Unmanageable Care

Richard Epstein from the May 1993 issue

(Page 2 of 2)

So even if firms decide to play, they will still have to pay, albeit somewhat less. And if they decide to pay, the cost could quickly escalate, encouraging other steps to avoid the tax. Companies could hire fewer employees to reduce the head tax; they might decide to scale down their business, or even leave the market altogether. The system of play or pay could turn into a system of play or pay, then fold. The problems of health-care coverage would remain unsolved, and wider economic markets would be disrupted. The costs would thereby be diffused but not eliminated.

Ultimately, some broad-based levy on earned income or all income (or perhaps a national sales tax or value-added tax) will be needed to fund universal coverage. These taxes will reduce the rates of investment, production, and profits otherwise attainable in the private sector, and they will generate fierce opposition from a public that knows it's already overtaxed. And the government will still have to figure out just who will provide health care for the people who are not placed in the regulated market. Successful insurers will probably be forced to provide coverage at a loss for those persons unable to secure protection in the regulated market. And when that system fails, the government will become the ultimate manager of competition; it will go into business itself, with the same success and imagination that it brings to the operation of the Post Office or the public schools.

To be sure, there are some gains that managed competition might achieve. Insurance firms might seek to make contracts to provide low-cost care for their customers. But those incentives to reduce costs all come from the competition side of the package. The addition of government-assigned business will invite cost-plus forms of accounting that will have exactly the opposite effect and will create massive disputes over which of the carrier's joint costs should be assigned to the private and which to the government portion of the plan. The managed side of the package will thus impede efficiency in the name of universal and comprehensive health-care coverage that we cannot afford to provide given our shrinking resource base.

We have to let go of the allure of universality, which is today treated as though it were an undeniable ethical imperative. In part the slack will be picked up by a resurgence of private charitable care, which hospitals could provide if freed of their regulatory burdens. And cities and states could again run a system of public hospitals to take care of some of the poor and emergency cases. This system consciously gives certain persons second-class health care at best and leaves the risk of no health care at all.

But it also offers hidden gains. Persons who know that their health care is at risk will have an incentive to take steps to reduce their need for it: There will be less drinking, less drug use, and less casual sex. Likewise there will be stronger incentives to tailor health plans to meet what people regard as their essential needs, not what regulation requires them to purchase.

There is, of course, a big cost: Some people will surely die for want of health care, as they have died in the past and as they continue to die today. But the issue is not whether there will be comprehensive universal health-care coverage funded out of public revenues. It is beyond our power to legislate that into existence. The issue is whether we can find ways to increase access by reducing costs. Unless we let go of the impossible dream of universal health coverage, we will engage in punitive regulatory measures that will not save those in need but may well bring down the entire health-care system in ruins.

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