Free Markets and Health Care

Republicans shot themselves in the foot last week on the health care when Senator Jim DeMint said that health care would be Obama's Waterloo. It allowed Obama to portray them for the narrow minded political operatives they are. I guess going from the majority party to irrelevance in a few short years wasn't good enough. However, our side needs a plan that will be both popular and helpful in solving some of the problems with health care financing (let me be clear it is financing not health care itself that is being changed). I offer an alternative, but first this quote from the Ludwig von Mises Institute:

It's true that the U.S. 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.

So what's to be done? The two issues that Obamacare purports to solve are the rising cost of health care and the lack of coverage for 46 million Americans. (By the way that last number includes 11 million illegal aliens, why aren't the Republicans all over that?) Over at Carpe Diem, Professor Perry has documented that the costs of elective cosmetic surgery have been totally contained, in fact they have risen less than inflation. The obvious lesson is that folks with "skin in the game" help control costs. This is economics 101, a subject Obama clearly flunked, or more likely, was never taught. It seems that the best health insurance scheme would be to have plans that give money back to the beneficiary for not using the insurance. Alternatively, perhaps the first $3000 dollars, or pick some other number, of medical expenses are paid out of pocket. After that insurance kicks in to cover catastrophic conditions, with some sort of copay upt to a limit to discourage bad behavior.

With respect to the uninsured, the 46 million number is a vast exageration. But that is actually good news, it means that the problem can be solved with much less pain and market distortion than Obamacare proposes. I would propose that we just put together a health insurance subsidy for those with less than poverty line income, a little like the earned income tax credit works today. But even the poor need "skin in the game" too, or they will overwhelm the system. So such a subsidized system should require large initial out of pocket expenses until a catastrophic cap is hit or some way to reward those who did not use their insurance. Further, the government should not be providing the insurance, only the subsidy, it would still be up to the poor to purchase their own policy. This will keep the feds out of the insurance business. I know this still costs some money, but not nearly what Obamacare will cost and it will be far more effective.

There are certainly other changes needed. We need more doctors and should allow as many to immigrate as want to. Many ailments do not require one to visit a doctor, other health care providers work just as well. I know this from military medicine, where the vast majority of my prescriptions over the years came from Nurse Practicioners or Independent Duty Corpsmen. Frivolous medical malpractice lawsuits remain a problem; Texas showed the benefits of cleaning up that mess. This package of reforms could bring real relief to Americans while not endangering the free market that has made American health care so advanced.

I think it is important to have free market solutions as ready alternatives. People are conservative and generally don't want radical change but they also are unhappy with the present system. Given the choice between change and the status quo, I think change is going to win. Friends of liberty need to offer a better change.

Reason.tv's Nick Gillespie offers this half a loaf solution that reinforces some of my themes.