healthcare – a re-evaluation
Reading and listening to the coverage and commentary on healthcare, it’s hard not to become cynical. On the Right, you have repetitive talking heads with no interest in adding depth to the debate, instead arguing bellicosely against what they see as government-run healthcare (a credible threat, I concede), but providing no additional insight beyond that. On the Left, we’re met with the supposed “reality” that the “market has failed”—as though the market is free and unregulated to start with—and that the government must step in and save healthcare as we know it, providing liability coverage (insurance) to millions of Americans.
Yet the truth is in between, and the visions of both the Left and the Right are at best useless and at worst dangerous. There are real consequences to failing to understand economic problems and issuing false solutions to those problems. Using the fiat hand of government to distort markets has led to many severe consequences, and a few catastrophic consequences as well.
Something must be done about healthcare. That much is certain. Idealistic libertarians—and I’m including libertarian-leaning conservatives* in that group—are wrong to discount the need for action—for “change,” if you will—in healthcare. We do need change, and simply blocking that change isn’t enough for conservatives as a political force nor for the country.
Liberals*, for their part, are correct that we need “change,” but they fail to understand the necessary change, instead opting for change that “feels better” and is politically easier to explicate rather than sustainable and fiscally responsible change. They look at the deplorable number of non-insured without ever asking the obvious question: why is medical treatment so very expensive that even routine procedures are unaffordable without insurance? The issue of cost control is met with an outmoded response: use the coercive power of government to control costs via legislation; furthermore, compete directly with the greedy, heartless private sector via a “public option.” Neither pseudo-solution will lower costs in the aggregate, instead shifting the cost burden and likely increasing aggregate costs.
My own libertarian instincts notwithstanding, I feel like the only practical and politically feasible solution is to mandate that every American have some minimal level of healthcare. Call it catastrophic health insurance, if you will. It would be like a high deductible health plan (HDHP), but primarily intended for ER visits and other major events. Of course, Americans could get beefier or additional insurance as well, though tax incentives toward “premium” (or Cadillac) plans would be removed, as would tax favoritism toward employer-sponsored health insurance. That coupling would be weakened over time. To truly distribute risk—which is the intent of insurance in the first place—non-discriminatory laws would be enacted such that insurance applicants are not rejected for existing medical conditions. More people would have health insurance even as insurance itself was taking a less active role in medical treatment.
In fact, the problem with healthcare is insurance itself. That is not to say that high healthcare costs are primarily due to insurance companies per se, though they do share part of the blame. Government shares a significant portion of the blame, and of course the public and media share the remaining. I’ll leave room for blame toward other sources as well, but that’s beyond the scope of this blog entry.
Healthcare is the only insured activity where typical, quotidian expenses are expected to be paid—at least in part—by insurance. Imagine going to Home Depot, purchasing some new lamps, and then whipping out your home insurance card at the cash register. Or imagine asking the mechanic who just rotated your tires if he will file your auto insurance claim or if you’re expected to do it. What would happen? In either case, the person at the cash register or in the body shop would probably look at you as though you were completely bonkers. And yet, a visit to the doctor necessitates the use of insurance and the negative ramifications that go along with it.
Referring to the examples above, what would happen if oil changes and tire rotations necessitated the use of insurance? Further, suppose due to custom or fiat legislation that auto insurance was required to cover such expenses; what then would happen? I suspect that oil changes and tire rotations would rise in price, perhaps over many years, until they were hundreds of dollars. In fact, you would likely blindly hand your insurance card to the attendant, never knowing before or after what the actual price of the tune-up (except your own co-pay). That is exactly what we do at the doctor’s office; and try polling hospitals in advance of surgery how much the operation will cost—you will likely be met with disbelief and non-committal estimates.
It doesn’t have to cost $2,000 to visit the ER. Routine or even advanced surgery doesn’t need to cost thousands or even hundreds of thousands of dollars. Staying one night in the hospital doesn’t need to cost as much as the accumulated mortgage payments for the entire year. While tort reform would lower some of these costs by lowering risk premiums, it would still not be sufficient to lower aggregate costs of medical care (though it would be a good start). More must be done, the objective being to increase price transparency and competitiveness. Ironically, that involves less insurance involvement, not more. The lofty goal of “insuring millions more Americans” is only a recipe for enslavement to insurance companies or to government itself for medical coverage, and even then it’s dangerously unsustainable.
There are solutions to our sick healthcare system, but time is running out. Solutions must be agreed upon by a majority in both parties, lest it be unwound later on. The solution isn’t a simplistic bullet point but instead a visionary, multi-faceted change; it must be phased in over time, not rammed through over a Christmas holiday. That’s the change I can believe in. Will the political class listen?
* Note that I’m using the modern definitions of conservative and liberal from the American vantage point.