Wednesday, August 12, 2009

Is Health Care Different?

In a way, proponents of socialized medicine are right: the market for health care is different from, say, the market for bread. But the source of this difference is not intrinsic to health care; it is the result of our legal and regulatory system. In other words, it's not a market failure, but a government failure.

Whole Foods CEO John Mackey advocates eight reforms to fix these legal and regulatory distortions, in a surprisingly astute WSJ op-ed:
  1. Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs).
  2. Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits.
  3. Repeal all state laws which prevent insurance companies from competing across state lines.
  4. Repeal government mandates regarding what insurance companies must cover.
  5. Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year.
  6. Make costs transparent so that consumers understand what health-care treatments cost.
  7. Enact Medicare reform.
  8. Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.
Let's look at how these reforms would improve the health-care system, point by point.
  1. High deductibles encourage thrift. When you pay out of pocket for a portion of health care services, you're more likely to eschew costly solutions (like visiting the ER for minor maladies). This forces individuals to weigh the costs and benefits of their health-care consumption.
  2. The current tax structure favors employer-provided health insurance over individually-owned insurance. Employer-provided insurance shelters employees from the full cost of health-care consumption, discouraging thrift and encouraging over-consumption.
  3. Competition lowers cost and increases choice.
  4. This encourages purchasers of insurance to buy a plan that applies to them. A 20-year-old male does not need his insurance plan to cover yearly mammograms.
  5. I agree with Don Boudreaux on this one; I don't want legislators setting limits on courtroom payouts. But, if a patient brings a suit and loses, he should pay the cost.
  6. This point feeds into point one. People need to know the price of procedures to encourage thrift and wise decision making.
  7. Medicare is a time bomb. It will have to be dealt with sooner or later.
  8. This point addresses the main moral argument liberals make for socialized medicine: giving the poor access to health insurance. This charity should be voluntary.
This last point is Makey's key argument:

Many promoters of health-care reform believe that people have an intrinsic ethical right to health care—to equal access to doctors, medicines and hospitals. While all of us empathize with those who are sick, how can we say that all people have more of an intrinsic right to health care than they have to food or shelter?

Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That's because there isn't any. This "right" has never existed in America

Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.

Although Canada has a population smaller than California, 830,000 Canadians are currently waiting to be admitted to a hospital or to get treatment, according to a report last month in Investor's Business Daily. In England, the waiting list is 1.8 million.

Makey isn't the only one advocating these reforms, but alternative arguments have been drowned out in the current debate. The Left portrays opponents of socialized medicine as right-wing nuts, or puppets of the insurance industry. The Republicans, true to form, are merely intent on watering down the Democrats' bill. What we need is reform that addresses the root causes of the health-care breakdown, while protecting our basic individual rights.

We need to make health care look more like bread.