WENDY K. MARINER

MARKET

THEORY

AND MORAL THEORY

IN H E A L T H

POLICY

ABSTRACT. Recent efforts to introduce competition, consistent with microeconomic theory, into the United States health care system raise questions of distributive justice. Similarities between microeconomic theory and libertarian philosophy suggest the possibility of confusing economic goals of efficiency and cost containment with social goals of equity of access to care. This paper raises the fear that if the two are confused, society may unwittingly abandon any serious effort to ensure that the poor have access to essential types of medical care, because libertarian philosophy cannot justify placing any constraints, however beneficient, on the actual distribution of benefits and burdens of illness resulting from free trade. Key words: Distributive justice, Libertarianism, Moral theory, Microeconomic theory, Cost containment, Competition, Basic health care, Elective health care.

1. INTRODUCTION The present enchantment in the United States with market approaches to distributing health care services seems a natural outgrowth of Western Society's belated realization that resources are not infinite. The remarkable growth in health care expenditures - both in absolute dollar terms and as a percentage of GNP (HCFA 19 81) - has raised fears o f unwarranted excesses, either in use or in supply. There is a wide-spread feeling that things have somehow ranged out of control. Efforts to identify the causes of such excesses have scrutinized social welfare programs such as Medicare, Medicaid, Hill-Burton, and aid to medical education, that introduced new consumers and providers into the health care system, as well as insurance mechanisms of financing that encourage expensive forms of care. It m a y be remembered that many o f the programs that are now being blamed for contributing to rising costs were the result of efforts to provide for the underserved ill. During the past fifty years, the public health policy debate centered around equity o f access to care. We were uncomfortable with the fact that, in a land that boasted a miraculously rapidly growing medical armamentarium, so many people involuntarily suffered remedial, but unattended, illness. Intuitions of fairness, however vague, p r o m p t e d the notion that illness or injury required medical care, regardless o f the circumstances of the person afflicted: access to health care ought not to be hindered b y barriers such as financial resources, social status, race or religion (Gutman 1981). Implicit in this perhaps intuitive response was the idea that there is a right to health care (or at least some identifiable types of health care) that may be claimed by each and every member of society (Chapman et al. 1971). While no cogent theory of a

Theoretical Medicine 4 (1983) 143-153. 0167-9902/83/0042-0143 $01.10. Copyright © 1983 by D. Reidel Publishing Company.

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right to health care emerged from the debate, the 'right' became a rallying force for advocates of equal access. With their support, programs to finance medical care for the elderly (Medicare) and the indigent (Medicaid) became law. In the absence of adequate controls by those responsible for paying the bills, however, the cost of medical care has sky-rocketed and forced a re-examination of the health care system as a whole. At a national level, the policy issue is how to structure a health care system that can provide services to the population at a reasonable cost. The cost considerations are of such magnitude that it is impossible to determine the social goals of health care divorced from their economic implications. Contemporary debate, then, focuses on reducing the costs of health care services (McNemey 1980, p. 1088). Economists offer new ways of introducing competition into the health care delivery system because they seem to believe that competition is more efficient and therefore more economic than the present conglomeration of regulatory constraints. Now saving money is, in general, a laudable goal. If the ill and injured can be competently cared for in a more efficient way than currently obtains, more funds may become available, either to improve health care or to achieve other social goals. Nevertheless, the emphasis on saving money, and on competition as the means to do so, is worrisome and perhaps dangerous because it may commit us, as a society, to a philosophy that will lead to untoward results. In this paper I want to outline why I am worried that the pro-competitive proposals could be dangerous. I am concerned that cost considerations may overwhelm our thinking in setting social goals for national health policy. It is elementary that economic principles of efficiency are no substitute for social goals or principles of justice. However, in view of the similarities between microeconomic theory and libertarianism, it is just possible that a national commitment to a microeconomic theory of competition could gain sufficient momentum to carry us over into a libertarian philosophy which precludes any constraints on a free market system, even to help the indigent get basic health care. Such a philosophy does not recognize any claim upon society's resources, even those necessary to prevent one's own death from accident or disease. In my view, society has a moral obligation to structure a system to distribute health care such that it provides for the basic health needs of all persons, regardless of their personal resources. (Just what qualifies as 'basic care' to which all persons would be entitled is a question of considerable magnitude and complexity, beyond the scope of this paper. I might suggest my own modest claims in this regard by mentioning that I would limit basic care to that necessary for survival and for ordinary human activity. While this could include certain preventive services such as immunization, it would not include most elective procedures, such as cosmetic surgery.) I fear that the present trend, which focuses on the

MARKET THEORY AND MORAL THEORY IN HEALTH POLICY 145 economics of health care, could lead to a national disavowal of any obligation with respect to the actual health needs of the people. My concerns do not rest upon any hard evidence of the inevitable consequences of adopting competition in a free market as a mode of delivering health care. They arise from the closely correlated values implicit in microeconomic theory and libertarian philosophy, described below, and the degree to which the content of public policy is shaped by the terms of the debate. The purpose of this paper is to make clear what we may be buying into if we accept free market theories uncritically. If we let our economic theories slide into political theories about social goals and rights and obligations, we may end up with a system incapable of providing for the poor. If we seriously wish to achieve some form of equity in the distribution of health care, we need to consider our social goals carefully and arrange our economic institutions so that they serve those goals.

2. THE RELATIONSHIP BETWEEN MARKET THEORY AND MORAL THEORY The market approaches to health care delivery advocate competition - among those who finance or deliver health services to produce a cost-effective supply, or among consumer-patients who use such services to foster a favorable benefitcost ratio - to achieve the optimal use of resources. The goal of the economic model, and competition, is efficiency or Pareto Optimality. Efficiency is, according to economists, a procedural objective, not a determinant of social values. It may be a desirable criterion to select means to achieve overall goals, but it is not intended, in microeconomic theory, to substitute for social goals. Moral theory, on the other hand, is intended to provide a conceptual premise for generating the normative content of social goals. Its focus is on the overall structure and policies of a society's political, legal, economic, and social institutions, rather than the means of implementing social policy. If we were to ask what kinds of moral theorists could support a market as the basic economic institution in society, we would undoubtedly find many candidates, among them utilitarians, libertarians and contractarians. Scholars with widely divergent theories, including RaMs (i971) and Nozick (1974), could argue for a free market as the fundamental economic institution of society. Their arguments, to be sure, would differ. A Nozickian libertarian would appear to view moral theory as primary and economic theory as secondary, with the natural rights of individuals requiring a free market. A Rawlsian, seeking a just distribution of economic benefits and burdens, might support a market as one of several justifiable means of achieving that distribution.

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Does the likelihood that a variety of theories can justify the same basic economic institution mean that the market is morally neutral? Phrased differently, the issue, I think, is whether moral constraints may be placed on the market. To consider this issue, it seems useful to distinguish between two kinds of constraints: constraints on the initial distribution of benefits and burdens of the market system; and constraints on the operation of the current market system. A moral argument arises if we suggest modifying the initial distribution. Nozick, for example, would probably not support any change in the initial distribution as long as the exchanges that created it were fair. Rawls, however, might argue, in reverse, that if the initial distribution were unfair then the social institutions must be changed so as to achieve a just distribution. A lesser argument may appear with respect to the operation of a market. While most theories could support removing imperfections (deviations from perfect competition) in the current market system to permit its efficient operation, they might differ on the question of whether (and what kinds) of constraints could be placed upon the process of competition. The difference appears to lie in whether the operative moral theory bases principles of distributive justice on process or on outcome. A consequentialist theory, which judges the morality of social institutions in terms of their distributive results, would focus on the consequences of the distribution generated by the market, and impose whatever limitations might be necessary to ensure that the market produces the desired (or required) outcome. Deontological theories which select principles of distribution according to particular moral rules or rights are more likely to focus on the process by which the distribution is accomplished to ensure that it respects those rules or rights. An extreme libertarian like Nozick who conceives of certain rights, like individual liberty, as primitive is not likely to be able to permit any social institution to function in any way that interferes with such rights. In Nozick's view, moral rights derive from a Kantian concept of autonomy that values individuals as ends (Nozick 1974, pp. 28-33). The autonomy of the individual his autonomous space - is protected and preserved by certain natural rights, essentially that others refrain from doing him harm. Nozick posits side constraints to ensure that the individual's autonomous apace may not be invaded without his consent. A non-consensual invasion is thus a moral wrong for which punishment or compensation is due (Nozick 1974, pp. 54-87). Nozick's conception of distributive justice derives from his view of the individual as the possessor of moral rights deemed inviolate. These individual rights cannot be defined in terms of any particular consequential distribution of benefits or burdens, but begin and end with our liberty to make choices and transfers. The wherewithal to exercise this liberty lies in our own natural asserts, -

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which Nozick finds we own. He argues that we are entitled, by reason of ownership (not necessarily merit), to all our natural assets, to use as we please (as long as we do not harm others), and to all the fruits thereof. Hence, he concludes that individuals have property rights in their own natural assets and what they produce therefrom. Distributive justice, then, amounts to a process, not any identifiable end state, whereby 'goods' justly acquired may be freely exchanged via markets, with appropriate adjustments for rectifying peculiar transactions (Nozick 1974, pp. 150-153). This libertarian conception views any interference with free exchanges as wrongful infringment of liberty. It would be difficult, if not impossible, for a libertarian to justify imposing restrictions on a free market system of exchange. Some regulation of the market to preserve freedom of choice undoubtedly would be acceptable. For example, antitrust laws designed to protect free competition among suppliers and mechanisms for providing full information to consumers to enable them to make informed choices would further the goals of free and fair trade. But devices intended to restrict certain choices for the purpose of ensuring a preconceived distribution would certainly be considered unjust, regardless of their impact. Alternative views of rights as derivative (based on other moral premises), rather than primitive, can be seen in the works of Rawls and some utilitarians, which permit moral theory to develop and constrain social institutions for the purpose of fulfilling distributive goals. Such theories could require limiting the initial distribution, and perhaps the operation of a market system, to serve broader social goals. They could require attention to universal access to basic health services even in a market system. The constraints necessary to achieve such universal access may reduce the market's efficiency, but they need not infringe on any fundamental rights. An example of a theory permitting attention to universal access to basic care may be found in RaMs' A Theory of Justice (1971). While Rawls does not concern himself with specific applications of his principles of justice, much less with health care, his conception of justice may accomodate specific distributional objectives, without violating any basic liberties. Daniels suggests that this may be true for the social goal of universal access to basic health care (Daniels 1979, 1981, 1982). Building on RaMs' Second Principle, that society's institutions should be designed to ensure fair equality of opportunity (Rawls 1971, pp. 73, 84-88,302), Daniels argues that health care institutions, and perhaps government itself, will play an important social role. This is because they provide the services necessary to restore or maintain people at a level of functioning ('normal species functioning') that provides them with ari equal opportunity range (Daniels 1981, p. 165). Since normal species functioning is a key determinant of the opportunity range open to individuals, health care (or certain theoretically

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identifiable types of medical and social services) is not just another economic good. It is special in the sense that there are important social obligations inherent in the distribution of health care. RaMs' fair equality of opportunity clause, therefore, could be held to require that society not only refrain from placing obstacles in the path of access to basic care, but also remove such obstacles and compensate for others (Daniels 1979, p. 187). If a market is an appropriate mechanism to distribute basic (as well as elective) health care, then the initial distribution should be such that it provides universal access to basic care. Moreover, certain constraints might be placed on the market process itself to ensure that it does not operate to impede or preclude access to basic care. 3. SIMILARITIES BETWEEN MARKET APPROACHES AND LIBERTARIANISM In the current health policy debate advocates of competition tend to concentrate on the issue of efficiency. They do not appeal to moral theory to justify a market as a basic economic institution or competition as the means of achieving cost containment. After all, the United States health care system functions within a market system, albeit one considerably modified in favor of social welfare. The task of economists, then, is simply to produce a more efficient system of delivering care at less cost. To the extent that they draw upon theory to buttress their recommendations, they speak in terms of microeconomic theory. Microeconomic theory and libertarianism share certain assumptions about the way economic goods should be distributed. These shared assumptions may give rise to some confusion as to the proper sphere of each theory. If, in the pursuit of efficiency, economists take it as tautologically true that interfering with the market is tantamount to infringing upon rights, then it will be impossible to alter the initial distribution and difficult to put constraints on the market process in the name of equity. The similarities in microeconomic theory and libertarianism can be seen in the proposals to introduce competition into the United States health care system. Advocates of competitive market approaches offer a variety of reforms, but appear to base their proposals on some basic microeconomic assumptions (Rosenblatt 1981, pp. 1069-70). First, all market oriented approaches assume that health care, in the form of medical, dental, and psychiatric services, is an economic good like all other goods and services (Stockman 1981 ; Durenberger 1981 ; McClure 1982; Enthoven 1980). Second, as an economic gbod, health care should be subject to acquisition and disposition in the general market. Using the free market model of perfect competition, the markgteers view the distribution of health care services as ideally and necessarily flowing from voluntary trans-

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actions between 'providers' and 'consumers' (Enthoven 1980, pp. 110-113; Havighurst et al. 1975, p. 19). According to the model, these transactions are the result of rational choices made on the basis of marginal utility (a cost-benefit calculus). Markets thus express individual preferences. The twin goals of the market approaches appear to be to conserve public funds (by reducing government expenditures for health care) and to reduce (at least the rate of increase in) health care costs (Blumstein et al. 1981, p. 852; Inglehart p. 294). If health care is seen to be an economic good, then competition can be viewed as the most efficient way to trade or distribute it, that is, at least cost (Winsten 1981, p. 1280). To the extent that the choices actually made within the system are seen as undesirable, they are viewed as stemming from market imperfections, such as financing by insurance or regulating the supply of beds (Clark 1980; Havighurst 1978). Hence, remedial energies are directed primarily toward correcting the imperfections, or deviations from pure competition in a free market. The general goal of these approaches is consumer sovereignty in a voluntary system in which consumers (and providers) face the real costs and benefits of their choices at the margin and thereby bring about a lower total cost for health care. Most advocates of competition favor restructuring the incentives to individuals (or their representatives, such as employers) in order to raise cost-consciousness (McClure 1982; Enthoven 1981, pp. 109-110; Clark 1980, pp. 1484-7). They also suggest altering the incentives to providers to induce them to create less expensive financing mechanisms (like competitive insurance packages) or organizational structures (like health maintenance organizations) (Christianson et al. 1979, p. 818; Enthoven 1980; Havighurst 1977, pp. 475-477). One might complain that such 'incentives' amount to artificially manipulating people's preferences, but they are justified as mechanisms to achieve more perfect information. Since, in a perfectly competitive model, individuals are presumed to make cost-effective choices on the basis of perfect information, it is reasoned that if providers and consumers are freed to face the financial consequences of their behavior, they will act rationally to minimize expenditures. If the foregoing, admittedly simplified, summary, is accurate, the competitive proposals have a clear libertarian ring to them. If free trade is the prerogative of individual freedom and the right to dispose of one's property as one sees fit, it begins to sound as though individual liberty requires freedom of choice concerning health care as an economic good. Now freedom of choice may be a thing of beauty but if its preservation is seen to be the object of the social structure, or a Nozickian side constraint, then it becomes difficult to justify any social programs involving the redistribution of income. This difficulty is apparent in the somewhat tortured efforts of market approaches to provide access to health care for the poor in a market system.

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Market approaches rely on money as the proxy for consumer choice. Only persons with sufficient financial resources can buy into the system and receive care. The knowledge that illness and injury strike irrespective of assets, however, has made most societies uneasy with allowing their poor to go without care. In the United States, access to care remains uneven (hence unequal) (Aday et al. 1980), and where access is offered, the quality of care may vary widely (Wyszewianski and Donabedian 1981). Most market enthusiasts, then, toss in a proviso that the needy will be provided for, generally by income transfers or vouchers to enable them to acquire what others can afford (Fried 1978 p. 127; Havighurst 1981, pp. 1142, 1151; McClure 1981, p. 25). Enthoven (1981, p. 110) posits some structural constraints, like open enrollment and community rating, to ensure a fair premium for health plan insurance, and thus some measure of equality of access to health plans. This approach views equity solely in terms of purchasing power. While it acknowledges the inability of a market system to accommodate those who lack funds, it appears to regard the preservation of economic freedom as more valuable than any distribution of services based on need. It could, of course, be argued in defense of competition that, on the contrary, the real goal is equity of access to care, that equity of access in a market economy should begin with an equitable distribution of income, and that the income transfers accomplished by means of vouchers or subsidies are simply efforts to achieve a fair initial distribution. But, a libertarian could object that such efforts are really unjust in the absence of any evidence of unfairness in the process which resulted in the current distribution. Even if the current distribution could be changed, there is no guarantee that a market system could maintain equity of access to care while reducing health expenditures (Cohodes 1982, p. 56; Ginsburg 1980; Luft !982; Rosenblatt 1981, pp. 1078-88). The operation of the market requires individual freedom of choice in the creation and consumption of services. It is the process by which services are allocated, not the outcome, that is the focus of analysis (Havighurst 1982, p. 1119). It allows the distribution of services to be determined by the power of the individual purse, and the right to care by the resources at one's disposal. There is no discernible normative conception of equity of access once the trading begins. Providing the minimum income to enable everyone to express his preferences in dollars appears to be all that justice requires. Hart (1979, p. 832) expressed it nicely: "So long as rights are not violated it matters not for morality, short of catastrophe, how a social system actually works, how individuals fare under it, what needs it fails to meet or what misery or inequalities it produces".

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4. CONCLUSION Efforts to provide access to care appear to stem from some intuition that health care is sufficiently more important than other goods to require a more equitable distribution of it. If there is some value to enabling the poor to obtain care, it cannot be simply because everyone should be allowed to play the market game, but because there is something special about health care. If not, then the poor should also be entitled to vouchers for other economic goods. Under the market system, any redistribution of income requires a serious justification, which microeconomic theory does not offer. Perhaps it is in the spirit of utilitarianism and its focus on consequences for the social welfare, that proponents of competition have not pressed a strict version of microeconomic theory, but have attempted to expand participation in the health care market. The justification for this attempt, however, is not entirely clear, and, in any event, is certainly not strong enough to generate any moral obligation on the part of society to ensure universal access to basic health care. As such it provides some practical remedies to current problems of access but no real basis for longterm solutions. If we wish to evaluate the ability of the market approaches to create a morally defensible health care system, we must decide what kind of a system we wish to have. If all we wish is to allow people to make their own decisions about what kinds and how much health care they will use, then perhaps the market is the most efficient way of proceeding. But if we wish to ensure that every individual has access to basic health services, then it seems clear that pure competition cannot do this unless it is subjected to some strict constraints that may be incompatible with its premises. In defining social goals, our choice of moral theory affects whether we may justifiably place constraints on the market. The proposals favoring competition are sufficiently compatible with libertarianism that they may sacrifice considerations of equity in favor of efficiency. My concerns about market approaches for health care delivery stem from the possibility that our attitudes toward equity may be subtly shaped by libertarian notions of liberty that creep (often uninvited)into discussions of health policy. The way we flame questions of policy significantly affects the range of available answers (Tribe 1974). To the extent that the entire health policy debate centers around individual preferences and cost reduction, there is a danger that the language of efficiency will become the libertarian language of social goals and effectively eliminate serious attention to issues of equity. Individual preferences cannot necessarily be equated with the public good. Reliance on individual preferences to bring about the public good may change the philosophical approach to the problem and ignore the public good itself. There are other normative principles that should be considered in our search

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for the optimal distribution o f health care. Such principles do not necessarily dispense w i t h a m a r k e t system, but t h e y m a y place constraints on the market to ensure that it serves the goals o f equity. WENDY K. M A R I N E R Department of Health Policy and Management, Harvard School of Public Health, 6 77 Huntington Avenue, Boston, MA 02115, U.S.A.

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