Healthcare Reform is a Disaster in the Making
Published by Peter Mains on November 12, 2009 at 07:54 PM
A bill the ostensibly is meant to control health care costs has just passed the House of Representatives. If you've been following the Golem's coverage of Health Care Reform, then you know that the government already spends at least 45% of all health care dollars. As in education, the creep of government in the health sector hasn't stemmed the rise of costs. Rather, costs have steadily grown irrespective of efforts to regulate and displace the private sector.
The reason is simple. If you subsidize health care, then demand increases. If demand increases, then prices will also increase. This effect can be counteracted by an increase in the supply. This is what happens for other necessities such as food and clothing. Over the long sweep of history, incomes increase, and so does our disposable income. Innovations in manufacturing and cultivation of crops and animals constantly pushes prices down.
I mention food and clothing because, like medical care, they are necessities. How often have we been told that doctors and insurers have us by the jugular because medical care is a charge that we have to pay. We can't avoid it. And yet, shouldn't we be making progress in the field of medicine? Shouldn't competition and innovation be pushing prices down rather than allowing prices to spiral out of control?
Like education, though, medical care is heavily regulated and subsidized. Tax rules have pushed most Americans into employer-provided insurance. This gives insurance companies the power to make many basic health decisions. Worse, we don't even get to choose our health insurance. Perhaps employees get to choose from two different plans, but there should be dozens of choices. We wouldn't settle for so little choice in breakfast cereals, laundry detergent or jeans. Why is something as important as health insurance dictated to us?
Health care reform will fail precisely because it mirrors this failed system of truncated choice and bureaucratic decision making. History repeats itself as a farce. A "public option" will no more drive down the price of healthcare through increased competition than public universities have driven down the price of a college education. Even worse, the public option will breed dependency in a way that will preclude the possibility of effective health care reform for generations. As difficult as welfare reform was, health care reform will be even more difficult once we blunder into a single-payer system.
True reform is possible, though. Health Savings Accounts, plus high-deductible polices have proven to be effective in controlling costs. Unfortunately, regulation, tax credits, subsidies and outright welfarism have disincentivized thrift and encouraged health care madness. Tort reform would immediately save 1-2% in malpractice insurance savings, and then as much as 10% by beating back the scourge of "defensive medicine" -- unnecessary procedures executed to prevent that 1 in a million lawsuit. (WaPo estimates $100-$200 billion in annual savings, and our health sector accounts for $2 trillion of GDP. I've seen estimates of 15%, but I don't know where those numbers are coming from.)
These will, of course, be off the table once we cut the cord with reality by making health care free. Zero sum thinking will likely take over and, as I've said before, we are in for the "Soylent Green" model of cost containment. Let's hope that the Senate kills this monster.
"I mention food and clothing because, like medical care, they are necessities." Unlike healthcare, you can eat a variety of healthy foods that vary in price from reasonable to expensive and ironically, the simple/inexpensive foods that can be substituted for the expensive foods can be the most nutritious. The comparison of food and healthcare is beyond ridiculous. I have never heard of someone substituting a heart transplant with hair transplants. "True reform is possible, though. Health Savings Accounts, plus high-deductible polices have proven to be effective in controlling costs" My guess is that you do not have one because you still have to deal with insurance companies and pay for the privilege of catastrophic care. The family or person who has such a plan is expected to pay large sums out of pocket or from your health savings account. My experience is that these plans are not suitable for people who do not have disposable income or families who have any medical conditions that deplete any savings rapidly. I cannot understand anyone who has faith in health care companies and assumes they are going to be fair and compassionate to all. I assume you are a Catholic because of the fact that you are featured on a Catholic blog and my thought was that you must not belong to a church that feeds the hungry or is exposed to the working poor.
I may not be able to substitute a heart transplant with hair transplants, but I can substitute a generic drug for a more expensive one. If I'm shielded from the cost difference by my health insurance company, though, it biases my choice toward the more expensive drug. One of the main arguments for health care reform is that, from a cost-benefit perspective, Americans make very poor choices. Markets force people to make better choices, bending the cost-curve downward.
Your comments implying that I am uncompassionate toward the poor are off the mark. I think that we can provide basic health care for the poor in our society, but that starts with reducing costs. The only real way to do that is to introduce market forces
I am surprised that Mary makes the assumption that, since someone disagrees with her method of helping the poor, that he does not care about the poor. There is no greater sin than to put and keep people in poverty, but that has been the result of socialism every place it has been tried. Look at the progress the Soviet Union made in its 70 years of existence -- farmers still used horse and wagons, it could not feed itself, its technology was second rate, although resource rich, it could not produce enough oil and electricity to keep the houses lit and heated. Look at the astonishing change in China after adopting just a limited free market. Look at the progress in our own country where poverty today is defined at a level that was middle class when I was growing up.
Clearly the best way to reduce poverty and distribute wealth is a free-market system. Bill Gates gets more of the pie than I do, but he also made it possible for everyone to get bigger pieces. I shouldn't envy him when my wealth also increases at a rate commensurate with my output.
It's the same with health care. If we want to kill what is, despite its flaws, the best system in the world, let's use the socialist solution that has failed everywhere. If we want to increase the level of health care, like increasing the level of wealth, we need government to get out of it, open up the free market, and reduce the unnecessary friction in the system caused by conflicting and confusing regulations. When people can decide what is best for themselves, they make sound decisions and that's good for everyone. Now that's compassion.