Politics & Policy

Fixing What Ails Our Health-Care System

(Photo: Alex HInds/Dreamstime)
Reforms that nibble around the edges of the system just won’t do; it’s time for a bolder reimagining of American health care.

It is a remarkable fact that Americans currently pay more for health care than they do for food. Viewed in broad historical context, this is virtually unprecedented; humans have almost always spent most of their income on sustenance. Even as recently as 1960, Americans spent 17.5 percent of their income on food and 5 percent on health care. Today, we spend 9.9 percent on food and 17.7 percent on health care:

Over the same period that food expenditures were cut nearly in half, health-care costs more than tripled. How can this be explained? Both agriculture and medicine have benefited greatly from advances in science and technology. Yet the former industry has charged Americans less and less while the latter has charged them more and more. What accounts for the brilliant success of our food-production system in making its vital products ever more widely and cheaply available at the very same time that our health-care costs spiral out of control?

The answer should be clear. Despite an assortment of mandates, regulations, subsidies, free-food and meal-ticket programs, the American food production and delivery system is still basically market-driven. Distortions noted, at the end of the day, the vast majority of food sold in America is bought at supermarkets for cash by individuals who are free to choose what they buy, and who shop for value accordingly.

This system works amazingly well. But imagine how things would go if we distributed food the way we allocate health care. Instead of going to the store and buying what we want, we would each pay a monthly food-insurance premium. Armed with such a policy (paid for by our employers out of our paychecks, whether we like it or not) we would each go to the grocery store, where a clerk would fill our cart with what he thought we needed. We would pay out-of-pocket until we hit our deductible, after which point the store would bill our insurance company for the rest.

In such a system, neither the shopper nor the store would have any interest in containing costs. This being the case, the store wouldn’t even bother to tell the shopper how much the goods cost, as it really wouldn’t be any of his business. The store’s management would have an obvious financial incentive to fill the cart to the brim, not to mention a legal spur forcing them to do so: Since they were the ones responsible for filling each customer’s cart, any failure on their part to fill it with a necessary item could easily result in a lawsuit.

For example, should they fail to include roses in your cart, they could be sued for your girlfriend’s suicide. Of course, she might be the type that prefers wildflowers, or chocolate, or theater tickets instead; how can those contingencies be dealt with? What about a failure on their part to provide you with a portable generator in advance of a power blackout, a fire extinguisher in advance of a fire, or an inflatable raft in advance of a flood? There’s no end to the possibilities of what could go wrong, so clearly, they would need grocery-malpractice insurance. The cost of this would figure into their bill to your food-insurance company, along with the cost of all the useless extra stuff they would be sure to include among your purchases to protect themselves against malpractice lawsuits launched by the army of legal bandits eagerly awaiting such opportunities. These costs would then be passed on to your employer in the form of increased grocery-insurance premiums, who would then pass them on to you by further reducing your pay.

It should be obvious that any such absurd system would lead to out-of-control grocery bills. Yet this is precisely the way we distribute health care.

In short, the problem that we face is not that there are too many people who lack health insurance, but that there are too many people who have it. If we want to get health-care costs under control, we need a system where the majority of medical expenses are paid for by informed individuals who shop for value and are free to choose what they want to buy accordingly.

So what should Congress do? The most effective action the government could take would be to simply ban health insurance and enact transparency laws forcing medical providers to clearly advertise their prices for services rendered. This would crash health-care costs overnight. Unfortunately, things are not so simple. Health-care costs differ from grocery costs in one key respect: They are unpredictable, which means that for most people catastrophic health insurance would still be warranted. What’s more, there would still be indigent Americans unable to pay for health care even at the greatly reduced rates such a system would provide. Such people, however, could be given medical stamps, analogous to food stamps, to help cover all or part of their medical bills.

The recently failed Trump-Ryan health-care bill was useless, because it simply perpetuated the current nonsensical system in slightly altered form. To truly fix health care, we would need to build a new system from scratch with two cornerstones: the free market and a safety net — the former to drive down costs, and the latter to protect the most vulnerable.

So what would the bill creating such a system look like? It would repeal Obamacare, with all of its mandates, as well as all prior incentives for employer-provided health-insurance plans. It would provide raises for federal employees, replacing their health-insurance policies with cash and encouraging state, local, and private employers to do the same. It would create a regime of enforced transparency, including published prices and hospital-cost ratings calculated by government statisticians, so that the public knew where health-care bargains were to be found. It would include regulations forbidding the uninsured from being charged more than the insured, and laws sharply limiting the maximum punitive damages obtainable from medical-malpractice lawsuits. It would include assistance to help all those meriting government support, including social security, disability, unemployment, and welfare recipients, in paying their medical bills. And it would create a universal system of catastrophic health insurance, administered either through the federal government, the states, or employers.

It may be observed that the type of system described above is comparable to the one used in Singapore, which delivers quality health care at one-third the cost of our system. The primary difference is that in Singapore, the increased salary resulting from the elimination of health insurance is reserved in health-savings accounts that each citizen uses to pay for medical expenses. While superior to our current system, such paternalism seems to me unjustified. There are times in life when saving for future health expenses is the wrong thing to do. For example, a student attempting to work his way through college would do much better directing his meager earnings toward that goal, which, once attained, would put him in a far better position to pay for his health care and all other needs later on. The state does not necessarily know what is best for each of us. Individuals should be free to choose.

The last item on the bill’s list could stick in the craw of conservatives, because a universal system of catastrophic health insurance might have to be single-payer to pass Congress with bipartisan support. But they should reflect: Such insurance would be very cheap, both because catastrophic insurance is in general cheap and because the free-market principles enshrined in the rest of the bill would drive down health-care costs across the board. Besides which, unless there is serious reform along the lines described above, the ultimate result of Obamacare’s ongoing failure will be an enormously costly single-payer health-care system of the European variety. A system combining free-market principles that dramatically reduce costs with single-payer catastrophic insurance and a safety net for those who need it would certainly be a much better outcome.

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