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> you could simply direct hospitals to treat poor people for free. Nobody does that

Actually, I believe that's exactly what happens in the US with emergency departments. Although it supports your point about such a practice being distortionary, it also draws attention to the fact of the sheer complexity of all this.

That's mostly what bothers me about seemingly-simple statement or analogies about economics (or, really, economic theorizing in general), that the reality is far more complex and interconnected.

It's not just emergency departments. I worked for a hospital system in Maine. We provided a significant amount of free care (emergency and otherwise) to those with a qualifying income level as part of a state program.

That sounds very much like Medicaid, or are you saying that the state mandates that the cost of the care come out of the "pocket" of the hospital?

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