A Four-Step Health Care Solution
Found at The Mises Institute
It’s true that the US health-care system is a mess, but this demonstrates not market but government failure. To cure the problem requires not different or more government regulations and bureaucracies, as self-serving politicians want us to believe, but the elimination of all existing government controls.
It’s time to get serious about health-care reform. Tax credits, vouchers, and privatization will go a long way toward decentralizing the system and removing unnecessary burdens from business. But four additional steps must also be taken:
1. Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health-care personnel. Their supply would almost instantly increase, prices would fall, and a greater variety of health-care services would appear on the market.
Competing voluntary accreditation agencies would take the place of compulsory government licensing — if health-care providers believe that such accreditation would enhance their own reputation, and that their consumers care about reputation, and are willing to pay for it.
Because consumers would no longer be duped into believing that there is such a thing as a “national standard” of health care, they would increase their search costs and make more discriminating health-care choices.
2. Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs.
Costs and prices would fall, and a wider variety of better products would reach the market sooner. The market would force consumers to act in accordance with their own — rather than the government’s — risk assessment. And competing drug and device manufacturers and sellers, to safeguard against product liability suits as much as to attract customers, would provide increasingly better product descriptions and guarantees.
3. Deregulate the health-insurance industry. Private enterprise can offer insurance against events over whose outcome the insured possesses no control. One cannot insure oneself against suicide or bankruptcy, for example, because it is in one’s own hands to bring these events about.
Because a person’s health, or lack of it, lies increasingly within his own control, many, if not most health risks, are actually uninsurable. “Insurance” against risks whose likelihood an individual can systematically influence falls within that person’s own responsibility.
All insurance, moreover, involves the pooling of individual risks. It implies that insurers pay more to some and less to others. But no one knows in advance, and with certainty, who the “winners” and “losers” will be. “Winners” and “losers” are distributed randomly, and the resulting income redistribution is unsystematic. If “winners” or “losers” could be systematically predicted, “losers” would not want to pool their risk with “winners,” but with other “losers,” because this would lower their insurance costs. I would not want to pool my personal accident risks with those of professional football players, for instance, but exclusively with those of people in circumstances similar to my own, at lower costs.
Because of legal restrictions on the health insurers’ right of refusal — to exclude any individual risk as uninsurable — the present health-insurance system is only partly concerned with insurance. The industry cannot discriminate freely among different groups’ risks.
As a result, health insurers cover a multitude of uninsurable risks, alongside, and pooled with, genuine insurance risks. They do not discriminate among various groups of people which pose significantly different insurance risks. The industry thus runs a system of income redistribution — benefiting irresponsible actors and high-risk groups at the expense of responsible individuals and low-risk groups. Accordingly, the industry’s prices are high and ballooning.
To deregulate the industry means to restore it to unrestricted freedom of contract: to allow a health insurer to offer any contract whatsoever, to include or exclude any risk, and to discriminate among any groups of individuals. Uninsurable risks would lose coverage, the variety of insurance policies for the remaining coverage would increase, and price differentials would reflect genuine insurance risks. On average, prices would drastically fall. And the reform would restore individual responsibility in health care.
4. Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased promote carelessness, indigence, and dependency. If we eliminate such subsidies, we would strengthen the will to live healthy lives and to work for a living. In the first instance, that means abolishing Medicare and Medicaid.
Only these four steps, although drastic, will restore a fully free market in medical provision. Until they are adopted, the industry will have serious problems, and so will we, its consumers.
Related posts:
- The Second-Best Solution to Health Care: Do Nothing
- A Free Market in Health Care Is the Only Solution
- What Is the Free-Market Approach to Health Care Reform?
- My Response to a Pro-Government Health Care Supporter
- Understanding the Cost of Health Care
2 Responses to “A Four-Step Health Care Solution”
admin says:
September 20, 2009 at 10:05 pm
“I think deregulation of health care providers would be a fiasco. What would keep a high school dropout with a thermometer and a stethescope scope from putting out a sign, calling himself doctor, and doing surgery or providing prescription medication? It would be going back to the day of witch doctors, bleedings and abortion-by-coathanger!”
What makes you think people would go to these type of places? In a free market, customers can choose where to go, unlike the government.
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“There have already been some mistakes made by the FDA in approving drugs and devices. Would you really de-regulate everything so that an uneducated doctor (see above) could, say give Thalidomide to pregnant women as a sleep aid and have her baby come out with no limbs? This happened in the 1950s when the regulation of medications was not as careful as now. In fact the influx of babies being born with severe physical disabilities was the motivation for getting more regulation of the drug industry. While the testing of drugs I feel is somewhat overdone, particularly putting medications that are shown to be safe and effective in other developed countries being put through complete trials before being marketed in the US, not testing at all would be far worse.”
Fraud is still a crime in free market.
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“And then there is that stupid notion that Republicans hide behind called “personal responsibility”. Some people are creative, educated and intelligent enough to find what they need without “the system”. They are able and usually willing to engage their personal responsibility. I, myself, left without health care by the Republicans, have sought out a low income clinic and am in the process of requesting prescription assistance from drug companies. Because I am well educated, read about a local clinic in the paper and can use the Internet, I am able to do this. Many people were not blessed with my level of intellect. They are low verbal, socially inept, or intellectually limited and need to be looked after or at least assisted in aquiring help. God did not make them of any less intrinsic value, and in fact many limited people have either special gifts, such as high levels of motor learning and are skilled tradesmen. Others are just all around good people who work hard and be as responsible as they are able even if they lack intellectual prowess. They should not suffer just because they don’t know the basics of how to heal a sore throat or recognize when they have poison oak or a heart attack. Being slow or low verbal is not a sin and I am not better than they are because I availed myself of a quality education”
Our country was founded on the principle of “self responsibility.”
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“Would you have sick people dying in the street as they do in places like Calcutta India and other underdeveloped places, where even basic care is unavailable, where a bottle of diarrhea medicine or some neosporin can save a life? Would you step over moaning, emaciated bodies lying in their own excrement too sick to move while their children beg for a sandwich? We are our brother’s keeper. We have a responsibility to one another as a nation that says it follows the walk of Jesus Christ. Most western religions have a caring clause.”
This is a silly theory. Before Medicare and Medicaid, people weren’t out out on the streets dying.
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“The world you are describing, one without regulation of behavior has already been tried. Look at what the Republicans did. The screwed up mess our economy is in as a result. The problems of today were caused by 3 Presidents (Reagan, Bush, Bush) Plus a Republican Congress taking over a potentially good president (Clinton) and keeping tax paying Americans from getting what they need to live in an environment that is people friendly and welcoming. We don’t need more of that. We need the for-profits put under strict control so that they have to give back and provide quality service for the money that they are so greedy for. We need government regulation to provide the basics and the charities to supplement what they do. We need to behave as though we care about the next person as much as we would like him to care about us.”
You are under the false assumption that I am Republican. You are also under the false assumption that the free market failed. We haven’t had anything close to a free market in ~100 years. Why are you so angry w/o corporate greed but dismiss greed in the government? At least corporations who are dishonest or have prices that are too high will go out of business. Think of FEMA during Katrina. If that were a private company, they would be out of business, but because it’s the government, not only do they still exist, they now have more power.
You really have a false understanding on free market principles.
twinkie1cat says:
September 19, 2009 at 10:08 pm
I think deregulation of health care providers would be a fiasco. What would keep a high school dropout with a thermometer and a stethescope scope from putting out a sign, calling himself doctor, and doing surgery or providing prescription medication? It would be going back to the day of witch doctors, bleedings and abortion-by-coathanger!
There have already been some mistakes made by the FDA in approving drugs and devices. Would you really de-regulate everything so that an uneducated doctor (see above) could, say give Thalidomide to pregnant women as a sleep aid and have her baby come out with no limbs? This happened in the 1950s when the regulation of medications was not as careful as now. In fact the influx of babies being born with severe physical disabilities was the motivation for getting more regulation of the drug industry. While the testing of drugs I feel is somewhat overdone, particularly putting medications that are shown to be safe and effective in other developed countries being put through complete trials before being marketed in the US, not testing at all would be far worse.
Refusing to insure people with risks, denying them insurance coverage is already a major problem in the United States. People are going on with either very poor medical care at filthy public hospitals like Earl K. Long and getting infections as a result, or getting emergency room care which is both expensive and without continuity. Would you prefer they got none at all, a poor person having a heart attack being left to die? Granny on an ice floe like the eskimos used to do?
And then there is that stupid notion that Republicans hide behind called “personal responsibility”. Some people are creative, educated and intelligent enough to find what they need without “the system”. They are able and usually willing to engage their personal responsibility. I, myself, left without health care by the Republicans, have sought out a low income clinic and am in the process of requesting prescription assistance from drug companies. Because I am well educated, read about a local clinic in the paper and can use the Internet, I am able to do this. Many people were not blessed with my level of intellect. They are low verbal, socially inept, or intellectually limited and need to be looked after or at least assisted in aquiring help. God did not make them of any less intrinsic value, and in fact many limited people have either special gifts, such as high levels of motor learning and are skilled tradesmen. Others are just all around good people who work hard and be as responsible as they are able even if they lack intellectual prowess. They should not suffer just because they don’t know the basics of how to heal a sore throat or recognize when they have poison oak or a heart attack. Being slow or low verbal is not a sin and I am not better than they are because I availed myself of a quality education.
Would you have sick people dying in the street as they do in places like Calcutta India and other underdeveloped places, where even basic care is unavailable, where a bottle of diarrhea medicine or some neosporin can save a life? Would you step over moaning, emaciated bodies lying in their own excrement too sick to move while their children beg for a sandwich? We are our brother’s keeper. We have a responsibility to one another as a nation that says it follows the walk of Jesus Christ. Most western religions have a caring clause.
The world you are describing, one without regulation of behavior has already been tried. Look at what the Republicans did. The screwed up mess our economy is in as a result. The problems of today were caused by 3 Presidents (Reagan, Bush, Bush) Plus a Republican Congress taking over a potentially good president (Clinton) and keeping tax paying Americans from getting what they need to live in an environment that is people friendly and welcoming. We don’t need more of that. We need the for-profits put under strict control so that they have to give back and provide quality service for the money that they are so greedy for. We need government regulation to provide the basics and the charities to supplement what they do. We need to behave as though we care about the next person as much as we would like him to care about us.