Saturday, July 29, 2017

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.


Kgaard said...

Great piece Scott. Isn't half the problem not government but regulatory capture? Wasn't Obamacare written by the insurance companies? How do we eliminate the ability of capital to dictate terms of legislation to its own benefit?

The second half of the problem is simply 100% voter suffrage. The intellectual justification for it -- that all men are equally capable of self-rule -- collapsed long ago. So why not eliminate the right to vote for those who are net dead-weights on the society? Is not 100% voter suffrage dragging us to ruin?

steve said...

Government is certainly the problem but more so because they will NEVER make the hard decisions to do what is right but will always make decisions to do what is either politically expedient or in McCain's case, personal payback. Literally sickening and terribly disheartening.

Rich said...

Blame the Heritage Foundation (actually I credit them):

Frozen in the North said...

Health care is about 18% of America's GDP. My guess is that the problems are more complicated than 10 "suggestions". BTW, the skinny plan was driven by one objective alone, to allow massive tax cuts after Medicaire and Medicaid were killed off. Be honest, that all these guys are thinking about

Scott Grannis said...

If Paul Krugman is to be believed (which is not often, unfortunately) then Heritage made a big mistake.

Andrew Ross said...

Canadians have figured out a Health Care System.
Relatively popular too.

Maybe we should just adopt their system.

Scott Grannis said...

Why do so many Canadians come to the US for treatment? Because a single payer system inevitably results in rationing and long wait times. Only the rich end up getting good healthcare.

Benjamin Cole said...

The U.S. has a healthcare system for 22 million former federal employees that is not only single-payor, but single-provider.

This health care program operates federally owned hospitals, staffed by 3450,000 federal employee doctors and administrators, and is entirely funded by income-tax payers. No co-payments.

I just described the VA.

Obviously, the GOP loves communism, when it comes to health care.

In 2017 there will be an average of 11.4 million people on Obamacare, which uses privately-provided care, though funded with public dollars, and cross subsidies.

If the right-wing wants to go to totally private health care system, let them start with the VA. Finish that then turn your guns on Obamacare.

Could save income-tax payers a ton of money too.

The VA health care program is not just socialism, it is distilled communism.

BTW, President George Bush's Medicare Part D plan added more liabilities onto US taxpayers than the rest of entire Social Security system.

Between the Donks and the 'Phants we are getting socialized crony capitalism and welfare-ism.

Dan said...

We need a hybrid system where baseline health care is available to all (ending trips to ERs for health issues that would typically be discovered and dealt with at the office level) and additional coverage is available for those who wish to purchase it. Pre-existing conditions must be covered as insurance companies will never include them if let up to their good will.

Bryon Severns said...

#5. End AMA's restriction on number of Physicians. The AMA's statement of continuous improvement by raising the standards for licensing physicians is essentially a guarantee that healthcare will not have sufficient supply and thus the price will continue to rise. If the government is determined to lower cost of healthcare it must change AMA's masterplan and require increased number of licensed physicians.

The Cliff Claven of Finance said...

Yesterday I searched for a new dentist very close to home.
Asked on the phone if they had any "special deals" for new patients.
Many acted surprised that I asked that.
One nearby dentist had a special deal.
But before I took that deal, I needed another service.
I asked their price for re-gluing a crown that fell off on Sunday.
They told me $150.
I was shocked and told them I paid $75 at my old dentist,
who had moved away.

They wanted my business, and offered the service for $75.

I went in, got a lot of attention, and a very detailed explanation of why that crown
was likely to fall off again in a year or two (which I already knew from other dentists).

50% savings just for asking for a better price on the phone.

I live in the same wealthy neighborhood where the dentist is located.
People here would pay $150 for 15 minutes to re-glue a crown without blinking.
But I have the smallest home in the village, retired very young, and watch my spending.

The first problem with medical care is almost no one cares about the prices!
Doctors / dentists act shocked when I ask first !

The second problem with medical care was observed firsthand recently,
when we lost my wife's mother AND father a few months apart -- both over 90.

There is a huge amount of money spent to keep very old people
alive a few months longer after a stroke, dementia, etc. that make no sense.

My wife had to intervene to get treatment stopped and let her parents die
at the appropriate time. There is a huge amount of money wasted
in the last six months of life (I once read almost 25% of Medicare spending)
on people whose quality of life is so low they don't want to live on,
although are reluctant to tell that to their children, or are "out of it"
and can't communicate. Forget about the money / saving --
we would never let our favorite household pets suffer like that before death.

Unknown said...
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Scott Grannis said...

Re Canadians getting healthcare in the US. I spent a few minutes doing a Google search and found the following article which substantiates the claim that many Canadians seek healthcare outside their country due to long wait lists for treatments.

But the more important issue is that it is virtually certain that a single payer system that seeks to control costs, as Canada's does, will inevitably have to ration healthcare.

A free market "rations" goods and services by finding costs which most effectively match supply and demand. Shortages lead to higher prices, which then attract more supply. Free markets are the best system ever invented for creating abundant access to goods and services for the greatest number of people.

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