I previously argued that American healthcare is neither capitalism nor socialism, but best characterized as rent-seeking paternalism. Patients have been stripped of the agency consumers normally enjoy, while “sovereign” suppliers (Paul Starr’s term) capture enormous rents behind a screen of pro-patient rhetoric.
That was the diagnosis. This is the treatment. The proposal rests on two principles. First, for healthcare to meet the basic standards of capitalist justice, rather than a status quo sometimes little better than plunder, prices must be transparent enough to make legitimate consent possible. Second, healthcare capitalism needn’t eliminate subsidized care, but subsidy must become the exception, not the norm. The way to get there is a principle I call life-cycle means-testing.
I want to open a discussion, not close one, with a proof of concept against a failure of imagination. Healthcare capitalism is possible. Admittedly, the first step, medical billing price control, sounds like the opposite of a free market. It is shock therapy for price opacity, the cancer at the heart of American medicine. Capitalism is founded on consent, and consent requires transparency. Even centrally fixed prices that patients can see are closer to capitalism than a system where people are treated without knowing what they’ll be charged. The real objective is downstream: a system in which private brokers help consumers navigate menus of providers, services and prices, making consent and consumer sovereignty real.
This is less alien than it might sound. Germany, Australia, Japan and especially Singapore already have policies that match parts of this proposal. But the system as a whole has no parallel abroad, and neither does its goal of consent rather than universal coverage.
The Paternalist Exception
One medical scenario truly breaks the capitalist paradigm. An unconscious, unidentified patient is wheeled into an emergency room and will die without immediate treatment. No one can ask for consent, check ability to pay, or show a price list. The hospital should judge what is good for the patient and act. That is paternalism, and here it is right, though absent consent the hospital’s right to bill afterward is doubtful. Such care must sometimes be subsidized by philanthropists, taxpayers or other patients. Call this the paternalist exception.
Our system handles it fairly well. The trouble is that we have let it expand to cover adjacent cases until the whole system is maladapted to efficiency, competition, and cost control. What if the risk is disability or extreme pain rather than death? What if the patient is conscious but drugged, or in too much agony to think? What if they’re lucid but lack the medical knowledge to decide? What if they understand perfectly but can’t pay? Stretch by stretch, the paternalist exception has exempted most of healthcare from capitalism.
The challenge is not to deny the paternalist exception but to contain it and build capitalist healthcare around it.
Shock Therapy for Medical Price Opacity
The strangest part of my proposal is also the most urgent: medical billing price control.
The constitution of liberty rests on natural rights and consent. You own yourself and the fruits of your labor, and every other property claim derives from consensual exchanges at agreed-upon prices. We betray this principle when we let medical providers bill patients for charges they never understood or agreed to.
In healthcare you almost never know the price. Ask what something costs and, if you’re insured, staff might tell you the copay, but rarely the full price. That is what makes the profession “sovereign”: it has been placed above the messy business of selling and negotiating. It shouldn’t be.
Medical billing practices need to change. A bill generated in a consent vacuum has no moral legitimacy. Economists usually prefer gradual reform, but when a system is badly out of whack, you must move fast. Poland’s 1990 “shock therapy” dismantled the communist economy by freeing prices and imposing hard budget constraints almost overnight. It was painful, but it made Poland one of post-Communist Europe’s great successes. Justice demands a similarly sudden intolerance of price opacity, even if it breaks many hospitals’ business models. But while we should stop letting hospitals bill whatever they want, banning them from billing at all would go too far.
I therefore propose medical billing price control, a regime that caps what providers can bill wherever adequate patient consent hasn’t been secured. Initially, that’s everywhere, since no mechanism yet exists to secure consent to the complex pricing arrangements healthcare would need. Imagine a nationwide, publicly searchable schedule of maximum billable prices per episode of care, with teeth. Bills above it would be void. The 2021 federal rule made hospitals post prices. This would make them binding.
People could look up what care for a given condition will cost, and hospital pricing would face democratic accountability, a poor substitute for market accountability but better than none. Explicit consent at point of service could be as simple as pressing a button and printing a sheet. Cash paid up front plausibly proves consent, so cash patients would be exempt. But whenever providers treat now and bill later, the law would not recognize debts above the official price. Initially low but rapidly escalating fines for non-compliant bills, plus apps to check any bill’s validity, would enforce the transition.
Much would go wrong. A rule like “fix the price at 80% of the historical average amount actually paid” would feed a large, fallible data exercise, sometimes setting prices too low, creating shortages, and sometimes too high, deterring worthwhile care. Price control would also have to spill over into treatment protocols, so doctors can’t evade it by choosing worse treatments that happen to be mispriced in their favor. Prices set by data bureaucrats would probably look little like the hospital “chargemaster,” the price list for everything from an aspirin to an hour in the operating room that routinely runs several times what anyone pays, anchors insurer negotiations, and is sometimes, spuriously, accepted by courts as a consent standard. But patient-facing price controls would likewise lack the informational and efficiency value of real prices, and would share central planning’s clumsiness. Still, they give consent a place to begin, and healthcare capitalism can grow from there.
Medical billing price control should be understood as a temporary substitute for the consent that the healthcare system currently does not know how to secure. Contract law already treats promises made under duress as voidable, and many patients in the midst of a medical crisis are under duress. The law can reasonably side with the future self who says “I was treated unfairly” against the present self making desperate promises. Until patients can show they are equipped to decide, let the only recognized charges be those the regulator deems proper for the condition.
Cash patients are exempt for a reason: money paid before treatment is consent already given, not a promise made under duress. And as we’ll see, practices may arise where a broker with a genuine fiduciary duty to the patient can recommend a course of care and its price before treatment, in a way that amounts to consent. Such an agreement should be enforceable, protocol or no protocol.
The result is three tiers of consent. Cash patients pay up front, at whatever price they negotiate. Patients with fiduciary brokers can negotiate prices and care. Everyone else falls back on scheduled prices and standard protocols. The cash exemption is not a loophole. It’s the top tier, and the paternalistic exception shrinks as patients climb.
It’s awkward. But the ideal of a benevolent doctor directing care without regard to cost is impractical given scarcity and self-interest, and the fiction is deeply distortionary. Health “insurers” have had to perform the essentially governmental function of defending people against medical plunder, a function the government wrongfully abdicated. They are a protection racket, filling a gap the government’s negligence created. Medical billing price control is the minimum viable way for government to end the anarchy and assert law and order against providers who bill without consent.
Gating Taxpayer Support by Life-Cycle Means-Testing
The next step is to attack third-party payment, the single biggest source of healthcare’s dysfunction. Only when most consumers feel the full cost of treatment will they become the motivated, smart shoppers an efficient capitalist industry needs. Yet patients often can’t or won’t pay. Specifically, there are:
1. Patients with no realistic prospect of ever paying for care. Call this the solvency problem.
2. Patients whose assets plus borrowing power probably exceed the cost of care but who can’t get the ready cash. Call that the liquidity problem.
3. Patients with sufficient liquid assets to pay out of pocket who won’t do it.
Case (3) sometimes means care isn’t worth the cost, but often just means people use third-party payment because it’s there.
Conventional means-testing could try to bar only case (3) patients from subsidized care, but that creates perverse incentives and administrative burdens, and it unfairly subsidizes people short on liquidity but long on net worth. Life-cycle means-testing is better: if people will be able to pay, let them pay when they can. It can’t be implemented directly, because people don’t walk around with their net worth plus the present value of their lifetime earnings stamped on their foreheads. But policies can be more or less well aligned with the principle.
In principle, the liquidity problem shouldn’t need a policy solution. Capitalism has one: a medical line of credit. But when government has displaced a market solution, its sudden exit won’t conjure that solution overnight. Better to have the government audit how it subsidizes care, allocate those subsidies to the patients who benefit, and convert them into loans, billing patients at controlled prices for services it paid for on their behalf. Implementation would be messy, but here the first step pays off: a loan must be denominated in a price, and an official public price list makes the conversion feasible. If the government pivots from third-party payer to medical creditor of last resort, some people will end up deeply indebted for procedures that were urgently necessary and inherently costly.
The next step deals with those debts. Student loans are a useful precedent. They linger and burden many, but income-based repayment (payments capped at 10% of discretionary income) and eventual forgiveness (after twenty years) limit the damage. That’s a model for medical debt.
Four rules would keep medical debt from causing severe hardship while protecting taxpayers from subsidizing the affluent:
1. Originate medical debts to the government at mildly above-market interest rates with a ten-year repayment schedule.
2. Cap required payments at 10% of disposable income, generously defined to deduct the costs of meeting basic needs.
3. Medical debts to the government aged more than ten years become eligible for forgiveness.
4. But there is no medical debt forgiveness for millionaires.
People seeking medical debt relief would report income and spending on basic necessities, and qualify for reduced payments if the full payment would exceed 10% of the difference. After ten years of making reduced payments, they can apply for forgiveness. The application includes an inventory of eligible assets, from bank accounts to stock portfolios to real estate, at fair market value. Anyone worth more than $1 million is denied and keeps owing the full debt, though they can reapply if their finances deteriorate. For everyone else, every $5 by which net worth falls below $1 million unlocks $1 per year of forgiveness on debts at least ten years old. Someone with no assets could get $200,000 a year in forgiveness of decade-old debts, while someone worth $900,000 just $20,000, with no cliff in between.
This is a subsidy, but a targeted one. It reaches people who’ve paid down medical debt for a decade and still haven’t cleared it. For those who die in medical debt, the balance would be recovered from their estates, as with Medicaid estate recovery. The accounting would need more detail, but this is enough for a proof of concept.
Insurance, Brokerage, and the Shape of Healthcare Capitalism
Medical billing price control and a government creditor of last resort do not amount to healthcare capitalism. They box in the paternalist exception. In the rare literal case of life-saving care for an unconscious patient, society could say, “You couldn’t agree to this, but we think it’s fair for you to owe us the normal cost of the services we provided, and to pay us when you can, if you can. Here’s how it works.” Whether the extreme case is actually handled that way hardly matters. The expensive cases are the adjacent ones, and for them, medical debt at controlled prices is the general fallback.
This reform would kill “health insurance” as we know it, the community-rated, guaranteed-issue kind that makes no capitalist sense. It wouldn’t ban it, just make it uncompetitive, probably triggering a slow death spiral as healthy people opted for self-insurance with a government backstop. Some people who are sicker, hypochondriac, or poor healthcare shoppers would either see their living standards fall or live in rolling debt to the government punctuated by occasional forgiveness. Others would skip care and not miss it. There would be some gamesmanship and perverse incentives at the margin, the usual frictions of combining capitalism with a safety net. But rent-seeking paternalism would retreat to niches, and for most people, most of the time, healthcare would be just another capitalist industry where you get what you pay for.
Health insurance might return on the model of homeowner’s insurance, which skips routine maintenance but smooths consumption after large setbacks. In that world, an insurance payout could arrive as cash in hand before treatment, turning even the liquidity-constrained patient into a cash customer.
But the key question is how brokerage would evolve. Many markets are complex or urgent enough that people need agents for real-time information and decision support. Healthcare navigators exist, but pervasive opacity leaves them little to shop on. The real brokers in healthcare are the “insurance” companies, but they act ex post, which is the wrong time. That would change fast if healthcare turned capitalist. Three analogies are useful intuition pumps:
• Airplane tickets: Travelers compare fares across airlines on sites like Expedia and Google Flights. Expect healthcare sites where you compare prices and book appointments across providers.
• Realtors: Homebuyers need help they can trust. Expect healthcare “realtors” who market through social networks, know their clients’ finances and lifestyles intimately, and have inside knowledge of the industry and specific providers.
• Finance and investment: A healthy body is a financial asset, and healthcare spending has a complex ROI. Expect specialists who can tell you whether, balancing treatment cost against earning power, a certain hip replacement or Lasik surgery has better than even odds of letting you bequeath more to your kids.
Good policy in a capitalist framework involves some soft planning, to settle discretionary features and sell reform to a skeptical public, but it can’t dictate outcomes. One question does require an evolving policy answer: what counts as consent? Bills from providers that can’t state a price are fundamentally illegitimate, but bills based on regulated published prices that people can’t understand or negotiate aren’t much better. That’s a stopgap. Patients often can’t navigate healthcare markets in real time. They need professionals who combine a genuine fiduciary duty with market expertise.
That occupational evolution can’t happen under physician “sovereignty” and extreme price opacity. It’s likely under price transparency and life-cycle means-testing, but it can’t be guaranteed or scheduled. In that sense, healthcare capitalism remains aspirational even on the best policy path. Real capitalism is never just competition plus property rights plus rational self-interest. It always involves tradition, professionalism, and the exercise of virtue by someone. But healthcare capitalism is worth fighting for. Capitalism’s drive toward innovation and efficiency has vastly improved the human condition in domain after domain. It can do the same for healthcare.
Great piece here. Thank you.
The price controls are a bad idea. They would not be "temporary", and they would be manipulated by left-leaning administrations to try to force prices below market rates.