Markets, Not Mandates

How medical markets would improve health care and reduce costs

The New York Times calls it "possibly the most complex legislation in modern history." The health care "reform" currently being hammered out by the Democratic leadership of the House of Representatives already clocks in at $1 trillion and 1,000 pages—and it's nowhere near done. But one thing is clear: the legislation attempts to substitute top-down mandates from a centralized bureaucracy for the distributed decisions made by millions of consumers, physicians, and insurers acting in a marketplace. This will fail.

While congressional reform efforts screech and shudder along, let's take a moment to dream: What would real reform look like? It would be consumer driven, transparent, and competitive.

Right now consumers are locked into the health insurance and health care plans that their employers choose, thanks to previous government meddling with the health care system and the tax code. Consequently, most consumers simply don't have a clue what their health insurance costs. They have no way to reduce those costs, and no incentive to do so, even if they could.

Harvard University business professor Regina Herzlinger is stuck in exactly the same place as most Americans—her employer, in this case, the president of Harvard, buys her health insurance for her. "I wouldn't permit him to buy my house or my clothing or my food for me. Yet as my employer, he could take up to $15,000 of my sala­ry each year and buy my health insurance for me, without knowing anything about my preferences or needs. It's ridiculous." Indeed it is.

Third party payments are the main source of dysfunction in the American health system. "The devil systematically built our health insurance system," once suggested Princeton University health economist Uwe Reinhardt. As evidence, Reinhardt pointed out that it "has the feature that when you're down on your luck, you're unemployed, you lose your insurance. Only the devil could ever have invented such a system."

So the first step toward real reform is to give consumers responsibility for buying their own health insurance. The employer-based health insurance system must be dismantled, and the money spent by employers for insurance should be converted to additional income. This would immediately inject cost consciousness into health insurance decisions.

Since governments have been intervening in and distorting medical markets for more than a century, there are no examples of truly free-market medicine in any of the developed countries. (Switzerland is probably the nearest that any developed country comes to having a free market in health care and health insurance.) So it is impossible to know what might have happened had health care markets been allowed to evolve. While there are hints of what a market system might look like embedded within our current mess, much of what could happen under medical markets is tough to predict. Nevertheless, here's one partial vision of how a system of competitive health care and health insurance might develop if real reform were adopted.

The typical American might purchase high-deductible health insurance policies that would cover expensive treatments for chronic diseases such as heart disease, cancer, AIDS, diabetes, multiple sclerosis, or the catastrophic consequences of accidents. Coverage would also include expensive treatments such as heart surgery, organ transplants, dialysis, radiation therapy, etc.  In addition, Americans would be able to buy health-status insurance that would guarantee that they could purchase health insurance at reasonable prices in the future.

The good news is that such policies are available even now. A quick check on online health insurance clearinghouse eHealthInsurance pulls a quote of $131 per month from Anthem Blue Cross Blue Shield for a single 55-year-old male with a $3,000 annual deductible, no co-pay after the deductible, reasonable pharmaceutical benefits, and lifetime maximum benefits of $7 million, with a health savings account (HSA) option. With HSAs, consumers make annual deductible contributions, which lowers their income tax bills, and then take tax-free withdrawals to pay for routine uninsured medical costs. That was the cheapest plan, but over 80 other insurance policies were available. Of course, as deductibles went down, the prices for other plans went up. The UnitedHealth Group has begun offering a policy that guarantees purchasers the right to buy an individual medical insurance policy in the future even if they become sick.

So markets mean more choice in health care, but would they make it cheaper as well? President Barack Obama famously read surgeon Atul Gawande's New Yorker article, "The Cost Conundrum." Gawande argues that medical costs are high because incentives are skewed toward providing ever more treatment as a way for physicians to earn more money. Gawande analogizes health care to building a house without a general contractor. Without someone keeping an eye on what's really necessary or desirable, house buyers would pay an electrician for every outlet he recommends, a plumber for every faucet, and so forth. Doctors get paid for each procedure they recommend. Curing patients becomes an incidental side effect of their treatments. What matters, says Gawande, is not who pays.

Gawande gets his diagnosis right, but botches his prescription. Cost-conscious general contracters exist in the housing market because of consumer demand, not government mandate. Similarly, consumer choices have driven the housing market to create the huge variety of options including high-rise condos, gated communities, rental apartments, manufactured housing, townhouses, and suburbs filled with ranch houses, Tudors, and Cape Cods. Competition in medicine would force physicians, hospitals, pharmaceutical companies, and other practitioners to figure out ways to reduce costs. Perhaps a medical general contractor model would prove most effective at lowering costs, but why not let some people go a different route?

Gawande also argues that consumers are not in a position to negotiate prices. In the New Yorker article, Gawande and Texas cardiologist Lester Dyke try to imagine how an elderly woman might bargain over bypass surgery. Gawande writes:

"They discuss the blockages in her heart, the operation, the risks. And now they're supposed to haggle over the price as if he were selling a rug in a souk? "I'll do three vessels for thirty thousand, but if you take four I'll throw in an extra night in the I.C.U."—that sort of thing? Dyke shook his head. "Who comes up with this stuff?" he asked. "Any plan that relies on the sheep to negotiate with the wolves is doomed to failure."

But Gawande and Dyke miss the crucial point—markets force the wolves to compete among themselves and end up benefiting the sheep. Cardiac surgeons and all other physicians would be vying with one another for patients helping to push down the costs. Competition would provide a strong impetus for medical practitioners to provide consumers with good information about the effectiveness of various treatments and drive innovation. Heart patients in future medical markets would be in a much better position to consider the risks, benefits, and costs of bypass surgery, stenting, pharmaceuticals, and/or stem cells for treating their disease.

Once consumers are unleashed, the medical marketplace would be transformed. Most likely, a lot of routine care would be done through retail health centers located in shopping malls, drug store chains, and mega-stores. Such centers would not be staffed with physicians but with nurse practitioners or other qualified personnel. Consumers would generally pay for routine, everyday care directly out of their health savings accounts.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Xeones||

    Reform means markets, not mandates.

    Ok, Ron, but then how are the politicians supposed to look like they're doing something?

  • spambot||

    It really does not matter what is better or worse. The big fight is over whether healthcare is a right and it should be paid for by the government. I believe it is not therefore I know I am NOT for Obama's plan. If you do believe it is a right you are going to go for Obama. That is the root of everything. All else is moot really. It is not about results for most folks, it is just that "healthcare should be provided by the government". Everything else breaks down to tastes great / less filling style arguing.

  • ||

    Spambot is right. Although I must say I find the cognitive dissonance of so many of my fellows simultaneously believing that "[free] healthcare is a right" and "healthcare should be subject to extensive government controls" to be disturbing.

  • ||

    >Ok, Ron, but then how are the politicians >supposed to look like they're doing something?

    They could always bail out uncompetitive companies... ;) Or how about just randomly throwing hundreds of billions of dollars at... stuff!

  • ||

    If receiving something at the expense of others is defined as a right, then we are instituting slavery to provide that something.

    The only question remaining: Who is to be enslaved? In the case of "free" medical care, the enslaved can be: the providers (who may be compelled to work for less than they would otherwise be able to obtain in a non-coerced situation), the patients, who may be coerced into accepting medical care from providers they would not otherwise choose, or everyone else, who may be coerced into paying more taxes.

    No one has a "right" to enslave their neighbor, even if the majority agrees with the establishment of this coercive system.

  • Rich||

    > Who is to be enslaved?

    That's why we're developing *robots*, duh!

  • ||

    The question is why the free market has not worked so far. This is because health care market is qualitatively different from, let's say, a supermarket. To use a simple economic model based on commodity for analyzing health care is to ignore the complexity of the real world.

  • ||

    Andrew: Asserting that the "health care market is qualitatively different" doesn't make it so. What's really interesting is that the old arguments that assymetrical information makes health care markets somehow different from other markets is becoming ever less relevant (if they ever were) as information about all aspects of health care becomes increasingly accessible.

    See also economist Bryan Caplan's comments on Paul Krugman's recent claims that markets cannot cure health care.

  • Gary Chartier||

    The irony here is that the enthusiastic drive for a state-based system reflects the devastatingly high costs of health-care--which have themselves been created by the state.

    This article was thoughtful and helpful, but it seemed to me to miss the two most crucial market-oriented reforms needed to make health care accessible:

    1. An end to the monpoly enjoyed by state-licensed health care professionals and accredited health care institutions.

    2. An end to the monopoly enjoyed by patent-holders.

    Ending professional licensure, state-supported accreditation, and patent protection and opening up markets for medical services, hospital care, and drugs and devices to real competition--now that's market reform, and it would drive costs down dramatically.

  • ||

    Gary Chartier: I should solve the entire health care problem in just one column? ;-)

    Other possible reforms in include (1) setting no benefit mandates whatsoever, allowing insurers and consumers operating in markets to figure out what the right packages should be; and (2) allow policies and services to be sold nationally.

  • ||

    Health care is nothing more than a service industry, not some sort of inalienable right. Why does the government need to make it more complicated than that?

    Great article, Ron, but I hate how us libertarians have to show our realism after every good article with statements like "well, we can dream" lest we be ridiculed for our foolish thinking that we could actually solve some of the problems plaguing our country.

  • ||

    Hey, Folks!! Remember how, back in the 60's we decided that there were too many people who couldn't afford decent food. So, we nationalized all the farms, set up a Food Czar and required all Americans to spend at least 20% of their income on Food. Oh, wait a minute, we didn't do that at all. We just gave poor people vouchers (called Food Stamps) to buy food at the same place they always had. Gee, I wonder if something like that might work with health care? Maybe give a voucher for the average health insurance premium. Of course, that wouldn't let Obama play God with a seventh of the economy and punish those evil
    doctors, but it would solve the uninsured problem. Just a silly notion.

  • Anonymous||

    The question is why the free market has not worked so far.

    That was a relevant question before 1965. It is not now.

  • Sean W. Malone||

    The question is why the free market has not worked so far.

    That was a relevant question before 1965. It is not now.



    It would have been an even better question when Wage Controls were imposed in 1943.

  • ||

    Every time people ask "why hasn't the free market worked?" I think of Ayn Rand's comment: it has never been tried.

    We should try it first. We have 50 states restricting our choices in the insurance industry and the medical field. We have federal restrictions on top of that. We should have a nationwide - or even international - market in healthcare, and instead we have divided the country into fifty cartelized markets, where entry is controlled by State Boards of Insurance. People in other countries can get drugs directly from a pharmacist; we are denied that freedom. People in some states may hire midwives, but not in others.

    Let's try a good dose of freedom!

  • ||

    Danny: Thanks. I may not have understood you, but I put the "one can dream" statement in not as a way to obviate comments about how actually "impractical" my proposals are, but as a way to signal my dismay with the process unfolding on Capitol Hill.

  • ||

    I agree with 'terrymac' - why are we so quick to rule out a free market when it hasn't been tried? Forcing health care - or anything for that matter- will not work. We can look to history to prove that. Prohibition, anyone? That worked out splendidly.

    As citizens, we must be allowed to choose for ourselves what is best for us and our families based on our own personal incomes and health care issues. If affordable health care is made readily available to everyone, a competitive market will arise and people will benefit from it. Shopping around will also make people more aware of what they do and do not need and how to manage their own lives better rather than letting the government tell them what they need.

  • ||

    Oh, they're practical, Ron, just improbable [to ever be implemented]. I also took that line out of context as a stand-alone statement, when it is obvious looking back now that you were talking about the previous sentence and I extrapolated it to the whole article.

  • ||

    The question is why the free market has not worked so far. This is because health care market is qualitatively different from, let's say, a supermarket.

    No Andrew, the market isn't working because the vast majority of patients are shielded from the actual costs of the care they receive. The includes Medicare, Medicaid, and everyone with employer-based insurance.

    Absent proper price signals to trigger cost-cutting decisions, demand is GOING to skyrocket and prices are GOING to rise. It's entirely prdictable and virtually inevitable.

    The only way to solve this is not to further shield people from the price of care, by handing control to the government. The way to resolve this is to return to a fee-for-service model where insurance is purchased individually and used only for catestrophic illnesses.

  • TallDave||

    "possibly the most complex legislation in modern history."

    It's a very very bad sign lawmakers tell you there's no point in even reading it.

  • TallDave||

    The question is why the free market has not worked so far.

    In what sense has it not worked? Health care has gotten much much better over time, and because we are so much richer (thanks to the free market) we can afford a lot more of it.

    To the extent we have problems, they are government creations: insurance mandates, strange tax incentives, etc.

  • TallDave||

    The big fight is over whether healthcare is a right and it should be paid for by the government.

    The whole notion of "positive rights" is very dangerous to liberal democracy. You should do not have a "right" to the fruits of someone else's labor.

    Should we feed the poor rather than letting the starve? Sure. But because we choose to, not because they have a "right" to food.

  • perilisk||

    Any recommendations on how to solve the issue of "pre-existing conditions"? Insurance works well for catastrophes that are random and not too common, but as soon you introduce a semi-reliable crystal ball, that goes out the window.

    This seems like an issue that technology is only going to exacerbate, as our lifestyles are becoming much more transparent, medical knowledge is increasing, and genetic testing is becoming more common -- while in some cases premium prices could pressure people to make healthier (well, more healthcare-cost-efficient) lifestyle choices, if your genes indicate you're 95% likely to get a horrible (but treatable) disease later, your only option is either to start saving up for treatment from the day you're able to work, hope for charitable help, hope for a breakthrough that makes treatment more affordable, or just give up on getting treated.

    Don't misunderstand me, I believe that increasing our knowledge is a good thing for humanity, but it's also disruptive, and disruptive technologies can royally screw people over in the short run, until people figure out how to create a new, functional system. A lot of the patches that government put in place are basically trying to force everyone to pretend that we can still have this system where illness is unpredictable and often unexplainable.

    Regardless, if insurance is only going to be worthwhile for fairly random maladies, then to the extent that randomness is a measure of ignorance, insurance will probably see more decline in a technologically advancing free market than under a stagnating corporatist health care system.

  • ||

    My neighbors, conservative Christians/fairly staunch Republicans, recently went quiet on the issue of universal health care. Once vocally against it, they had taken on a resigned tone in recent days. I asked them why, when it didn't seem that things were going well for Obama and the Dems, and they gave me a reply that still has me scratching my head.

    They told me that they felt it was inevitable and while they didn't care for it, they had found a silver lining. Once in place, universal health care that mandates that the only payment that can be received for medical care must come from the feds could be used to their advantage. First, they felt it would help swing things back to the Rs in 2010 and 2012. Second, they've decided that a R admin and congress can effectively outlaw abortion if they are in power and universal health care is in place, by merely removing it from covered care. Since it will be illegal to pay for medical services beyond govt care, any procedure the feds won't pay for is defacto illegal.

    Orly?

  • johnny john john||

    Talldave: Isn't that the point? That if the majority of Americans agree to Universal Healthcare, then it should be implemented?

    Nobody has natural rights to roads, military protection, or even constitutional "rights". The government mandates these to you through law, supposedly controlled by the people through democracy.

    So why do we have free speech, free religion, the military, roads, etc? The people, through the gov't, decided to give us individuals these things. The people, through the gov't can decide to give us more things, like healthcare.

    Universal healthcare and "positive rights" are not dangerous ideas. They have been desired and obtained through democracy for hundreds of years. Ask the 20+ countries that have implemented some form of universal healthcare, where it is more popular than ever. Ask the recipients of medicare. They love it, and it's political suicide to kill it.

    Also: The gov't runs the military. Has gov't involvement inhibited military technological progress? No.

    It all comes down to ideology. But beliefs that the gov't cannot run healthcare to please the desires of the US public are unfounded.

  • johnny john john ||

    "R admin and congress can effectively outlaw abortion if they are in power and universal health care is in place, by merely removing it from covered care. Since it will be illegal to pay for medical services beyond govt care, any procedure the feds won't pay for is defacto illegal."

    Tim: That's a lie. Your neighbors have a serious misunderstanding on how universal healthcare works.

  • ||

    Any recommendations on how to solve the issue of "pre-existing conditions"? Insurance works well for catastrophes that are random and not too common, but as soon you introduce a semi-reliable crystal ball, that goes out the window.


    Depends on what you mean by "pre-existing".

    I think people should be able to customize their insurance to cover illnesses they know they have a genetic disposition towards. We're still talking risk factors here, not certainties.
    And insurance rates may vary accordingly. If we have individual insurance, you'd be able to do this. Pay less for heart disease coverage if you aren't likely to get it. Pay more for cancer.

    As for already having cancer before you walk in the door, then it's your fault for not getting insurance. That's like driving a totaled car up to GEICO, buying a month's worth of coverage, and expecting them to pay out the full value of the vehicle.

  • ||

    Excellent article.

    In the process of posting this to my Facebook wall, while all my friends get mad at me for invoking politics into their lives. Naive bastards.

    This is quite similar to Milton Friedman's argument back in 2001, that the biggest change we need is to get off the employer or third party payer system: http://www.hoover.org/publications/digest/3459466.html

    Also, Cato's quick bullet list is very informative: http://healthcare.cato.org/free-market-approach-health-care-reform

  • The Mythical Canadian Libertar||

    As I prepare to watch a second immediate family member enter cancer treatment in as many years, I have to say this is one of the best things I've read in the entire time I've been reading Reason, and that's a high bar to clear. The combination of having endured Canada's health care impotence as a relative and the revelation that something requiring serious care is in my family history has me looking with real intent at a relocation. Get your congresscreatures off of this claptrap and onto loosening immigration restrictions, would you?

  • Mike Laursen||

    Any recommendations on how to solve the issue of "pre-existing conditions"?

    I don't have all the answers. For some of the reasons you point out, insurance isn't always the best system for covering medical expenses. If health insurance weren't so tied with employment it would help somewhat -- one could buy into a health insurance plan at a young age and keep it for a long time.

    As far as technology making it easier to do very early screening for genetic problems, technology is also the well from which any alleviation of those problems would come from.

    ... if your genes indicate you're 95% likely to get a horrible (but treatable) disease later, your only option is either to start saving up for treatment from the day you're able to work, hope for charitable help, hope for a breakthrough that makes treatment more affordable, or just give up on getting treated.

    Yes, it's a tough situation to be in. The list would also include hope that taxpayers help pay for your treatment.

    This blog is full of arguments about that, but I'll just point out that it's a humongous jump from "government should help people in desperate and relatively rare circumstances get needed medical treatment" to "the Federal government should provide universal healthcare". I believe the arguments commonly given for forcing people that don't even need help with paying their own medical care to participate are (a) efficiency, and (b) fairness. Any others?

  • Mike Laursen||

    Regarding the efficiency argument for single-payer insurance, one claim that is often made is that it will lead to economy of scale.

    There's often some magical thinking about how this economy of scale would come about: if you have scale, you'll get economy of scale. Realistically, it takes hard work to figure out how to get economy of scale; if you don't have motivation to do that hard work, like competition, you'll just get wastefulness on a grand scale.

  • ||

    So why do we have free speech, free religion, the military, roads, etc? The people, through the gov't, decided to give us individuals these things. The people, through the gov't can decide to give us more things, like healthcare.


    What exactly is "the people" you speak of? According to your own argument, individuals don't have rights unless "the people" grants them. That makes "the people" some disembodied arbitrary ruler that disposes of my life as it sees fit.

    What is "the people" in reality? A political system. A state. One ruled by politicians and interest groups that fight for dominance and control, not over their own lives, but over everyone's including mine and yours. Aren't powerful? Aren't an established interest? Then you are fucked. Because "the people" ain't you. "The people" is an abstraction, an nice pretty symbol painted on a power structure to make people feel better about being oppressed.

    Really, why the fuck should I care if the guy telling me what to do, taxing me, controlling my life is controlled by some happy-joy-joy abstraction made to make us feel warm and fuzzy?

  • Mike Laursen||

    Nobody has natural rights to roads, military protection, or even constitutional "rights". The government mandates these to you through law, supposedly controlled by the people through democracy.

    Well, no. Please run along and learn the difference between the words "entitlement" and "right". Then you may join in on the conversation at the adults table.

    Ask the recipients of medicare. They love it, and it's political suicide to kill it.

    Are you distinguishing between being dependent on it, and "loving it"? I know from personal experience that it is confusing and frustrating to deal with Medicare.

  • johnny john john||

    "Please run along and learn the difference between the words "entitlement" and "right""

    Mike Laursen: That's hilarious, because rights and entitlements are almost the exact same thing. The big difference is that "rights" sounds a lot better. How bout you look it up.

    From what I understand, as the elderly vote in greater numbers than any other group, they consistent vote in support of medicare time and time again, and that customer satisfaction is around 90%.

    The gov't has every "right" to impose universal healthcare on us all. Beliefs that gov't cannot run/regulate/mandate healthcare efficiently is unfounded. Governments across the globe run numerous "successful" systems. There are too many working examples such as Taiwan, Japan, Switzerland, etc.

    However, the belief that the free-market can solve all health-care issues IS unfounded. As admitted by everyone, there is not a single free-market healthcare case study to analyze, and there are plenty of naysayers.

  • ||

    # Andrew | July 28, 2009, 5:52pm | #
    # The question is why the free market has not
    # worked so far. This is because health care
    # market is qualitatively different from, let's
    # say, a supermarket. To use a simple economic
    # model based on commodity for analyzing health
    # care is to ignore the complexity of the real
    # world.

    You know, I agonized over that issue for a long time. But it recently occurred to me that there is a much better analogue to health care than the food market (which had been my previous favorite): The transportation market. There are many parallels. Most of the time, you arrange for your transportation via non-urgent, voluntary transactions, much as you would deal with normal check-ups and minor illnesses or injuries in health care. But sometimes, your need is very urgent. In transportation, you absolutely have to get to a particular place by a particular time at short notice, or suffer consequences up to and including death. In health care, you have to be seen and treated, perhaps with extraordinary facilities or heroic measures. In both transportation and health care, complex, often very expensive equipment is involved, which is used and operated by highly skilled, experienced, well-trained people.

    Yet in transportation, somehow they have managed to provide for not only the everyday, routine transportation needs, but also the drop-everything, I have to get there NOW urgent needs, all with reasonable availability and at reasonable prices. People typically don't go bankrupt or have to mortgage their houses to afford emergency trips to wherever. Nobody talks about having or needing "transportation insurance." If it were offered as an employment perk, most people would cock an eyebrow and wonder why.

    I think a lot of the reason for this is precisely because the transportation industry is dominated by the requirement to fill people's normal, routine transportation needs in a competitive environment. The infrastructure, workforce, and methodologies built up in this way automatically lower the cost and improve the availability and reliability of emergency transportation also. Just so, in medicine, the need for more automation and streamlined procedures, more effective drugs, and better diagnostic equipment -- perhaps equipment that can be safely and accurately used at home and owned by patients as blood glucose, blood pressure meters and common bathroom scales are now -- will all serve to spur innovation and ultimately lower the cost of health care across the board. That is, if we let the free market deal fully with the situation. I am worried by the many comments I read, in this thread and elsewhere, which ask how to reform INSURANCE. Insurance is not access to health care. It is, theoretically, mitigation against one's inability to afford health care. Let the free market work to make health care AFFORDABLE again, like transportation or food, and health insurance will become as irrelevant (or compartmentalized to a small niche, at least) as "transportation insurance" and "food insurance."

    Finally, the commenter who advocated something like "health stamps," as the government now issues food stamps in lieu of taking over the food sector of the economy, hit the nail on the head. If the government MUST get involved, cash equivalent vouchers are the way to go. The takeover of the health care sector is unacceptable in "the land of the free and the home of the brave."

  • Chad||

    Catastrophic health insurance just doesn't work. People are not going to shop around for things that are covered by their insurance. If you make co-pays and deductibles high enough to force them to shop around, you put them at risk of being wiped out financially by a serious illness - defeating the point of insurance in the first place.

    This can be seen right now. There are countless people out there with "good" insurance - much more thorough than the "catastrophic" plans Ron suggests - that are being bankrupted by serious illnesses. Yet costs have not been contained one whit.

    Health insurance is simultaneously a massive market failure AND a necessessity. Get over it.

  • Gilbert Martin||

    "The gov't has every "right" to impose universal healthcare on us all"

    Governments don't have rights -they have powers. Only individuals have rights - and those are all negative rights. There are no affirmative rights.

    In this country, the federal governments powers are limited to those enumerated in the text of the Constitution as per the 10th Amendment. There is no enumerted power in the Constitution that authorizes the federal government to create a mandatory national healthcare scheme.

  • LeeJoe Cruz||

    I say, pass the legislation. In fact: pass it with every benefit imaginable put into the plan. We should strive to make this the most expensive and miserable plan ever. At the end of the day, the dollar won't be able to handle the stress. With the destruction of the dollar and the repudiation of federal debt, comes the inevitable demise of our current overlords.

  • William Furr||

    There are a lot of good arguments both for and against free market health care, here and elsewhere across the blog-o-sphere. The core issue for me, though, is that I find it profoundly immoral to apportion health care based on ability to pay. The fact that I make more money than a day laborer should not entitle me to better health care, simply because I have more money and leisure with which to shop around.

  • ||

    @johnny john john


    Then by extension, the government is the ultimate source for existence of the population. Individuals obtain their existence from the government rather than the reverse. And as such, because government has supplied you with your existence they have the right to deny you your existence. What a rosy picture that paints. Allowing your life to be left to the hands of an "people" who's only definite characteristic is that they are not you.

    Fortunately, the founders of the US did not see things this way. They did not draft the Constitution establishing the Federal Government as the supplier of rights and possessing indefinite powers. No, the rights most prominent are inalienable and Governmental authority is explicitly restricted in the causes fir which they can be limited. One such cause is of course the deliberate infringement on the rights of others.

    Its is sad and embarrassing that anyone should think their life is granted to them by the government.

  • Brian Combs||

    William Furr said:

    "The fact that I make more money than a day laborer should not entitle me to better health care, simply because I have more money and leisure with which to shop around."

    I agree and feel the same way about food. Clearly, food is more important than health care, and it's immoral to have it be differentiated by cost.

    The fact that I make more money from a day laborer should not entitle me to better food, simply because I have more money and leisure with which to shop around.

    Let's nationalize the entire food production system!

  • ||

    No one has mentioned one other non-competitive aspect of health care: the way the AMA controls the number of doctors that are trained. It is really no more difficult to train a doctor than, say, an aerospace engineer or other form of rocket scientist, but rocket scientists earn much less return on their educational dollar than medical doctors. If the government supported and subsidized medical degrees the same way it supports and subsidizes science degrees useful to the DOD, I suspect that the salaries earned by both types of professionals would rather rapidly start to converge. The AMA will scream bloody murder to any such plans -- which of course is a good sign that it would be effective ...

  • ||

    There are a lot of good arguments both for and against free market health care, here and elsewhere across the blog-o-sphere. The core issue for me, though, is that I find it profoundly immoral to apportion health care based on ability to pay. The fact that I make more money than a day laborer should not entitle me to better health care, simply because I have more money and leisure with which to shop around.

    ----But you do not find it immoral to take the property from another person to benefit someone else?

  • Mike Laursen||

    That's hilarious, because rights and entitlements are almost the exact same thing.

    OK, so what you meant to say in your original comments was, "Nobody is naturally entitled to roads, military protection, or even constitutional 'rights'." I actually agree that the idea of natural or God-given rights is nonsense. But I think you're idea that rights are given by the government is off, too. Rights are whatever you can manage to wrest away from government power; i.e. concessions from the powers that be, not "mandates", as you put it.

  • Mike Laursen||

    ...they consistent vote in support of medicare time and time again, and that customer satisfaction is around 90%.

    Might want to check your numbers. And define what level of satisfaction reported in a poll corresponds to "love".

  • ||

    Mr. Bailey,

    Didn't you vote for for Obama? From his clear record did you not see that what he is now pushing on us was inevitable with his election. Did you not see how a public figure like yourself going on record for Obama would influence many and help assure his election? I once admired your writing and bought one of your books for my daughter majoring in biology. To me now, and I am sure legions more, you have no credibility on the issue for which you are arguing here.

    Ditto for the rest of the childlike folks at Reason who set aside reason last November.

  • ||

    There are countless people out there with "good" insurance - much more thorough than the "catastrophic" plans Ron suggests - that are being bankrupted by serious illnesses. Yet costs have not been contained one whit.

    Chad, God bless him, doesn't see the connection between "insurance much more thorough than the catastrophic plans" and "costs have not been contained."

    Gee, Chad, I thought all those people who were wiped out by health care costs [citation needed] had been kicked off their plans by the Evil Insurance Companies.

  • ||

    The core issue for me, though, is that I find it profoundly immoral to apportion health care based on ability to pay.

    While I, by contrast, find it profoundly immoral to have the government exert control over healthcare, and confiscate my earnings to pay for services consumed by others.

  • ||

    Wow! The second-ever editorial I've seen pointing out that markets are the cure for health care. Maybe there is hope after all. Thank you, Mr Bailey.

    But don't underestimate Medicine's aversion to innovation. Oh, all will talk about what a cutting-edge profession they're in, but what they remember viscerally is that, for instance, Tagamet came along and gastric recessions (a third of some surgeons' practices) disappeared. Flexible endoscopes and same thing with colon surgery.

    Disintermediation alone (if you have to go thru B to get from A to C and you can get rid of B without compromising standards, that's disintermediation) could make our physician shortage go away and dramatically drive down health costs, often with public health improvement, but the rules of medicine are stacked against such innovation.

    Simple example: I helped an ENT with a device that allows a nurse to provide a manipulative cure for positional vertigo. An $80 walk-in procedure could then provide instant relief for what is now a $2000 treatment after referral to a specialist. Only he was in dread his peers would find out and think him a rank commercializer.

    Market forces, and only market forces, have the power to work this level of beneficial system change. Government oversight will lead precisely the opposite direction, as it already invariably has.

  • Chad||

    R C Dean | July 29, 2009, 10:36am | #

    There are countless people out there with "good" insurance - much more thorough than the "catastrophic" plans Ron suggests - that are being bankrupted by serious illnesses. Yet costs have not been contained one whit.

    Chad, God bless him, doesn't see the connection between "insurance much more thorough than the catastrophic plans" and "costs have not been contained."


    I see it quite well. My point is that we are already past the point where increasing co-pays and deductibles are untenable...and they aren't working anyway. If we try to use even more co-pays and deductibles to contain costs, we will bankrupt even more people.

    In the end, the only way to get rid of this market failure is to have 100% co-pays. In other words, we would have to get rid of insurance, as the market failures are inherent.

  • ||

    What market forces are in play in the current health care industry?

    For market failure to occur, we first must (re)apply market principles.

  • ||

    Chad said:

    "In the end, the only way to get rid of this market failure is to have 100% co-pays. In other words, we would have to get rid of insurance, as the market failures are inherent."

    Wrong. Health insurance has been radically skewed by govt intervention and does not/can not respond to market forces at all.

    Example: My three sons in their 20s have, on average, less than a fifth of the medical costs of those in my age range. However, a govt rule stipulates that a 1:2 ratio on plan pricing. IOW, there cannot be a plan for one-fifth the price. The govt also stipulates the medical conditions that must be covered. My sons have to pay for diseases they have a snowball's chance of contracting at their age.

    Let the market work, and they could buy easily affordable coverage. Hell, I'd buy it for them.

  • ||

    R C Dean,

    Your life must be very inconvenient, what with avoiding all those roads and bridges and turning away firemen and police when they come to your aid. Surely you don't use any collectively-provided services, the product of immoral looting that they are.

  • ||

    What market forces are in play in the current health care industry?



    You guys really can't get away with this bullshit about how all healthcare's problems are a result of government meddling.

    The insurance industry is a for-profit, heroic, producing, non-looting entity. Its primary concern, rightly so, is maximizing profit, and it achieves this honorable end magnificently. Unfortunately it does this by denying as much care as possible. Meanwhile the actual medical industry leaches off of them. The market is working JUST FINE for these industries. Problem is there is no incentive in the marketplace to deliver quality and affordable and universal health care. Why should there be? Magic?

  • ||

    Why is there no incentive to deliver quality & affordable health care? Universal is irrelevant.

  • ||

    Tony said:

    "Problem is there is no incentive in the marketplace to deliver quality and affordable and universal health care."

    It's important you get this, Tony. What you describe means, by definition, that you do not in fact have a marketplace. You can wiki dat shit.

  • Mike Laursen||

    You guys really can't get away with this bullshit about how all healthcare's problems are a result of government meddling.

    I wouldn't say all of healthcare's problems are a result of government meddling.

    There's the tough fact of life that people get old and sickly and die. And the fact that they're coming up with new treatments all the time, but many new treatments are expensive and in limited supply, at least initially; that's long-term good news but can cause problems in the short term.

  • ||

    Things like roads, and the military are normally considered to be public goods. They are considered to be that because one person's use of it generally does not effect another persons use. Also, it's hard to deny the benefits that are provided. IE, the military doesn't pick which houses it protects, it protects the whole country.

    healthcare on the other hand is a private good. One persons consumption prevents another person from using that product.

    That's why the government providing things like the military are in the consitution, and things like providing healthcare are not.


    However, on the flip side. I imagine some type of indivudual mandate will be necessary combined with insurance companies not being able to disriminate based on pre-existing conditions. The fact is that insurance companies are to good now and picking their customers. They are not trying to mix high and low risk people, they are trying to just get low risk people. That defeats the point of insurance.

    For those that don't want any insurance, I would be perfectly willing to put in a provision that people could opt-out by signing a legally binding document that they would not accept ANY medical services that hadn't been paid for including ER services.

    This would preserve the element of free choice for those people whom it really mattered to, but take care of the vast majority of people.

  • ||

    How good a grasp do folks have concerning the amount our privately insured population is paying to subsidize gov't payors and the uninsured? At our two hospital system in the SE our privately insured folks pay 25% of every dollar to cover our losses on Medicare, Medicaid, Champus and the uninsured. We lose 20 million a year consistently on Medicare inpatient services alone (more than the uninsured). How can gov't solve the insurance coverage issue when it seems to me that their provider reimbursement policies have driven the cost of private insurance through the roof.

  • Mike Laursen||

    My point is that we are already past the point where increasing co-pays and deductibles are untenable.

    Oh, that's just silly. We have no problem counting on the average American to come up with enough money to pay all their taxes; why do we think, relieved of some of that tax burden, they couldn't come up with enough cash to pay for routine, run-of-the-mill medical care.

  • ||

    The insurance industry is a for-profit, heroic, producing, non-looting entity. Its primary concern, rightly so, is maximizing profit, and it achieves this honorable end magnificently. Unfortunately it does this by denying as much care as possible. Meanwhile the actual medical industry leaches off of them. The market is working JUST FINE for these industries. Problem is there is no incentive in the marketplace to deliver quality and affordable and universal health care. Why should there be? Magic?

    I don't think you understand what happens to markets when you remove the price feedback to the buyer.

    We have a situation where the amount the patient "consumes" has virtually no relatonship to either his insurance premiums or his out of pocket costs. As a result, the amount the patient is going to consume is going to rise without hindrance. Naturally, that creates a surge in demand that pushes up costs. Add the fact that it's almost illegal not to spend as much as possible due to malpractice litigation.

    The insurance companies, being the only "buyer" that has any price signal feedback, are naturally responding by trying to cut costs as much as possible. But due to federal meddling, they can't cost directly in proportion to the premiums that the individual is paying, they are forced to cost-shift and raise premiums so some patients are subsidizing others. Further obscuring any relationship between costs to the consumer and actual spending on that consumer. The result being that some consumers (the young and healthy) no longer have a reason to be in the system. Which creates a vicious feedback cycle. Healthier people stop buying insurance, fewer people are available to subsidize the sick, and so costs spiral further.

    Note that this would work the same way with a government plan. Either the government plan will start sucking up more and more cash, or some petty official will start trying to cut costs by denying coverage or capping payments. Which is exactly what is happening with Medicare. Which is why some doctors are refusing to take medicare patients.

    The only real cure for this problem is to reconnect the feedback loops between costs to the patient and spending by the system. Sicker people must pay more. Disconnect the amount an individual pays and the amount he gets in return, and you WILL end up with uncontrolled cost spiraling, in any system. Human nature.

  • ||

    To the point above about pre-existing conditions, people who their own actions develop a pre-existing condition should be required to pay higher premiums than those that don't. The same is true for auto insurance. The only caveat though is pre-existing conditions over which you had no control. How that is handled I don't have the answer except that it is not to put everyone on the same government plan.

  • Mike Laursen||

    The only caveat though is pre-existing conditions over which you had no control. How that is handled I don't have the answer except that it is not to put everyone on the same government plan.

    Exactly. Even if you presume that government needs to be involved, it's a big jump to argue that it would necessitate Federal, single-payer healthcare. Why not just provide means-tested help to the relatively few people who are in this situation? Could it be administered at the state or even county level? Could some softer incentive like tax breaks be used instead of centralized command and control?

  • ||

    I think instead of trying to determine which pre-exisiting conditions were accidental, and which weren't. It might be easeier, and more cost effective long term to base them on current lifetsyle conditions.

    So for example, if you go into your annual physical, and you are fit, a non smoker etc, then you would get a discount. If you weren't you would pay a premium.

    This would mean for example, that if you had heart problems at 40 because you were overweight, but then at 45 lost all that weight, and became fit that you would still be eligible for the discount. That way, there would be postive reinforcment for changes in future actions.

    Otherwise people might just say fuck it. Since nothing I can do will change my current/future costs why change.

  • mr simple||

    All good points, Bailey, but what does this have to xo with Gates and Crowley?

  • Neal Lester||

    Health care is different from other goods and services but it is possible to use market forces to design a universal coverage health care system with incentives to provide quality care and control costs. Please see:

    http://www.3dsafety.com/thoughts-on-healthcare.htm

    for details.

  • johnny john john||

    Libertarians want rights to protect freedom. Liberals want universal health insurance to protect the weak. These goals are not the same and in many cases will run in opposition to each other.

    I empathize with the libertarian's desire for freedom, but I just wish that libertarians could empathize with the liberals.

    No matter how "efficient" the free market becomes, it will not protect the weak as well as a large, systematic safety net mandated by the fed. The fed has more power than any other organization/individual (such as charity) to enforce the safety net. I don't know whether we should implement mandatory insurance like the swiss, gov't run like taiwan/UK/Canada, etc. Different systems sacrifice different amounts of freedoms for different kinds of benefits. Maybe single payer is not the way to go. Maybe different areas of healthcare could be regulated/deregulated. Maybe we should go the Swiss way, a highly regulated health insurance market with mandates on participation. But the free market did not solve the Swiss's problems (that's why they switched). They will not completely solve our problems.

  • Chad||

    Mike Laursen | July 29, 2009, 2:15pm | #
    My point is that we are already past the point where increasing co-pays and deductibles are untenable.

    Oh, that's just silly. We have no problem counting on the average American to come up with enough money to pay all their taxes; why do we think, relieved of some of that tax burden, they couldn't come up with enough cash to pay for routine, run-of-the-mill medical care.


    I am not talking about routine care. I am talking about people with serious illnesses who are STILL going bankrupt despite having thorough insurance. If we make the co-pays even higher, even more people will go bankrupt.

    The only way to get rid of the market failure is a co-pay of 100%...in other words, get rid of insurance.

    It isn't the government that makes insurance expensive. It is inherent.

  • Chad||

    Neal Lester | July 29, 2009, 5:53pm | #

    http://www.3dsafety.com/thoughts-on-healthcare.htm


    "Physicians personally involved in the care of an individual patient are best positioned to balance these conflicting goals"

    Only if you believe

    A: That a physician can fairly weigh the desires of a sympathetic patient right in front of him and the distant stockholders of the insurance company, and has the information to do such

    B: That the physician has no personal incentive either way

    Both are obviously false.

    The market fails.

    Try again.

  • Mike Laursen||

    Liberals want universal health insurance to protect the weak.

    If the goal is only to protect the weak, why do the non-weak have to get their health care through a universal system, too? Why not just provide means-tested assistance to people who are having financial difficulties?

    I empathize with the libertarian's desire for freedom, but I just wish that libertarians could empathize with the liberals.

    Ah, we like you. It's just that, if you come around to a libertarian blog, picking arguments with the commenters, we're going to have some fun with you.

    No matter how "efficient" the free market becomes, it will not protect the weak as well as a large, systematic safety net mandated by the fed.

    I'm going to guess that you are young and a bit sheltered if you think that the Federal government is especially good at protecting the weak.

  • johnny johnjohn||

    "I'm going to guess that you are young and a bit sheltered if you think that the Federal government is especially good at protecting the weak."

    My point is the fed has the power to protect the weak as well as persecute it. If we truly control the fed through democracy, we should be able to control it to our own desires. Besides, the rest of the developed world has proven how effective state intervention in healthcare is in improving citizen's health.

    "why do the non-weak have to get their health care through a universal system"

    They don't. There are numerous universal systems with luxury care and private sectors. Universal healthcare is *not* the same as "completely gov't controlled system".

  • Mike Laursen||

    My point is the fed has the power to protect the weak as well as persecute it.

    It's encouraging that you realize that.

    If we truly control the fed through democracy...

    You could stop right there. Voters have some control over the Federal government, but it falls short of a level that could be described as "truly control".

    They don't. There are numerous universal systems with luxury care and private sectors. Universal healthcare is *not* the same as "completely gov't controlled system".

    Sounds great. Please give me a universal system where I can opt out of filing paperwork with or getting approval from a government agency when I want health care, don't have my health insurance tied in with my employment, can take my out-of-pocket expenses and insurance premiums for myself or anybody whom I want to charitably provide for right off the top of my income before paying any taxes, up to the full amount of my income. Can I have that?

  • Mike Laursen||

    It isn't the government that makes insurance expensive. It is inherent.

    I'll give you that some part of the expensive is inherent. Can't go so far as to absolve government of any role in making health insurance expensive.

  • johnny johnjohn||

    Mike Laursen: You think you won't have to fill out paperwork if the industry becomes completely private? Funny.

    I agree that having healthcare tied to employment is pretty fucked up. It gives the employed a far greater advantage than the unemployed. Maybe healthcare reform can do something about this (probably not). Doing that will make healthcare much fairer for everyone. But I don't agree it will solve all healthcare's problems.

  • Mike Laursen||

    You think you won't have to fill out paperwork if the industry becomes completely private?

    When did I say that?

    Maybe healthcare reform can do something about this (probably not).

    If they don't, it's pretty fucked up. It's the biggest thing that is screwed up about our current system.

  • ewwbl||

    "Libertarians want rights to protect freedom. Liberals want universal health insurance to protect the weak. These goals are not the same and in many cases will run in opposition to each other."

    Why does "helping the weak" always translate into forced contribution for everyone else? Why would anyone empathize with a policy designed to confiscate, forcibly, the incomes of its citizens, and/or mandate the whole participate in programs to which they may be ideologically opposed?

    Would it be fair to raise taxes on the rest of the population ensure everyone has firearms?

    If liberals are so concerned with helping the weak, why not join or support groups that provide low cost health care to needy families? Why is it always to lobby the government for more and more responsibilities.

    No one can seriously argue that government intervention improves the quality of anything and its intrusion into health care is a large factor in the current issue. Why then should the Fed be rewarded with a greater role.

    Government intrusion inevitably increases corporate and special interest lobbying so why would its failure result in yet another topic for which they can pander to the voting public for generations.

    Complaints of constitutional shredding, big brother intrusion and reckless spending abound when its the war on terror, but those complaints fall silent when wanting to hand over the nations health care to the government.

  • TallDave||

    So why do we have free speech, free religion, the military, roads, etc? The people, through the gov't, decided to give us individuals these things. The people, through the gov't can decide to give us more things, like healthcare.

    No. Individuals have rights, the government does not give them out (but may be asked to protect them). They are inalienable.

    Further, the people cannot empower the government to take away our rights; this is why we are a republic and not a pure democracy. In a republic, the people cannot demand Socrates drink poison.

    There is a very important difference between saying "we will provide citizens with X" and "citizens have a right to X."

    It's easy to see why positive rights are logically absurd. Let's say you declare your own country, population you, and in your country you have a right to free food, housing, car, and healthcare. Since there's no one else in your country to provide these things, your rights are being violated.

    Now say a farmer and a doctor join your country. Since you have no money, you cannot pay them, but they must feed and care for you anyway because it is your "right" to be fed and cared for. Your "rights" essentially make them your slaves. And this what we're talking about doing.

    Some countries are in fact rolling back their socialized health care systems; Canada, for instance, is now allowing private insurance again. The difficulty in getting rid of a government entitlement program should not be misinterpreted as meaning the program is a good one; Russia needed a near-revolution to end Communism.

  • johnny johnjohn||

    That's the point Telldave: Countries need to find the balance between competition and cooperation. Capitalism vs. socialism. Society will constantly adjust its laws in trying to optimize that society.

    "the people cannot empower the government to take away our rights"

    HA. Hilarious. People empower the gov't to take away rights EVERY DAY. Ask any druggy, pedophile, murderer, rapist. These people, hated by society, are jailed and killed every day. They are jailed and killed because society and people want them jailed and killed. The gov't simply listens to their wishes and complies.

    I personally don't mind that rapists, pedophiles, and murderers are jailed.

    TallDave, you call these things "positive rights". I call universal healthcare "services rendered for paying taxes".

    I expect there to be a cost from universal healthcare, whether it be restricted freedoms or increased taxes. It's my belief that benefits like universal coverage, lower administrative costs (ie look at example of Taiwan), will outweigh the costs like higher taxes, restricted insurance company freedom.

    These beliefs stem from my other belief, that human beings should help the weak. They are mere political beliefs, just like the belief that everyone should be free.

  • ||

    "Countries need to find the balance between competition and cooperation. Capitalism vs. socialism. Society will constantly adjust its laws in trying to optimize that society."

    Why? The very idea is irrational. Socialism isn't cooperation, and it can't compete on its own merit so must be propped up. Society is not synonymous with government either.


    "HA. Hilarious. People empower the gov't to take away rights EVERY DAY. Ask any druggy, pedophile, murderer, rapist. These people, hated by society,re jailed and killed every day. They are jailed and killed because society and people want them jailed and killed. The gov't simply listens to their wishes and complies."

    People do empower the government to take away their rights, every time the government is allowed to extend its authority in the name of some non-descript goal like National security or common good.

    Druggies are not in jail because people asked them to be, pedophiles, murders, and rapists are there because they deliberately violated someone else's rights.

    "I personally don't mind that rapists, pedophiles, and murderers are jailed."

    --------
    "TallDave, you call these things "positive rights". I call universal healthcare "services rendered for paying taxes"."

    Its ironic that taxes are necessary to provide the services that you get for paying taxes, and that this is somehow a legitimate justification for increasing taxes to provide more services.
    "
    I expect there to be a cost from universal healthcare, whether it be restricted freedoms or increased taxes. It's my belief that benefits like universal coverage, lower administrative costs (ie look at example of Taiwan), will outweigh the costs like higher taxes, restricted insurance company freedom."

    "
    These beliefs stem from my other belief, that human beings should help the weak. They are mere political beliefs, just like the belief that everyone should be free."

    No, helping the weak, and people being free are moral beliefs. The political beliefs are that the government should provide the former, regardless of the cost, and grants the latter, for which we should be grateful.

  • johnny johnjohn||

    ewwbl:

    "Socialism isn't cooperation, and it can't compete on its own merit so must be propped up"


    What I find absurd is the libertarian's notion of achieving purity in capitalism. Every developed country uses a socialistic/capitalistic combination. There has never existed a "pure" capitalistic or socialistic country. I believe that complete purity in either forms of gov't are unattainable and undesirable. It's sorta like composite materials - You can balance away the weaknesses of two different materials by combining them together (at the cost of also reducing their strengths). The debate between things such as capitalism vs socialism, freedom vs tyranny, must note that human beings are known to want both sides of the spectrum. That is why every single successful society is built on the idea of creating mixed systems to give people the best of dualing ideas.

  • ||

    google :tier 4 drugs: and youll see why the status quo isnt gonna happen

  • abercrombie milano||

    My only point is that if you take the Bible straight, as I'm sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won't get the full deal by just doing regular skill english reading for those books. In other words, there's more to the books of the Bible than most will ever grasp. I'm not concerned that Mr. Crumb will go to hell or anything crazy like that! It's just that he, like many types of religionists, seems to take it literally, take it straight...the Bible's books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on...the Bible's books were written by people with very different mindsets...in order to really get the Books of the Bible, you have to cultivate such a mindset, it's literally a labyrinth, that's no joke

  • nike shox||

    is good

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement