Questions and Observations

We need to face a few facts about health care reform.  Our current system of health care funding is broken.  It’s not broken because we have a free market in health care. It’s broken because we don’t.

Spending in the US health care system is essentially out of control.  The US spends almost 16% of GDP on health care.  Canada, our nearest neighbor, spends a bit more than 10%.  In western Europe, the figure is generally between 7% and 9% of GDP.  It’s something I addressed in my book a few years ago:

Why is spending so much higher in the US, with its supposedly free-market system?  Why is it, with all that spending, that regular medical coverage doesn’t exist for 40 million Americans, when, in the rest of the industrialized world, there is 100% health coverage?

Something is deeply wrong with the financing of the US health-care system.

Part of the problem is that we really don’t have a free market in health care. Individuals, by and large, don’t buy health care policies. Health insurance is employer-provided. In effect, however, this is underwritten by the US government by making health care premiums deductible for businesses, which results in billions of dollars in lost tax revenues. And then, of course, you have to throw in the $300 billion or so that the state and federal governments spend outright to provide health care.  And, of course, once you hit 65, you’re on the government’s health care gravy train, because you’ve got your Medicare, which also covers prescription drugs, now.

Why do we spend too much for health care in the US? The Heartland Institute, a public policy think-tank, has listed several reasons:

1) Government subsidies to health care increases demand by artificially lowering costs.

2) Favorable tax treatment of employer-provided health care has the same effect.

3) Lower-income people without health care must rely on emergency room health care delivery at substantially higher cost.

4) Health care buyers and sellers meet in a “market” that is heavily regulated by the government.

5) State governments increase health care costs by mandating benefit coverages.

6) State governments artificially reduce the supply of health care by requiring Certificates of Need before health care providers can expand services.

7) States interfere with the creation and operation of PPOs by fixing prices or the range of services they can offer.

So, really, we have what is, in many ways, the worst of both worlds. We have a market-based system, but one in which market incentives are minimized through regulation and subsidies. In effect, government policy bids up health care prices, while at the same time interfering with the market forces that keep a lid on prices.

It’s no wonder that more and more people are looking at single-payer, government-provided health care as an alternative to what we already have. At the very least, a single payer system would end the inefficient and fragmented ways by which health care is currently purchased.

This is not a situation we can afford to ignore for long.

We have ignored it, though–although that appears to have come to a screeching halt.

Because of various government intereferences, more than 1/3 of all health care spending is purely administrative.  By contrast, Canada’s administrative burden on health care funding is about 1%.  If we were to switch over to a single payer system, there is an excellent chance that we would, in fact, spend less money on health care than we currently do.

Are there horror stories about health care in Canada or the UK?  Sure.  There are horror stories about our system, too.  For instance, you can find stories of families that were denied coverage, and were forced in to financial disaster all the time.

Canada, of course, has the rather unique problem of being a country with 1/10 of our population being spread over an equal amount of real estate.  In that situation, if you don’t live near a major metropolitan center–and Canada only has about 10 of them, there’s a shortage of available services.  In Britain, there are terrible NHS hospitals, but there are also excellent ones.  But the same it true in the US.  If you live in, say, Houston, Ben Taub Hospital probably wouldn’t be your first choice for treatment.  M.D. Anderson, however, would.

The bottom line, however, is that a single payer system would, in fact, deliver an equal or better level of health care as we currently receive, and probably do so at a lower cost.

But there is a fundamental problem with our current debate.  We are arguing over whether we should keep the system we have, or move to a system that sets us on the path to a single-payer system.  But those aren’t the only alternatives. There is another option that is being lost in this debate.  The democrats don’t want to mention it for ideological reasons.  The Republicans don’t mention it because of…well…incompetent buffoonery, I guess.

The alternative, of course, is to make the case that our current system costs so much, and is so distorted, because of government interference.  We have a mixed system of health care funding in which the government’s intervention imposes a  wide range of unnecessary costs.  So our choice is not to keep what we have, or eliminate the administrative overhead by turning it all over to the government.  The third choice is to return to a free market in health care.

Eliminate state by state coverage mandates, which result in 50 different–and sometimes wildly so–regulatory regimes.  Eliminate federal and state laws that prevent insurers from creating nationwide plans and risk pools.  Eliminate employer health-care coverage, and personalize it, to make it personal and portable.

Here’s another idea:  allow people to buy health insurance.  That isn’t what we have now.  We have pre-paid health care.  The two things are wildly different.  For example, look at how auto insurance works.  Imagine how much your car insurance would cost if we expected our insurance to cover 80% of the cost of oil changes, tire rotation, wiper blades, new tires, regular service, etc.  But that’s precisely what we expect medical insurance to do.  And then we wonder why it costs so darn much.

We need to allow insurers to offer simple catastrophic care coverage, with varying deductibles.  That way, you can pick up the tab for your own doctor’s visits, but you don’t have to worry about bankrupting yourself if some idiot runs a stop sign and knocks you off of your motorcycle.  We need to allow anyone who wants to set up a medical savings account.  Heck, if we really want “the government” to finance it, we could offer a 100% tax credit for health care expenditures.

We don’t need the government to rescue us from the unsatisfactory state health care is in.  We can accomplish the same goals of universal coverage and lower cost, by getting the government out of health care as completely as possible.  There are so many ways we could use free markets to relieve us of the distress the current system of funding is in, that they’re almost impossible to enumerate.

And best of all, doing so would comport with the country’s traditions of freedom, and individual choice.

And one final thing.  With a real free market in health care, if there’s a problem, you’ll also get accountability.  You’ll get access to courts where you can sue a private insurer who defrauds you, or someone who gives you substandard care.  What you’ll get with a single-payer system is no recourse.  If the government turns down your procedure, or you don’t get the health care you should, or if you keel over before your slot on the waiting list comes up, there’ll be nowhere to go, and no one accountable, any more than there is now if the public schools fail to adequately educate your children.

But free market reform doesn’t even seem to be on the table.