Politics & Policy

Friends Want Friends to Do Health Care

Some friendly advice.

I have a joke I tell my fellow health-policy wonks. It goes like this:

What do conservatives and Christian Scientists have in common?

Wait for it…

They don’t do health care.


Believe it or not, the wonks actually laugh, I think for two reasons. First, health-care wonks are all a bunch of lefties. But the second reason is that it’s true: Conservatives don’t do health care. And when they do, they often stop acting like conservatives.

From what this former-conservative-turned-libertarian can tell, conservative thinking on health-care reform is in need of a renaissance. No, I’m not hatching some libertarian plot to subvert conservatism — unless encouraging conservatives to return to their free-market principles would somehow subvert their cause.

So without getting too much into the weeds, I humbly offer a few thoughts that might help would-be conservative health-care reformers follow their freedom-loving instincts and recapture this issue.

‐ Think freedom, not universal coverage. In a field dominated by lefties and rent-seeking weasels whose unifying goal is to provide health insurance to everyone, it is easy to get caught up in universal coverage fever. Even erstwhile conservatives have been seduced into thinking we can achieve universal coverage in a free-market way.

Yet a free market would not provide health insurance to all; some people are uninsurable, others don’t want health insurance. National Review made the point nicely: “to achieve universal coverage would require either having the government provide it to everyone or forcing everyone to buy it.” Either way, government calls the shots. If conservatives adopt universal coverage as their goal, the left will have already won.

On the Cato Institute’s blog, I recently launched the Anti-Universal Coverage Club, where I highlight prominent thinkers who reject that goal. Its membership so far includes the editors of National Review, Grover Norquist, Andrew Sullivan, and former Medicare trustee Tom Saving.

The Anti-Universal Coverage Club suggests a different goal for health-care reform: to make health care of ever-increasing quality available to an ever-increasing number of people. Now what could be better than that? And notice that only vigorous market competition, where consumers own the money involved and are free to choose how to spend it, can deliver on that goal.

Reforms that don’t give consumers ownership of that money or don’t tear down government barriers to consumer choice (including the choice to spend that money on things other than medical care) should be suspect. Conservatives have adopted an awful lot of ideas — such as Massachusetts-style managed competition, association health plans, government-planned electronic medical records, etc. — that are in open conflict with individual ownership and choice.

‐ Health-savings accounts are not enough. HSAs were a positive step, but conservatives need to move on to the next step. To do so, it may help to look at HSAs in a new light.

Employer-sponsored family coverage costs $12,000, on average. Economists tell us that money is subtracted from the worker’s wages. Viewed from that perspective, the main benefit of HSAs is that they give workers ownership over a portion of their earnings that employers have historically controlled. Even with HSAs, however, employers still control the lion’s share. Conservatives should not rest until workers get to own and control every one of those dollars.

For the under-65 crowd, that means leveling the playing field between job-based coverage and individually purchased coverage. One way of getting there would be to allow workers to deposit all of that money into a “large HSA.” Another option would be a “standard health insurance deduction,” proposed by President Bush and endorsed by Rudy Giuliani. Either would give workers ownership over those earnings, which they could use to purchase the health plan of their choice (Large HSAs actually have an edge here) from any source.

The same principle of ownership applies to Medicare: Don’t give seniors a little bit of money in an HSA, give them all the money that Medicare would spend on their behalf and let them use it to buy the health plan of their choice. Give more to the poor and sick if necessary, but let the patient control the money.

HSAs let Congress dictate health insurance deductibles and coinsurance. Why should politicians have any say in such matters? When workers purchase health insurance with their own money, they are likely to gravitate toward higher deductibles and coinsurance anyway, because that reduces their premiums. We don’t need to worry about patients being cost-conscious in the doctor’s office if they are cost-conscious when purchasing their health insurance.

‐ Don’t “improve” welfare programs — cut them. At the behest of conservatives, Jeb Bush and other governors have made Medicaid more consumer-friendly. The only problem is that Medicaid and SCHIP are welfare programs, and making welfare more attractive leads to…more welfare.

There are probably ten million people who are eligible for Medicaid but do not enroll. (Some of them actually have private coverage. Riddle me that.) Giving recipients (A) a choice of insurance plans, (B) cash in an HSA, or (C) a voucher for private insurance encourages more people to become dependent on government for their health care.

Conservatives’ number one objective in this area should be to reform Medicaid and SCHIP the same way Congress reformed welfare: eliminate all federal entitlements and return the money to states as flexible, fixed-dollar block grants. That would be a nice step in the direction of getting the federal government out of the welfare business entirely.

‐ The lefties aren’t always wrong. HSAs don’t do enough to contain medical spending. Medical errors do kill thousands of patients every year. Health outcomes aren’t noticeably worse in (fully) socialized medical systems. Private Medicare plans do cost taxpayers more than traditional Medicare.

We disagree with the left’s ultimate goal, and so we sometimes get lured into disagreeing with them even when they’re right.

Conservatives shouldn’t be afraid to acknowledge the shortcomings of the U.S. health-care sector, largely because…

‐ We’ve already got socialized medicine. Government already pays for half of Americans’ medical care. Government controls production and consumption by determining the number of physicians; what services medical professionals can offer and under what terms; where they can practice; who can open a hospital or purchase a new MRI; who can market a drug or medical device; and what kind of health insurance consumers may purchase. Government even sets the prices for half of our health-care sector directly, and indirectly sets prices for the other half.

Much of the U.S. health-care sector is private. But private markets are not necessarily free markets. What matters is who controls how the resources are used. More often than not, that “who” is government.

Conservatives should not lift a finger to defend this quasi-socialized mess, lest they unwittingly abet those who are unjustly enriched by it. To wit…

‐ The health-care industry does not want free markets. When President Bush created a massive government health-care program (Medicare Part D), the health-care industry was with him. When President Bush vetoed the expansion of a government health-care program (SCHIP), the health-care industry was against him. Notice a pattern?

America wastes gobs of money on medical care that makes patients no healthier or happier. Some 20 percent of Medicare spending — over $60 billion annually — falls into that category. Providers actively oppose most any attempt to root out such waste.

We have far too little competition among medical professionals, insurers, pharmaceutical companies, and hospitals. Yet try to deregulate providers, insurers, or pharmaceuticals and watch what happens. The industry’s entrenched interests rally to preserve the laws that protect them from competition. It’s no accident that the health-care industry has spent more money lobbying Congress than has any other industry for the past ten years.

Employers are just as bad. Companies that support universal coverage typically do so because it would increase the labor costs of their competition, whether through higher taxes or health premiums.

When interacting with industry lobbyists, conservatives need to remember their Adam Smith: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Further, conservatives should challenge the lefties to explain how — contrary to all experience — more government would serve patients rather than special interests.

‐ Fight health with health. Some people will oppose SCHIP because it subsidizes families who don’t need charity, some because it crowds out private health insurance, and some will be agin’ it just because Hillary is fer it. But most people care only about how it would affect people’s health. Conservatives need to meet that concern by comparing the health effects of more freedom with those of more government.

For instance, people are generally surprised to learn that there is no evidence that expanding health insurance, such as through SCHIP, is a cost-effective way of promoting health. In other words, how do we know SCHIP would deliver the most health for the money?

SCHIP also discourages families from increasing their incomes (lest they become ineligible). Since income and education are correlated with health, might that negatively impact children’s health?

And why are lefties so eager to expand Medicaid and SCHIP when they acknowledge these programs often provide lousy access to medical care?

Conservatives who pose such questions without venom, and who offer reasonable alternatives (e.g., allowing families and employers to purchase coverage out-of-state), will win the debate.

Health care is a tough issue for conservatives only because they have strayed from their free-market principles.

When conservatives return to those principles, health care will again become a tough issue for the Left.

Michael F. Cannon is director of health-policy studies at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It, 2nd edition (forthcoming).

Michael F. Cannon — Mr. Cannon is director of health-policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It.


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