For those of you interested in the health care debate and those of you who watched Michael Moore’s sicko I strongly encourage you to watch ABC’s 20/20 special later today. It directly addresses the health care issue and gives the other side to many of Michael Moore’s claims.
Sep14th2007
Stossel seems to be arguing that there are three alternatives: State-run health care, insurace-based health care, and privately funded health care. Like Moore, I expect Stossel’s TV show will spend a great deal of time (deservedly) slamming the current insurance-based, employer-provided, health system. And I’m equally certain that he will find reasons (which do exist) to cast doubts on the efficacy of a government-run health care system.
All fine and good.
But there’s a big problem with what Stossel will say in his TV show. Namely -
I suspect that Stossel will refuse to understand and/or accept that the insurance-based system as it stands now, with all its worts, is the free-market in action. In other words, there simply is no way to move to the privately-funded system that Stossel favors. When people are asked to fund their own health needs they recognize the risk of catastrophic costs and purchase health insurance. Then, when employers realize they can attract employees by offering discounted health insurance they will do so. This is called the free market. The only way to keep it from happening would be to institute government controls. Essentially, Stossel’s preferred alternative - privately-funded health care - is nothing more than an early stage of the current insurance-based system. A stage we’ve already passed through and left behind. To back up (while maintaining the principles of free-market capitalism that Stossel holds dear) is not possible.
Sometimes (not always, but sometimes) free-market capitalism is not the answer. And the health care system in the U.S. today is a prime example.
I have two disagreements with your comment. One is defining todays system as free market and the second is not acknowledging that even todays health care system, with its psuedo free market aspects, produces some real gains to health care - gains that would disappear with a single payer health care system.
As far as the free market goes, what other free market system would have as much isolation from cost as the current one does? How expensive do you think car insurance would be if employers instead of employees paid for it and in the process covered even the most menial of car problems (paid for your gas, your tires, oil changes etc)? There are two areas of health care that have been performing just like other things under a free market - laser eye surgery and cosmetic surgery. Their prices have been going down and quality has been going up, just like everything else in a true free market system. You know what they have in common? They are both not covered by employers or health insurance. In other words, they are truly free market. I have no reason to think health care in general can’t move more in that direction as well (and in the process, reap the same benefits). See more on this here, here and here. Some simple and more free market solutions to make health care cheaper can be found here.
With that said, there are certain aspects that are more free market than others. One is the way we pay for pharmaceutical drugs. The United States (because of its non single payer health care system) is the last country to have a for profit drug invention industry. Which means that companies that invent a life saving/enhancing drug can charge a large amount of money for it in the United States and thereby recoup their costs (estimated at 800 million/invention) and make enough of a profit to continue to invent more drugs in the future. Other countries, having some form of nationalized health care, have essentially killed this very essential market. Which is why the United States produces such a disproportionate number of life saving drugs. See, for example, cancer survival rates here. More on this can be found here and here. You make health insurance single payer and you kill the goose that lays the golden egg.
The incentives are even scarier. Under a single payer health care system the incentives to cut costs (high taxes, something people feel IMMEDIATELY and EVERYBODY would feel) are strong while the incentives to invent life saving/enhancing drugs are weak (we currently don’t have these drugs, don’t know what the drug would be, and don’t know how beneficial it would be and the benefits are spread out to the few who would use the drugs). This sets us up for a significant reduction in life saving drugs.
These are just the beginning of the trade offs one must go through in deciding which health care system to adopt.
HP,
Perhaps you and I have a different definition of “free market”. In my mind, when a person chooses to sign a contract with an insurance company, that is a free market transaction. And, when an employer signs a contract with an insurance company to cover their employees, that is also a free market transaction. Right?
If, through government policy or law, the individual or employer were somehow forbidden to enter into a contract of their own free will with an insurance company, than that would be the opposite of a free market system. But that’s not what has happened, is it?
What has happened is that the free market has quite simply spontaneously and naturally produced a system based on employer provided insurance for health costs. And that system, by all accounts, is a failure.
What has happened is that the free market has quite simply spontaneously and naturally produced a system based on employer provided insurance for health costs. And that system, by all accounts, is a failure.
Not so. This is an indirect result of government interference. The primary reason that insurance is covered by employers is because of the tax code. Its cheaper for an employer (and employee) to give you X dollars in medical costs (tax free) than to instead give you that X dollars through payroll (taxable). That is why economists, of all stripes, tend to favor abolishing the employee tax exempt status of health care.
My understanding of how we got here is a mixture of three things: 1. tax policy, 2. price controls during WWII (government price controls prohibited companies from paying employees higher wages so to attract better employees companies offered to pay for health care as well) and 3. spontaneous order.
HP,
I don’t think I agree with you that the “primary reason” for employer insurance is the tax code (in my opinion, the primary reason is the discounted group rates insurance companies offer to employers) but I do think you make a good point that the tax code has contributed.
That having been said, the problems in the current system lie not so much in the fact that it is employer-based, but that it is insurance-based. Problems are inherent when the person who gets the treatment doesn’t pay the bills.
Problems are inherent when the person who gets the treatment doesn’t pay the bills.
Agreed. If you are interested, this is what economists have to say on the matter, see here and here.