Businessdictionary.com defines a “market” as:
“An actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods, services, or contracts or instruments for money or barter.”
Please note with particular interest that the words “buyers” and “sellers” are plural. This is not an accident of grammar. It is how traditional markets operate.
The Patient Protection and Affordable Care Act (PPACA), as written, creates a market-like mechanism called an “exchange,” which we are now calling a “marketplace.” Why the change? Earlier this year, Julie Bataille, director of the Office of Communications at the Centers for Medicare & Medicaid Services (CMS), said, “We are recommending not using the word ‘exchange’ in the [PPACA] enrollment materials. Words like ‘marketplace’ resonate much more with the consumer and also tend to be something that is all inclusive.”
According to Bataille, this decision is based on external research and CMS focus group testing conducted in Cleveland, Dallas, Miami, Philadelphia and Houston. Additional sessions were conducted among Spanish-speaking focus groups in Houston and New York. So, marketplace it shall be.
For some, Exchange vs. Marketplace may be a distinction without a difference, especially since these marketplaces are already shaping up to be a bit different in nature than the traditional market definition above.
Economists know that markets can sometimes take different forms. For example, if the PPACA marketplaces roll out with a limited number of sellers (as appears to be the case in at least a few states), they will create more of an oligopoly than a traditional market. The difference is in the base definition. In an oligopoly, the market is dominated by a small group of sellers, which often reduces competition and leads to higher costs.
An oligopolistic marketplace would directly contradict much of what we were promised in the chaotic run up to PPACA’s passage. On July 20, 2009, speaking at the Children’s National Medical Center in Washington, President Obama said, “The reforms we seek would bring greater competition, choice, savings and efficiencies to our health care system […] For the average American, it will mean lower costs, more options and coverage you can count on.” In his 2012 State of the Union Speech, he said, “Our health care law relies on a reformed private market, not a government program.”
Unfortunately, PPACA appears to be designed to transform rather than reform. The ostensible commitment to a private market seems to contradict the actual intent of the PPACA framers. In June 2003, speaking to the AFL-CIO, Obama said, “I happen to be a proponent of a single-payer health care program. I see no reason why the U.S. cannot provide basic health insurance to everybody. A single-payer health care plan, a universal health care plan. And that’s what I’d like to see.” Recent statements by Senate Majority Leader Harry Reid, D-Nev., echo those sentiments.
Were that to happen, we would have a very different form of market — known as a monopoly, where, by definition, only one seller is available to a multitude of buyers.