival — rationing care, in other words.

But you could really find dozens of other, similar stories. The theory of capitalist health care is that people want medical care, and private companies — drug companies, device manufacturers, providers, etc. — will sell them the care they want. Price signals from the demand side of the market will dictate what kind of health care gets produced, with none of the waste (stereotypically) associated with government planning. The problems, though, are well known. The markets for hospitals, medical devices, and pharmaceuticals are all notoriously concentrated, which means that companies will try to reduce supply in order to drive up prices. The price signals in the health care market are completely distorted. For example, there isn’t enough vaccine research because it’s hard to make tons of profits on a shot that people only get once. And cleaning up the price signals would make things even worse. A competitive market equilibrium means that all the people to the right of the market-clearing price and quantity — the people whose willingness to pay is below the market price — get nothing. That’s OK if we’re talking about vacations in the Greek islands, but not OK if we’re talking about frontline cancer drugs.

We don’t need to have a government monopoly on health care. We could have a government agency whose job is to protect Americans against preventable medical problems that steps in wherever the private sector falls short. If there’s a shortage of rural hospitals (and there is), the agency would build and staff them. When it comes to important drugs, the agency would ensure there are adequate supplies; when necessary, the agency would contract with onshore manufacturers to ensure those supplies. (We don’t rely on Indian generics manufacturers to make our fighter jets, you know.)

So why do we continue outsourcing our medical defenses while treating military defense like a public good? Clever marketing by the health care industry and the doctor’s guild, no doubt. Decades of right-wing rhetoric about “socialized medicine” (although the private sector does much more rationing of healthcare than Medicare does). A Democratic Party in thrall to the idea that markets can solve all problems. The widely-held fallacy that money spent by individuals on stuff they need is good and money spent by the government on the same stuff for the same people is bad. Excessive faith in capitalism.

The U.S. health care system is going to crash into a wall at some point in the next couple of decades. Despite Obamacare’s efforts to keep premiums down, the cost of increasingly expensive health care will simply shift to deductibles and co-payments, expanding the already serious problem of people who are insured yet cannot afford the care they need. Republicans are going to double down on privatizing Medicare and gutting Medicaid, leaving poor people and much of the middle class to fend for themselves. We need to recognize that the only viable alternative is to treat health care as a matter of national defense—not as a consumer good that only some people can afford.



James Kwak

Books: The Fear of Too Much Justice, Take Back Our Party, Economism, White House Burning, 13 Bankers. Former professor. Co-founder, Guidewire Software. Cellist.