Health Care and Freedom
An interview with Cato Institute scholar Michael Cannon.


Ramesh Ponnuru

Michael Cannon, a health-policy analyst for the libertarian Cato Institute and a co-author of Healthy Competition, recently agreed to answer a few questions of mine for the benefit of NRO readers.

NRO: Is it fair to say that the Democratic legislation on health care amounts to a government takeover of the system? That it amounts to socialized medicine?

CANNON: That’s not only fair to say — it’s imperative to say.

We’re in a dangerous spot where the Obama administration could drop the “government option” and still enact an individual mandate, which is really the most sweeping and dangerous measure in any of the bills before Congress. The individual mandate is itself a government takeover. It would reduce health-insurance choices. It would allow (indeed, require) the government to dictate the content of every health plan in the country; to dictate the relationships between doctors, hospitals, and insurers; to control the prices for health insurance and medical services; and to ration medical care. Sarah Palin’s legitimate (if hyperbolic) “death panels” claim was about the president’s plan to expand Medicare’s existing power to ration care. But the Massachusetts experience shows that the individual mandate would give the federal government that power over non-elderly patients, too. Once the government controls those decisions, what is left to nationalize?

NRO: Mickey Kaus recently asked

some of my conservative friends [to] explain to me just what it is that private insurers do that makes them worth preserving. The central problem, sketched by David Cutler in his book Your Money or Your Life, is that the free market does not reward insurers who provide excellent care. The market punishes insurers who provide excellent care, because the people who will be most attracted by excellent care are sick people, the very people who will drive insurers into bankruptcy. If private firms want to make a profit, at least in the [individual] market, the surest way to do it is to think up innovative ways to screw buyers — deny care to those likely to need it, write complicated clauses into policies that allow the insurer to weasel out of paying, etc. Everyone agrees private insurers do these things. What do they do that’s so great that makes up for it? [Overemphasis in original.]

You insist you’re not a conservative, but can you answer his question?

I don’t know Kaus, but it appears that he may be afflicted with the typical laziness that the Left brings to health care: They start with the conclusion that government should run everything, then work backward. Everything that goes wrong is “the market,” even when the problem was created by government. If that’s the way you “reason,” who wouldn’t hate markets?

To respond to Kaus’s concerns, first, the market does not punish excellent care. Government does. Kaiser Permanente and Group Health Cooperative coordinate care, emphasize preventive care, and use electronic medical records to make medicine safer and more convenient. Why have these health plans achieved feats that have eluded Medicare? Because
markets promote quality by enabling competition between different ways of paying health-care providers. But government — particularly Medicare — quashes such competition. It favors fee-for-service payment, which penalizes coordinated care, preventive care, electronic medical records, etc. (I recall an exchange with Ezra Klein where he claimed that, because physicians favor fee-for-service payment, the fact that Medicare adopted and used fee-for-service to shape the health sector should be blamed on “the market.” Oy.) It’s ironic that the same folks who say the market punishes excellent care, and who even hail the achievements of Kaiser and Group Health, are trying to drive those same private plans out of Medicare Advantage.


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