Easy healthcare fixes

Congress has once again failed to fix the problem of healthcare—a problem exacerbated (but not created) by Obamacare. Arguably, the main reason for this failure is the fact that trying to manage the healthcare industry by government fiat is impossible. It's manifestly impossible for any collection of politicians and bureaucrats, no matter how smart or how well-intentioned, to design a healthcare system that covers pre-existing conditions, expands access, improves services and lowers costs. The best and most efficient healthcare system can only be achieved by a freely-functioning market that is not burdened by government meddling, subsidies, regulations, or mandates.

The best way to "fix" healthcare is to get the government out of the business of "fixing" healthcare. Steve Horwitz has a few simple suggestions that would go a long way to improving  the healthcare industry. (Big HT to Mark Perry!)

If you want to really reform health care and make it cheaper and provide easier access, you can start with the following, after you end the ACA:

1. End the tax-favored treatment of employer-provided insurance
2. End the limits on interstate competition in the insurance market
3. End the community standards legislation
4. Tort reform
5. Deregulate the supply side of the market by loosening or ending licensing provisions and the AMA's monopoly on the supply of physicians.
6. Encourage the development of more walk-in clinics and other ways of avoiding third-party payment.
7. Encourage health insurance to be actual insurance for major medical problems, not third-party payment for health maintenance
8. Expand the use of pre-tax dollars in health savings accounts

There are surely more. But all of these have been on the table as alternatives for years. They would work from both the supply and demand side to accomplish the goals of lower cost and higher quality care.

It would not guarantee universal coverage, but the cost of covering everyone is that you give up on lowering cost and will eventually have to ration supply. You cannot have lower costs, expanding supply, and universal coverage. At best, pick two.

While this would help a great deal, it doesn't address the problem of the poor, the unfortunate, and those with pre-existing conditions. Fortunately, there are ways to solve this problem, as I discussed in this post—as John Cochrane has proposed, we should raise taxes to directly support charity care and subsidies, instead of using the system of cross-subsidies that so greatly distorts things today.

I posted the chart below a long time ago, and it bears repeating:

Since the consumers of healthcare are for the most part not the ones who pay the bill, there is no price discovery, there is no transparency, and there is no way for competition to work effectively to reduce prices and improve services. We must get rid of the third party payer problem if we want to have any chance of improving the healthcare industry. That can be accomplished very easily by changing the tax code: for example, let everyone deduct the cost of healthcare insurance. Since WW II, the government has allowed only employers to deduct the cost of healthcare insurance. This created a powerful incentive for everyone to get as much healthcare insurance as possible (insurance that covers not just major expenses but also very minor expenses) from their employer. And it's now the case that almost 90% of all money spent on healthcare is spent by someone other than the person receiving healthcare services.

Suppose we did the same thing for food. Suppose we said as a society that food was a universal right; that it would be inhuman to not provide quality food for everyone. Suppose we made food a single payer commodity—let everyone have access to food and have the government pay for it all. What incentive would there be for producers to supply all the things people want and in the right quantities? Why would anyone buy what are now the cheap cuts of beef? Think of the amount of food that would go to waste in people's refrigerators. Soon there would be shortages of food, and the inevitable result would be the rationing of food. Single payer for anything can never be a good solution. History is littered with failed experiments in single payer, aka socialism.

It is immoral to declare a "right" to healthcare, because by doing so we make anyone who works in the healthcare field a slave of everyone else. No one should have the right to the services of someone else—to argue otherwise is to condone slavery, and ultimately to empower the government at the expense of the liberty of all.

Fixing healthcare isn't really all that difficult. What's difficult is accepting the reality that government can't fix healthcare except by drastically reducing its influence on the healthcare market. We don't need a government healthcare fix; we need to restore market forces to the healthcare industry.